Today: January 18 2019
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IMF and Ukraine. Endless game without rules

IMF and Ukraine. Endless game without rules

Tags: Ukraine, IMF, Economy, Analytics, Credit, Reform, Donbass, War, USA, Debts

The theme of Ukraine appeared in my books and articles only after the Maidan and coup in February 2014, when the country was replaced by a political regime and a vector of development. And recently I was pleased to learn that my modest publications in Ukraine do not vanish in vain: in Kiev, published a list of books by Russian authors published in the Russian Federation and banned for import to Ukraine. In the list of 74 names, there is among them my book "Ukraine. The Economy of Troubles, or Money on Blood "(Moscow:" Book World ", 2014). Considering this as a confession, I decided after a pause to return to Ukraine again.

3 April, the International Monetary Fund's Board of Directors decided to allocate to Ukraine the next tranche in the amount of Kiev for a long time waiting for this tranche of $ 1 billion., The previous (third) has been allocated more than six months ago, and since then the IMF held the Ukrainian authorities in nervous tension.

The main reason for the delay was the failure to Kiev, the terms set forth by the Foundation in September 2016 years. Another reason was the uncertainty caused by the presidential election in America. The fact that the United States - the main shareholder of the IMF, it still holds a blocking share in equity and votes of the Fund. In short, the go-ahead from the team of Trump on a positive decision on Ukraine tranche was given to the Fund until March.

I have repeatedly written that the IMF made decisions on lending to Ukraine, grossly violating its own rules, which the Fund has been guided by for decades. This was always done because of political goals pursued by the Fund's main shareholder in Ukraine. The rules of the IMF prohibit lending to countries where civil wars are waged. Soon for three years, as Kiev is conducting military operations in the Donbas, the Fund "did not notice" when in 2015 decided to approve a four-year program of assistance to Ukraine for a total of 17,5 billion dollars. Let's pay attention: for the first two years of the program, the Fund managed to expose Ukraine more than a dozen large and several dozens of small terms for further "cooperation", but at the same time, I never mentioned that Kiev should stop the war in the east of the country, which exacerbates the Ukrainian economy and brings the country closer to default. Or maybe the IMF behind the scenes has already recognized the NDP and LC as sovereign jurisdictions? Then there really is no civil war on the territory of Ukraine.

Another violation of the Fund was that from the end of 2015, Ukraine de jure is considered a country that declared a sovereign default. And with such countries, the Fund does not have the right to work (this rule exists almost from the moment the IMF was created). Let me remind you that in December 2013, the Russian Federation granted Ukraine a loan of $ 3 billion for a period of two years. This was in the penultimate month of Viktor Yanukovich's stay in power. Two years later, the "revolutionary" government of Arseniy Yatsenyuk categorically refused to fulfill the obligations under this loan. In short, in December in Ukraine, in fact, there was a classic sovereign default - the most terrible crime in terms of the canons of classical capitalism. He, too, was not noticed in the Fund.

For the IMF program to provide financial assistance to Ukraine could continue to work, the main shareholder of the Fund intervened in the internal kitchen of this international financial organization. Washington demanded changes in the rules of the IMF, which would allow to continue lending to the country that declared a sovereign default. The amendments were made to please Washington on the eve of the expiry of the Russian loan to Ukraine. True, for the sake of propriety in the amendments it was stipulated that the country that declared a sovereign default should demonstrate "diligent attempts to settle sovereign debt issues" with the creditor state. It was meant that Kiev had to organize a play called "Negotiations of Kiev with Moscow on the issue of a three-billion-dollar loan debt". However, by that time Kiev had already disengaged itself and did not even want to create the appearance of the play. The IMF did not "notice" this when, at 2016, it made a decision to allocate to Ukraine a third tranche of 1 billion dollars.

In the period between the third and fourth tranches in Ukraine, the nationalization of one of the largest banks, Privatbank, owned by Ukrainian oligarch Igor Kolomoisky, was conducted. To the surprise of specialists, the decision of the Government of Ukraine on the nationalization of this bank (in December 2016) was the result of IMF recommendations. It's amazing that from the 1980-ies the Foundation promoted its ideology around the world called "Washington Consensus". One of the members of this symbol of faith in the religion of economic liberalism is the provision that the private form of property is "by definition" better than the state one. The foundation has always given green light to privatization and a red light to nationalizations. And here everything is the other way around! In addition, with the nationalization of Privatbank, it turned out that the "balance" of this deposit-paying organization is a "hole" the size of 5,5 billion dollars. The capitalization and coverage of losses of the bank will have to be imposed on taxpayers - and here the IMF does not intend to give any principles, it will it is tough to demand that these five and a half billion in Ukraine be found.

