Ukraine has experienced an economic renaissance over the last three years, but the lack of a budget agreement in government is the biggest threat to financial stability, said President Viktor A. Yushchenko Monday at an event in New York hosted by the Council on Foreign Relations.
He cited severe problems in creating Ukraine's budget, which could undermine the country's foreign currency obligations. Yushchenko tied this hurdle to infighting inside the government.
"A country trying to fight a crisis should have a much stricter budget," said Yushchenko.
Due to the global financial crisis, demand for major steel and chemicals exports from Ukraine dried up, leading output to contract 20% in the first three months of 2009 - among the harshest European contractions of the global crisis.
The national currency, the hryvnia, slid almost 15% in the two months leading to September, with the president and prime minister at odds over key policies.
President Yushchenko said the hryvnia's fall was tied to price stability. He said the value of the currency had to be sacrificed to settle the sharp growth in Ukraine's trade deficit.
But, a $10.6 billion bailout from the International Monetary Fund has helped pull Ukraine's foreign-exchange reserves back to levels seen at the start of 2009, said Yushchenko.
The president called clashes within Ukraine's government a "baffling" development and "not normal," although he is optimistic, citing the democratic accomplishments Ukraine has achieved thus far.
He said Ukraine's Achilles' heel is that it has a parliamentary forum, instead of presidential forum, while government members have a problem organizing, leaving no clear majority.
"We need to put classical foundations for forming national power," he said.
Moody's Investors Service issued a new report Monday late afternoon saying that policy disarray across the macroeconomic spectrum threatens a new standoff with the IMF and another break in confidence that could renew downward pressure on Ukraine's B2 sovereign ratings.
Ukraine is working on building its relationship with the European Union, specifically in energy, said Yushchenko. Ukraine hopes to sign an agreement in December, he added.
Yushchenko said the government was working on harmonizing electricity systems with Europe, sky agreements and joining the European Union's energy association.
Ukraine is currently considered an observer to the Energy Community Treaty accord, entered into force in 2006.
Yushchenko also cited Ukraine's relationship with U.S. as strategic to development.
In response to a question on U.S. President Barack Obama's recent decision to abandon a planned missile defense system, he said, "We have to be more about the initiatives to strengthen our defense."
On the Ukraine's relationship with Russia, Yushchenko was direct. He said the disputed Tuzla Island will always be Ukrainian and that Russian troops should leave the Black Sea by the agreed-upon 2017.
"Neighbors need to have better relations," said Yushchenko.
He said that Ukraine's aspirations to join the North American Treaty Organization also complicated the country's relationship with Russia. However, he said entry is central to its independence.
Ukraine will not be used to threaten other countries, said Yushchenko. He added that an open security policy is Ukraine's "inspiration" to join NATO.
On a positive note, Yushchenko cited impressive growth in industry, machinery, food commodities, including corn and sunflower seeds, as well as foreign direct investment over the last three years.
"Ukraine has never witnessed such dynamics," he said.