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Sunday, October 23, 2016

Ukraine should forget about the IMF money

The chances of Kiev to year even though some money from the IMF are fading away. Consideration of the matter, the Fund again moved, and the us Ambassador to Kiev believes that Ukraine no longer need any loans. Although the real state of the Ukrainian economy is bad, we can say that the Ambassador is in some measure right. Though not for the reason that meant.

The international monetary Fund (IMF) again postponed consideration of the question of allocation of next tranche to Ukraine, UNIAN reports. Until the end of August the Fund’s Board of Directors will discuss the allocation of money to other countries, but not Ukraine. In particular, on August 22, the IMF will consider allocation of money Barbados, August 24 – Jordan, 29 August – Equatorial Guinea, 31 August to Serbia. Ukraine in the agenda no.

“Wages in Ukraine are much lower than in the EU, but the IMF is to focus not notice and continues to show graphs of growth of nominal wages in Ukraine”

Meanwhile, a few in July, Ukrainian Prime Minister Volodymyr Groysman, while in Brussels, claimed that Kiev has fulfilled all the measures stipulated by the Memorandum of cooperation with the IMF, were only “a few technical details.” The Minister of Finance of Ukraine Alexander danyluk, in turn, talked about the fact that tranche from the IMF will arrive in early August. But the Ukrainian account so nothing was done.

On Friday, the President of Ukraine Petro Poroshenko on the phone talked with the Vice-President of the USA Joseph Biden on the same subject. The parties discussed the importance of providing in the near future Ukraine IMF tranche and credit guarantee of the United States, said on the website of the Ukrainian President. However, all the evidence suggests that IMF to provide new loans to Ukraine is not willing. Especially if you remember that the last time the Foundation has given money to Kiev in August 2015, and then only belatedly. And for a year the IMF leads the Ukrainian politicians by the nose, promising to solve the issue.

U.S. Ambassador to Ukraine Jeffrey Payette explained that delay on its own. According to him, Ukraine at the moment, it appears, and do not need another tranche of the IMF. “From a practical point of view, Ukraine today does not need tranche of the IMF. Exchange rate stable, the reserve is sufficient, the confidence is still there”, – said Payette. According to him, the IMF cautiously approached the suspension of payments, not to destroy the credibility of the Kiev and at the same time emphasize that adheres to its own rules.

Formally, the IMF really have a reason not to hurry with issuance of loans to Ukraine. The fact that the extended credit program is designed to stabilize economies that have serious problems with balance of payments. Ukraine formally shows stable figures in currency (the hryvnia is not devaluing as fast as in the previous two years), a good foreign exchange reserve ($14 billion), and the overall balance of payments deficit decreased. The Ukrainian authorities, and then they say that the economic growth in the second quarter was a plus) and even the growth of nominal wages.

In reality, of course, behind these figures there is no growth and improvement in the economic situation. We can only talk about the sinking of the rapid fall.

But the IMF everything fits formally. For example, the balance of payments of Ukraine in the first quarter of 2016 was reduced to a deficit of $ 813 million. It’s a little, considering that in 2014 and 2015, the deficit reached 4 and 8 billion dollars. But if you compare with the first quarter of 2013, when the balance of payments was with a surplus of 1.82 billion dollars, of course, in how sad the situation is Ukraine’s economy. If you dig deeper, it becomes clear that a small deficit this year provides continuing decline of the population cannot afford to buy foreign) and exports (the country’s income dipped sharply). In the first quarter of 2013, the import was more than $ 22 billion in the first quarter of 2016 and the $ 11 billion, exports was 19 billion to 9.8 billion dollars.

The financial account of the balance of payments that shows the flow of investment into the country, for the first quarter also was positive – plus $ 260 million. But the IMF seemed not to notice that in 2013, over the same period, it was almost $ 5 billion.

Exactly the same formally, the IMF came up and fits the requirements for Ukraine. The most indicative situation with tariffs for gas and utility services. In 2014, the Foundation resented the fact that Ukrainians spend on utility services less than, for example, the citizens of Poland. Rather, the share of payment of the communal expenses of Ukrainians were less than the poles. The Fund has insisted to correct this injustice – namely, to be from the state subsidies for housing and utility services. Kiev listened to. “Now, when after the reforms of the IMF, housing prices increased 10 times, the IMF no longer makes the analysis of expenses of Ukrainians for payment of utility bills. Because even the most optimistic calculations show that the average Ukrainian family in the winter on payment of housing services spends about 60% of their income, and now, after another increase in utility tariffs, it’s curiosity. The average patch on Ukraine will be smaller than the average size of payments for the payment of utility tariffs”, – says Ukrainian economist Oleksandr Okhrimenko.

