Shadow Economy: Ukrainian Realias and Countermeasures During L. Kuchma’s Presidency

Abstract

The article analyzes the state of the national economy and its shadow sector during L. Kuchma’s presidency in Ukraine. It has been proved that the crisis in the country’s economy at the beginning of 1994 was caused by the imbalance among the economic strategy, inconsistency of its elements, and absence of timely economic reforms. The transition from socialist forms of economy organization to market ones led to the change of the shadow economic sector, its development, and adaptation to the new conditions. It has been found out that salary debt obligations in the official sector, the pressure of high taxes, and the processes of hyperinflation formed the ground for an intensive growth of the shadow sector in the economy of the mid-1990s. Corrupt practices among public officials were both an additional factor promoting the shadow economy growth and part of the shadow economy itself. It has been revealed that the basis of L. Kuchma’s strategic course was the process of reforming macroeconomic stabilization that included both financial and monetary stabilization, which favoured the improvement of the investment climate as well as creation of proper conditions for economic growth. The key components of L. Kuchma’s economic strategy in the period of 1994-1999 were an introduction of a consistent course of price liberalization, start of industry operation normalization, first steps of business legal framework liberalization, currency exchange rate stabilization and strengthening of the national monetary unit. It has been proved that a complex of reforms and measures in the financial and economic spheres introduced and put into practice by Leonid Kuchma’s team promoted stabilization of the national economy and decrease in the activity of the shadow sector. It is stated, however, that despite the slight decrease, such phenomena as corruption, crime, and shadow economy continued slowing down the development of the country