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EU loans: How Ukraine squandered everything and was left without finances

Author : Viktor Skarshevsky

Source : 112 Ukraine

EU promised that the first tranche in the amount of 600 million euros will be provided without any additional conditions - automatically, after the ratification of the loan agreement. The Ukrainian parliament ratified this agreement at the end of August, and the promised unconditional first loan tranche did not take place
21:23, 19 October 2020

Open source

Macro-financial aid from the EU is not just aid, it is a loan that needs to be repaid. Yes, at low-interest rates - but it’s a loan.

Over the past seven years, from 2014 to 2020, Ukraine has received loans in the amount of 3.81 billion euros under four macro-financial assistance programs with the EU.

Loans from the European Union are not targeted and are not directed, for example, to investment programs, export support, product development, and other similar tasks aimed at economic development.

All loan funds under four programs in the amount of 3.81 billion euros were sent to the black box of the Ukrainian state budget and were consumed.

The same fate awaits the fifth loan program in the amount of 1.2 billion euros, approved in July 2020. All funds will be directed to the state budget for consumption.

The basic condition for all programs with the EU is Ukraine's cooperation with the IMF. If there is no IMF loan tranche, there will be no loan from the EU.

By the way, the EU promised that the first tranche in the amount of 600 million euros will be provided without any additional conditions - automatically, after the ratification of the loan agreement. The Ukrainian parliament ratified this agreement at the end of August, and the promised unconditional first loan tranche did not take place.

In addition, the loan agreements contain conditions that limit the economic sovereignty of Ukraine. That is, in fact, the Ukrainian government trades in economic sovereignty in exchange for credit handouts.

For example, according to the loan agreement, all centralized procurement of medicines, medical devices, and personal protective equipment should be transferred to a new state-owned enterprise called Medical Procurement of Ukraine. The control over the state-owned enterprise will be carried out by a newly created supervisory board. By analogy with other state-owned enterprises, it can be assumed that the majority of foreigners will enter the supervisory board and they will lobby the interests of foreign drug manufacturers in procurement to the detriment of Ukrainian ones.

Related: Finance Minister believes IMF mission to arrive in Ukraine this fall

Moreover, the agreement contains a requirement to create supervisory boards "on a professional basis" for another 10 largest state-owned enterprises.

Under the guise of fighting corruption, the EU envisages interference in the work of the judiciary and law enforcement agencies. Thus, according to the credit conditions, Ukraine has undertaken to create the High Qualification Commission of Judges of Ukraine with international participation.

International participation is also required in the Ethics Commission, which will evaluate the members of the High Council of Justice and make recommendations for their dismissal in cases of non-compliance with certain standards.

According to the agreement, within a year, it is envisaged to complete the certification of prosecutors at the regional level and start attestation at the local level.

If the European Union really wanted to help Ukraine, it would be better:

1. To abolish 36 quotas for the export of Ukrainian goods to Europe. Not to give a loan, but to enable Ukrainian enterprises to earn more.

2. To not build Nord Stream 2, but modernize the Ukrainian GTS, for example, within the framework of a joint consortium. From the construction of the Nord Stream 2, as well as the Turkish Stream, the annual transit losses may amount to about $ 2 billion.

3. To not buy contraband Ukrainian round timber, it would be processed in Ukraine. And, as you know, you can earn much more from processing than from the sale of raw materials. According to the British non-governmental organization Earthsight, more than 1 billion euros worth of timber was exported from Ukraine to the European Union countries in 2017 alone.

With the European Union, and with other international financial organizations, including the IMF, it is necessary to negotiate not from the standpoint of "asking" - "what else can we do to get the next credit tranche," but from the standpoint of national economic interests.

Related: IMF estimates global losses caused by coronavirus crisis

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