Utility bills for Ukrainians, have become almost the same as in Europe. “But wages in Ukraine are much lower than in the EU, but the IMF is to focus not notice,” says Ukrainian economist.

Notices of the IMF and the fact that the gas market to maintain monopoly in the face of Naftogaz, although the Fund insisted on reforming the system. “The national anti-corruption Bureau of Ukraine pretends he sees nothing. As a result, the gas bought from Russia through the European offshore and gas tariffs for the population inflated several times. The monopoly utilities get a windfall,” adds Okhrimenko.

Thus, the IMF does not mean that the economic situation in Ukraine has stabilized. Because it’s not in the economy and in politics. The beneficiaries of the IMF – US and EU – just don’t want to feed Ukraine. Apparently, for their political purposes Ukraine is better to be destroyed. Because if you look closely, not only the IMF does not fulfil all these years, its promise to infusion of huge amounts, but also the US and the EU.

As debts rose Ukrainisation, the EU after independence promised 3 billion euros in macro-financial assistance. Yet given only 2 billion euros. The EU also promised through the neighbourhood Investment facility to give 3.5 billion euros, but Kiev has not received the money. The European investment Bank and the European Bank for reconstruction and development promised to provide about 8 billion euros of loans, but in July 2016, none of the cents the government of Ukraine is not received. About fake trade preferences and a visa-free regime with the EU can not recall.

In Kiev also see a couple of political reasons for the delay tranche from the IMF. First, the IMF wants to ready the draft budget for 2017. Are there, for example, further increase in gas tariff or subsidy reduction for the poor? In Kiev promised to create a budget in September, but tend to prolong the case until the 20-th of December. In Kiev also insist that the IMF is unhappy with the situation with the launch of electronic declaring of incomes of officials.

Kyiv continues to wait and hope for another handout from the IMF. So, Finance Minister complains that in case of failure of cooperation with the IMF will have to cut the budget and make unpopular decisions.

Moreover, without the IMF, Ukraine will not be able to obtain $ 1 billion in loan guarantees from the United States, 1.2 billion euros macro-financial support from the EU, as well as loans for the purchase of gas from European partners, said the Minister. “Cooperation with the IMF is the problem not only of this year. After all, the IMF does not just support our reform program. Each tranche of the IMF is a clear signal to investors that change is occurring and that in Ukraine it is possible to invest”, – said the Minister. US Ambassador to Ukraine, this probably would not agree, because with its bell tower, it turns out that the IMF does not give money to Kiev just for the opposite reason – because the Ukrainian economy is so good already.

“In my opinion, Payette your own words, Ukraine is preparing for the fact that the IMF tranche is likely before year end and not received. Of course, in the words of the Payette has some guile about the state of the economy of Ukraine”, – says Sergey Zvenigorodsky from UK “solid Management”.

However, the IMF had, without realizing it, makes Ukraine a big favor by not giving out loans. And it would be better to continue the IMF was unwilling to give them. “The possible failure of the IMF from providing the next tranche looks really good for the economy because the tranche is a loan, not charity” – I agree Zvenigorod. Ukraine’s foreign exchange reserves have recently demonstrated positive dynamics in July was almost $ 14 billion. However, this is still not enough to cover the country’s external debt, which already exceeded 70 billion dollars.

Of course, you can continue to live at the expense of loans in the hope that in the future the country will be an economic miracle, or ever, the IMF will write off these debts. However, for debt relief such strong organizations have to pay.

“The practice of developing countries shows that all loans granted by the world Bank or IMF and then decommissioned, led to only exacerbate problems in the economy and to dominate the country, the role of transnational corporations in the U.S. and Europe. For specialists in coordination of these loans is even a special term “economic hit men”, – says Alexei Antonov from “ALOR Broker”.

The money from the IMF is not foreign direct investment, and to the real economy, they do not reach. Some of it is to pay “old” debt, the IMF, the replenishment of gold reserves, the rest of the war in the Donbas and in the pockets of Ukrainian oligarchs. In other words, these loans will not change the situation in the country, but it forced the Ukrainian government to do a lot extremely painful for the economy of steps. And most importantly, that this dollar bondage lasts for decades, to pay the bills will have not one generation of Ukrainians.


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