According to the text of “Explanatory Note” attached to the relevant draft resolution of the Verkhovna Rada, the Government and the Ministry of Finance of Ukraine have started on the anti-constitutional, criminal in its essence, path of ignoring the common social values, the fundamental constitutional rights of our citizens, the powers and obligations of the Members of Parliament of Ukraine. Thus, the procedure of drafting and approving the 2016 State Budget of Ukraine included numerous violations of the Constitution and the laws of Ukraine.
The Verkhovna Rada of Ukraine had always received the Draft Act on State Budget of Ukraine for the following year de facto after December 1 of the year preceding the planned one: in 2014 the relevant bill #1000 was submitted on December 12. Whereas in 2015, the bill #3000 was submitted on September 14. However, it was recalled by the Government the same day with the revised draft presented only on December 11. While submitting the Draft Act on the 2016 State Budget of Ukraine, the Prime Minister of Ukraine A. P. Yatseniuk engaged in downright fraudulence by submitting the covering documents without the text of the budget itself. The report on the completion of the 2015 State Budget of Ukraine must be attached to the Draft Act, yet the aforemention report has not been provided.
Such actions on the part of the Cabinet of Ministers of Ukraine have resulted the Verkhovna Rada of Ukraine having to adopt the relevant law in the middle of the night, a mere few days before New Year, in order to ensure the timely enforcement of the Act on State Budget of Ukraine for the next year. The above-mentioned circumstances made impossible the detailed, thorough and qualitative work on the Draft Act on State Budget of Ukraine for the following year with adherence to the legislative requirements, thus preventing the Verkhovna Rada from making an informed and impartial decision on this matter.
The distortion of the procedure of adoption of the Act on State Budget of Ukraine, facilitated by the Government, in its turn, resulted in the delay of the budgeting on local level, in the violation of the order of organization and exercise of state power determined by the Constitution of Ukraine, in the underfunding of science, education and healthcare, in the unwarranted budget preferences granted to the particular ministries and agencies. Thus, the fundamental economic, social, and cultural rights of the citizens safeguarded by the Constitution of Ukraine have been violated. Particularly, this concerns the right to entrepreneurship (Article 42); the right to labour (Article 43); the right to social security (Article 46); the right to adequate standard of living (Article 48); the right to healthcare, medical aid, and health insurance (Article 49); the right to education (Article 53).
The duty to guarantee the realization of the aforementioned rights is imposed foremost on the State (Articles 3, 15, 30, 34, 46 of the Constitution of Ukraine), and above all – on the Government, for it is not only imbued with the functions of the highest executive body, but with the right to the legislative initiative as well. The Prime Minister of Ukraine A. P. Yatseniuk and the Minister of Finance of Ukraine N. I. Yaresko have neglected this duty and should be legally responsible.
Moreover, as of today, the Ministry of Finance of Ukraine has become the clear demolisher of Ukraine’s economy, the instigator of destruction of its investment prospects, and of hope for the decent living standards of millions of Ukrainians. The country’s foreign debt keeps growing, which enslaves both the current and future generations to the foreign creditors, turns them into the new serfs in their own country in the conditions of total poverty.
According to the statement by N. Yaresko made at the Government Session on August 27, 2015, Ukraine will not be obligated to pay off its foreign debts for 5 years only. In the following 5 years, the country will have to pay off $7,5 billion; and in the following 15 years the country will pay off $100 billion. For this, our country has been granted a $3 billion discount. This amounts to an overall payoff of $110 billion.
Adjusting for a possible inflation, which will amount to 5% a year on the average, our country will pay off over $200 billion. Basically, in order to achieve the current level of real GDP of Switzerland by 2040, Ukraine might pay off over $200 billion to the foreign creditors.
Furthermore, if Ukrainians wish to live better, they will have to work three times as much, in order to achieve at least the current level of Poland in 25 years, because they will have to pay off a minimum of $110 billion in interest.
If Ukraine wants to save in interest, which the incumbent Minister of Finance N. Yaresko is counting on, that is planning no more than a 4% GDP a year, then the actual GDP of Ukraine by 2040 will have been no more than $225 billion, or $5000 per capita. It equals the current living standards in the countries like Albania or Mongolia.
The violation of the constitutional rights of the citizens and the disregard of the requirements of the Budget Code on the part of the Government and the Ministry of Finance of Ukraine is occurring in conjunction with unprofessional actions, openly corrupt schemes, overt financial fraudulence, and foul monetary transactions conducted by the National Bank of Ukraine, headed by V. A. Gontareva.
