New Economic Course by Tymoshenko?

On September 21 in Kyiv, Yuliia Tymoshenko presented a program of economic reforms called “New Economic Course” developed by the team of experts under her auspices.

The key ideas declared in the New Economic Course include transition from the oligarchic raw material system to the social market economy of innovation type, struggle against monopolies, the change of tax legislation, revision of monetary policy, state support for certain industries, acceleration of economic growth to 7%, etc.

The key ideas in public administration include the active introduction of digital technologies in the work of state bodies (block chain, digital governance, digital democracy, etc.).

In the area of improving the business climate, the program proposes creation of an appropriate infrastructure for business development at the local level (including business incubators, business accelerators and coworkings), in addition to better protection of property rights and business deregulation.

In the area of taxation, the program provides for:

  • reduction of the overall tax burden;
  • reduction of the tax rate on personal income;
  • introduction of a progressive rate;
  • replacement of the income tax with the tax on distributed capital, as well as the value added tax – with a tax on the sale of goods and services;
  • transformation of a single social contribution into a personalized pension system;
  • introduction of a tax on a hectare of land for agriculture;
  • elimination of minor taxes and fees, including state duties and court fees.

In the budget sphere, it is proposed to introduce a new document – the “Budget Strategy”, which should be drawn up by the Government and approved by the Verkhovna Rada for the entire term of office of the Government. Based on the Budget Strategy, a more specific planning document for the medium-term perspective (3 years) – the Budget Declaration – should be developed. It also provides for the active use of the program-target method of budgeting and the strengthening of the impact of budget programs on socio-economic development. Tymoshenko also proposes to cut expenditures on maintenance of the apparatus of the authorities.

Much attention is paid to the management of public debt. In particular, the project provides for a reduction of the relative volume of state and state-guaranteed debt and the achievement of the target debt ratio of 60% of GDP, not later than by the end of 2020. This should be reached due to the detailing and clear regulation of fiscal rules, abolition of the practice of state financial investments in the authorized capital of banks and enterprises through increasing the state debt, introduction into the budget legislation of Ukraine of mechanisms for implementation of the debt limit, the activating of the internal market of government securities as an alternative to an external one, and increase of the share of hryvnia liabilities in the structure of public debt to a level of at least 50%.

Regarding the monetary policy, Tymoshenko expressed her conviction that the National Bank should be reinstated under parliamentary control; and part of its functions should be de-monopolized. The NBU discount rate should be reduced. According to her, small bank should be restored; and there is a need to move from short-term to long-term loans.

In the area of innovation development, Tymoshenko proposed to create a new ministry – the Ministry of Innovation Development, and to implement a comprehensive national innovative strategy. She also plans to work on creating innovative ecosystems, technopolises and clusters.

In general, the document presented by Y. Tymoshenko is a variegated mixture of academic postulates of several areas of economic theory, various definitions, country comparisons, analysis of the current situation in a number of sectors of the economy, as well as recommendations for state policies with varying levels of detail, which are largely based on popular ideas developed by representatives of the expert community and community activists. However, a large number of ideas and recommendations are declarative and contradict each other.