Ukraine Political Appointment: Shuffling The Deck Does Not Change the Cards
On January 18, 2012, Ukraine President Viktor Yanukovych appointed Valeriy Khoroshkovsky as a new Minister of Finance to replace Fedir Yaroshenko. Albeit unexpected, the move represents a rotation within the existing power circles, reflecting more orchestrated political maneuvering ahead of the October parliamentary 2012 elections.
Khoroshkovsky, who had left the seat of the head of the National Security Service (SBU) to head the Ministry of Finance, is considered to be close to the president’s circle. The 43-year old businessman does not hold a finance degree and in his professional career changed a number of managerial positions, among which a two-year stint as the minister of economics in 2002-04 and head of the State Customs in 2007. Khoroshkovky is also associated with the RosUkrEnergo group. Nevertheless, his lack of economic and financial expertise did not prevent this appointment, underscoring its political nature. As minister of finance, Khoroshkovky will oversee the execution of the 2012 budget including financing the fiscal gap pinned at 2.5%, but potentially larger given the government’s optimistic growth estimate of 3.9%. These tasks may prove to be challenging given Ukraine’s feeble economy and increasing financing needs in 2012. In fact, as financing strains mount, the country needs to approach again the IMF. The newly appointed minister will lead the Ukrainian delegation scheduled to meet the fund representative in Washington, on January 24, 2012.
There are a number of speculations regarding the implications of the appointment for the current cabinet of ministers and the economy. Khoroshkovky effectively replaces a close ally of Azarov, the current prime minister. As such, the move could potentially be a beginning of a government reshuffle preparing the grounds for an eventual Azarov’s resignation. It could be very convenient to use the prime minister as a scapegoat for Ukraine’s deteriorating economic situation, especially ahead of the October parliamentary elections and in light of falling popularity of the ruling Party of Regions (PR). In terms of structural reforms, the State Tax and the State Customs authorities could be brought under the Ministry of Finance to unify the public finances in the country. The concentration of all country’s financial streams may prove to be beneficial for the government ahead of the parliamentary elections, but detrimental in the long run as a potential source of power abuse and corruption.
However, only time will tell how realistic these speculations are. Nevertheless, the appointment of Khoroshkovky does not represent any essential change, but rather a shift within the ruling elite.
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