After a marathon, eight-hour debate, lawmakers voted down a measure that would have stopped the government from ending subsidies to number of key industries.
Ending subsidies is a vital part of the long-delayed reform program. "I've never said this before, but I'll say it now: We are a bankrupt state,'' a nervous Kuchma told reporters before the vote.
The vote was 168-118, with 50 deputies abstaining. It gave a major boost to Kuchma, who launched a bold reform program backed by the International Monetary Fund after his July election.
Emboldened, Kuchma also issued a decree to speed up land privatization, which is fiercely opposed by the Communist Party.
The Communists also failed Wednesday to oust radical reformer Viktor Penzenyk from the Cabinet. Kuchma appointed him deputy prime minister in charge of economic reform last week.
Since gaining independence in 1991, Ukraine, a nation of 52 million, has lagged far behind Russia and other East European states in reorienting its highly centralized economy toward the market.
Higher prices are another part of Kuchma's reforms.
Bread stores in Kiev were cleaned out Wednesday after the government announced bread prices would increase Thursday nearly five-fold.
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