On September 10, 2015, ended the mandate of the members of the Council of the National Bank of Ukraine, but due to the procrastination and lack of initiative demonstrated by the Head of the National Bank, the new Council still has not been nominated and appointed in accordance with appropriate quotas of the Verkhovna Rada and the President of Ukraine.
Due to a significant number of banks having been closed, the management of the National Bank intentionally caused the loss of money of the legal entities. It was an outcome of the bank accounts of these legal entities having been liquidated by the National Bank. A large number of legal entities went bankrupt and were unable to pay off their loans, which resulted in an enormous blow to Ukraine’s economy and the entrepreneurship of small and medium businesses. The number of distressed assets keeps growing rapidly, yet the National Bank is currently taking zero measures in order to suspend this process. Yet the management of the National Bank has repeatedly stated that the closure of banks was a necessary measure aimed at reducing the number of distressed assets. As of December 1, 2015, the share of overdue loans constituted 21,2% of the total loans issued, whereas as of January 1, 2014, this index was at 7,7%. Thus, the closure of banks has led to the increase in distressed assets, not the other way around.
Various shady schemes of withdrawing the income from the public financial institutions are also being spread. Out of those, the most widespread ones are the transactions of sale and repurchase of the local government bonds in short time before the coupon payment, and/or selling through the controlled organization at the lowered (below market) value. Thus, the trade margin between the selling cost and the purchase by the intermediary is created, and it is leveled by the term coupon period of the interest-bearing local government bonds.
In such transactions, the intermediary, due to revenues, obtains an opportunity to withdraw the excess funds formed out of profit in order to pay off the appropriate controllers (initiators) of such transactions. The most active intermediary at both stock and curb markets of the local government bonds is the company “Investment Capital Ukraine” (ICU), previously co-owned by the incumbent Head of the National Bank V. Gontareva, the bank “Avangard”, which belongs to the ICU Holding Ltd., as well as state-owned “Ukrgasbank” and “Oshchadbank”. The intermediary companies close to V. Gontareva, being the active participants of stock market in 2013-2015, were instrumental in accumulating excess profit that was subsequently withdrawn, directly or through other controlled companies, for “payment of commercial services” (orders), both for other market participants and public officials involved in such transactions.
According to a different scheme, the National Bank purchases the local government bonds from the market participants at a price much higher than the market. Such transactions result in either the National Bank suffering a shortfall in profits due to the investment in government bonds at a very low yield, or, in case of their selling off the market at the market price, – in direct loss for the regulator.
The official information available on the stock trades of the local government bonds at the secondary market demonstrates that the profitability of these securities is manipulated. According to the data as of November 24, 2015, the average profitability of the short local government bonds had equaled 40,39%, whereas on November 26, 2015, it suddenly dropped to 21%. The difference amounted to 100 billion Hryvna.
Currently, the National Anti-Corruption Bureau is conducting a pre-trial inquiry in the criminal proceeding from December 16, 2015, on the grounds of a criminal offense provided in part 1, Article 364 of the Criminal Code (“Abuse of Power and Authority”).
The statement of crime and the materials attached thereto contain the claims that the management of the National Bank have abused their authority, acted willfully for the purpose of acquiring benefits for the members of their families by informing the latter of the financial state of the Public Company “Delta Bank”, by allowing them to withdraw funds from the deposit accounts of the Public Company “Delta Bank” to the amount of approximately 12,5 million Hryvna, and by causing a substantial damage to state and public interests.
Under Valeria Gontareva’s management of the National Bank (from June 20, 2014), “Delta Bank” has been granted a stabilization loan from the National Bank of 960 million Hryvna (such loans are granted for a period of two years at the very least), as well as 1 billion Hryvna on bail of the government bonds on tenders.
According to the data of the National Bank, in 2015 “Delta Bank” did not receive a refinancing for a period longer than 30 days.
Through its downright criminal manipulations and foul audacious schemes, the National Bank of Ukraine has turned into a source of personal enrichment for its management and of obtainment of the enormous excess profits by financial speculators and frauds, both in our country and abroad. Such criminal acts of the National Bank, performed with the knowledge, and at times, in accordance with the aforementioned criminal proceeding, under direct supervision of its Head – V. A. Gontareva, are disrupting the fundamentals of functioning of the bank system of Ukraine, as defined in Articles 99, 100 of the Constitution of Ukraine; in Articles 6, 7, 25, 63 of the Act on the National Bank of Ukraine, and in Articles 43, 53, 63 of the Act on Banks and Banking. They are turning the Budget and Budgeting, already distorted by the Government into a unified public corruption scheme, a downright mockery of Members of Parliament, of the constitutional rights of millions of Ukrainians, of their hopes for the European living standards.
Author: Andrey Derkach