IMF credits: Relief for Ukrainian authorities, debt yoke for Ukrainian people

Author : Volodymyr Pylypenko

Source :

In the present economic situation, the IMF's demands seem extremely unprofitable. Moreover, the next tranche is unlikely to improve the country's economy
23:37, 14 November 2017

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The International Monetary Fund has put forward four demands to Kyiv for receiving next tranche. This was reported by the representative of the IMF in Ukraine, Jost Ljungman. In particular, we are talking about the adoption of a law on the privatization of state-owned enterprises, the creation of an anti-corruption court and the resolving of the gas prices issue in accordance with the Cabinet of Ministers’ Resolution No. 187. Speaking about the latter, in practice this means that the gas price for the population should increase by 17, 6%.

Also among the voiced demands is the adoption of land reform, that is, the introduction of the land market in Ukraine. According to Ljungman, the IMF did not abandon this reform. "We decided to postpone it for 2018 in order to give time for its comprehensive development and reaching of consensus in Ukrainian society," he said.

Do these requirements meet the economic interests of Ukraine and reduce social tensions? Well, let's try to answer these key questions.

Today, there is no need for total privatization of efficiently operating state-owned enterprises. After all, the government should work to improve the quality of management of these enterprises, rather than seek to sell them for a pittance. And this is exactly what is going to happen, because in the conditions of war it will be impossible to conduct successful privatization.

In addition, it is worth assessing how rational the increase in gas prices for the population is. Now gas is being sold to households at 6.8 thousand UAH per thousand cubes. The next increase will automatically lead to an increase in tariffs for utility services and will stimulate the growth of prices for consumer goods. Obviously, this will only lead to an increase in poverty and an increase, not a decrease in social tension.

And how long will authorities test the margin of safety and patience of Ukrainians?! According to Bloomberg, in 2016 and 2017 Ukraine was one of the poorest countries in Europe. Moreover, the UN reports that in our country, about 60% of the population is below the poverty line. It is unlikely that anyone from the IMF, the Ukrainian authorities are interested in such statistics. They have their own agreements and their own "perspective" of development. But the Ukrainian people are hostages to the situation, powerless performers of the decisions of those who inefficiently run the country.

Related: Parliament approves state budget for 2018 in first reading

Also let's look at another, equally controversial, "requirement": the introduction of the agricultural land market. To date (and a number of experts will agree with me), neither society, nor farmers, nor the government are ready for this, because the introduction of a free market of agricultural land will lead to de-immobilization of peasants and the formation of monopoly in agriculture.

However, the authorities, instead of accepting external loans and putting the economy on a "credit drug," should work to create conditions for stable economic growth. And here there is no way to do this without a thorough reform of the judicial and law enforcement systems. Global transformations in the country are possible only when the law operates, and not the will and interests of the elected.

Therefore, against the backdrop of internal chaos (both political and economic), IMF demands are unacceptable for Ukraine, they are a threat to national interests.

Let's look at the facts: the NBU report for October says that during 2018-2021 annual payments on the repayment and servicing of public and quasi-public debt in foreign currency will exceed $ 7 billion, namely, $ 7 billion from 2018 to 2021 annually. Total it is 28 billion dollars for four years.

At the same time, the IMF promises, according to the current lending program, only $ 5 billion tranches over several years, since Ukraine has already received $ 12 billion under the adopted program, which totals $ 17.5 billion.

It is worth noting that in 2017, according to the estimates of Ukrainian economists, the deficit of the state budget may amount to 3.5% of GDP. Therefore, it is necessary to compensate this at the expense of international and domestic loans. As a result, Ukraine is increasingly drowning into debt slavery, and the government has to urgently seek money for on-lending.

So, according to Minister of Finance Danyliuk, next year, in 2018, Kyiv plans to borrow another $ 2 billion. This is the "convenient" way for closing budget holes. Of course, this is much easier than implementation of an effective financial policy, fighting corruption and engaging in lawmaking, rather than in intrigues and speculation.

No doubt, the new terms of the IMF are unprofitable for Ukraine. And is there an alternative? Of course it is. Let’s learn from Poland. Our neighbor and strategic partner recently refusrd from $ 9.2 billion in loans from the IMF. As Polish Finance Minister Mateusz Moravetski said, they refused the credit line, because "today the economy is in such good condition that we can do it." In January-August the surplus of the state budget of Poland reached more than 4 billion zlotys (more than 1 billion dollars). Economic growth for this period was 4%.

Here you have the answer: you just have to work well, develop your state, implement reforms, and not engage in political patriotism, which has nothing to do with the creation of the state. And then Ukraine will not have to be an eternal supplicant.

So far, everything is exactly the opposite: the authorities do not hesitate to ask and borrow, and Ukrainians and several of their subsequent generations will have to pay back all these billions. So will we build a successful Ukraine with such an approach? No comments.

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