Ukrainian government is trying to make the IMF and the United States shell out

Author : Olexandr Honcharov

Source : 112 Ukraine

Although Ukrainian ministers and politicians talk about the need for reforms, they really do not want to change anything, they want the foreign brother come and pay for everything
12:00, 11 September 2018


The mission of the International Monetary Fund works in Kyiv from 6 to 19 September. We have already received $ 8.7 billion from its current program of expanded financing for Ukraine ($ 17.5 billion). By the end of this year, the Cabinet expects to get another $ 1.9 billion. Of course, it is now more difficult for Prime Minister Volodymyr Groysman to change political rhetoric for the next tranche of the IMF loan.

Let us assume that today the Cabinet of Ministers and the NBU have one task - to make the IMF and the US to “fork out.” In other words, although ministers and politicians talk about the need for reforms, they really do not want to change anything, they want the foreign brother come and pay for everything. But the fact that he is pursuing his own interests does not seem to bother anyone. Accordingly, businessmen and experts seriously began to fear that Ukraine, because of the lack of economic reforms, could soon be in the intensive care unit.

Related: IMF mission begins work in Kyiv

And these justified fears intensified after September 8, Prime Minister Groysman said: "We were thrown into a serious debt hole." Obviously, the economy is growing, but we have a debt, which we ourselves cannot pay back. We need to enter foreign markets, re-credit, reduce interest." In conclusion, the head of the Cabinet stressed: "I have to solve this issue. The IMF mission has arrived, we are working, we have constructive relations. In two weeks we will report the results of the talks." The Prime Minister is actually trying to persuade us that the failure of IMF conditions will push us to the default.

What is next? And then we would face a further reduction of social payments, which in a very poor Ukraine means a further reduction in consumption by the poor (and they have already amounted to 60%). We reduce the demand, thereby increasing the risks of protests and the collapse of local markets. But the US went the opposite path.

Related: Ukraine pays $160 million to IMF

Americans are on the rise, and our entrepreneurs can only get their hands on, as on September 6 the National Bank suddenly raised the NBU discount rate by 0.5 percentage points (up to 18%), putting the crediting of small and medium-sized businesses into a difficult situation. Obviously, we are purposefully destroying micro, small, and medium businesses. Gradually, Ukrainian facilities and production are closing. As a result, we are forced to support the life of the country and people through imports. And money is needed for the import. Where to take them in terms of such a scarce budget, and we have long been living at the expense of the money of international creditors. But these short and expensive loan money will also end soon.

By their incompetent actions, the authorities began to drastically reduce the financial possibilities of Ukrainians. Because of lack of money, people, stop paying utility bills and are also increasingly being re-rented to pay for unscrupulous moneylenders. And, of course, they spend less and less on food and leisure, which in turn imposes a huge negative impact on the development of the entire economy of the country.

Related: NBU expects tranche from IMF in autumn

The budget-2018 deficit is huge, the currency reserves of the National Bank are declining for three months in a row, there are no direct investments, international creditors do not give money, as they know that officials steal it. And yet, where can you find money to pay pensions and salaries to state employees, and most importantly - for economic recovery? To correct this grave socioeconomic situation, I would make three specific proposals. First, only the most severe authoritarian power can now save the economy of Ukraine from corruption, it should manifest a consistent struggle against embezzlement, bribery, and nepotism. Second, Ukraine should conduct a detailed audit of the state budget obligations-2018. Third, it should create and implement a set of effective incentives for the development of small and medium-sized businesses in Ukraine, since an entrepreneur is a taxpayer, filling the state budget.

However, the key question immediately arises: does someone in Ukraine believe in the implementation of the first proposal? Especially considering the fact that we have already experienced two Maidan revolutions. Therefore, the problems will become even more serious, if we do not shake our society again. But now we need a stick and carrot, and society needs to properly decompose them between officials and politicians.

Related: Ukraine promised IMF to legalize the gambling business. Would it happen in 2018?

In this regard, my forecast is this: the ongoing collapse of small and medium-sized businesses in Ukraine is becoming increasingly predictable. We are experiencing the recession, but we have not reached “the bottom” yet. The question is, will we reach it by the end of 2018? I have big doubts about this. Everything says that this autumn the downward movement will continue.

Well, when you slowly drown in the middle of a big river, the only hope is for another IMF loan. Then you are drowning not that fast, having time to look around, think, and make a decision. However, the drowning position is rapidly aggravated.

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This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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