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Who is D-student by IMF standards: Poland or Ukraine?

Author : Pavlo Vernivsky

Source : 112 Ukraine

It turns out that Ukraine is more diligent country by the standards of the IMF, but unfortunately, this did not manifest itself in its development
23:12, 25 February 2020

Open source

The IMF believes that the smaller the budget deficit, the better. Ideally, the budget deficit should be no more than 2% of GDP.

Over the past 19 years, the budget deficit of Ukraine has been:

    9 times - below 2%
    6 times - above 3%
    4 times - above 4%
    1 time - above 6%.

During this time, Poland’s budget deficit:

    3 times was below 2%
    13 times - above 3%
    9 times - above 4%
    3 times - above 6%.

It turns out that Ukraine, by the standards of the IMF, is a more diligent student, but, unfortunately, this did not manifest itself in its development. At the same time, Poland, being a "D-league", has advanced much further.

By the way, the logic of the IMF is rather strange. Their task is to help countries with a balance of payments deficit, and their loans go to replenish reserves. And instead of eliminating the root of problems in the balance of payments — like a trade deficit, they don’t react to it at all. Instead, they solve the problem of budget deficits.

Related: IMF representative Ljungman gives three scenarios for Ukraine's development over next 20 years

If we return to the deficit, then for greater clarity, you can look at the example of more developed countries. I will not take the United States, where there is a chronically large deficit. Take France for the same period:

    2 times - below 2%
    13 times - above 3%
    6 times - above 4%
    2 times - above 6%.

You say that developed countries spend money more efficiently? The low deficit rule applies to all countries. At EU level, all countries that want to join the eurozone must meet the Maastricht criteria. One of these criteria is a 3% budget deficit.

In fact, the size of the budget deficit is a struggle between two economic theories. Keynesianism says deficits need to be widened when demand in the private sector falls. Neoliberal theory, on the contrary, criticizes any increase in deficit. By the way, the problem of our prime minister is that he does not even really distinguish these two theories.

It’s just that Western countries support the Keynesian approach at home, and a neoliberal approach is being imposed on countries like ours.

Related: IMF expert group starts work in Ukraine

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