During the preparation of the decision on the fourth tranche of the IMF, the Ukrainian patriots blocked communications between Ukraine, on the one hand, and the NDP / LNP, on the other, as another event. This was a blow to the economy not only of the Donbass, but of Ukraine itself. According to expert estimates, the severance of industrial and economic relations with only large enterprises of Donbass (total - 43) will result in Ukraine losing 2,5% of GDP. This is in addition to the fact that the budget of Ukraine will lose almost 31,7 billion hryvnia, or 1,3 billion dollars, which came to the budget in the form of taxes from enterprises registered in Ukraine, but located in the People's Republic of China and the People's Republic of China.

I followed the course of the negotiations Mezhuyev IMF and Kiev. And what surprises again: The Foundation does not insist on getting the Donbass blockade was immediately stopped, once again pretending to be deaf and blind.

At the end of March of this year, the High Court of London decided on Russia's claim to Ukraine on the repayment of the above loan of 3 billion dollars. The British court recognized these obligations as sovereign rather than commercial debt, so its repayment does not provide any concessions. In fact, London once again confirmed that Ukraine is in a state of sovereign default. IMF, however, a few days after the decision of the court of London as if nothing had happened ruled on the fourth tranche. However, this is not all. In the last list of conditions for further "cooperation" between the IMF and Ukraine, repayment of a sovereign debt to Russia does not appear at all! It is not provided for the repayment of Russia's debt in the schedules of the Ministry of Finance of Ukraine.

And how to envisage it, even if it is not very clear how much money the IMF, the World Bank, the European Union will give before the end of the year. But how much it is necessary to allocate for repayment and service of debts before "privileged" creditors, it is more clear. According to the deputy head of the National Bank of Ukraine Oleg Churiy, to service the national debt in 2017-2019, Ukraine will need almost 13 billion dollars. Debt service to the IMF this year will require about 1 billion dollars. By the way, according to the semi-official statements of Kiev officials, the newly allocated tranche will fully return to the Fund. There is a simple accounting operation that allowed Ukraine to avoid another sovereign default. In reality, this tranche will not improve Ukraine's position in any way.

More big challenge for the country will be the next, fifth tranche. . He is scheduled for May of $ 1,9 billion in IMF reminded Kiev that at the time of issuance of the fourth tranche satisfied only three of the eleven main conditions: the nationalization of "Privatbank", the introduction of electronic declaration of incomes of civil servants and increase in gas tariffs for the population.

What else is there for Kiev? I will not talk about Ukraine's permanent obligations to the IMF to privatize state property, to reduce the number of civil servants, etc. Within a period of less than two months, Kiev needs to adopt a new pension law, as well as a large set of measures to combat financial crimes and taxation evasions. The tax police should be replaced by a new civil service under the Ministry of Finance to investigate financial crimes against the state. It is necessary to expand the powers of the National Anti-Corruption Bureau (NABU), which will have the opportunity to monitor citizens without special permits from law enforcement agencies (through an agent network, through control over e-mail, etc.).

And, perhaps most importantly in the list of conditions - to enact legislation legalizuyuschiyprodazhu land. This nail IMF program. After all, only a mass sale of Ukrainian land is the source of funds with which it will be possible to cover the enormous commitment of Ukraine to the International Monetary Fund and other "privileged" creditors. This is the last and most valuable asset, "Square", nothing left. Ukraine now operates moratorium on land sales until the end of the year, and the IMF is insisting that more of it is not renewed.

Internal political battles are already taking place around this. The radical party of Oleg Lyashko even filed a lawsuit against the government demanding to publish the text of the agreement between Ukraine and the IMF, corrected before issuing the fourth tranche. Having familiarized himself with the agreement, Lyashko called his conditions bonded and wrote in the social network: "This is a hammer on the neck of the Ukrainians. The authorities are gaining these loans, because they know that they should not return them. It is necessary not to recruit loans, but radically change economic and monetary policy. Orientation - exclusively on the national manufacturer, jobs for Ukrainians. The policy of power is a half-starved existence on the periphery of world development and progress. " This position is shared by the "Fatherland" of Yulia Tymoshenko and the "Opposition block". Tymoshenko told reporters that "the top state leadership suggested that the IMF balance the plundered state resources" at the expense of the population, and not by closing offshore accounts and taxing rich dividends, adding that "the government betrayed the interests of the people and is working on their pockets."

Let me remind you that in mid-April the government of Vladimir Groisman will report on the results of the work for the year. Many deputies are determined to recognize the government's work as unsatisfactory and to seek the resignation of Groismann and the team. Such sentiments for Ukrainian politics are not new, the only note is the criticism of the current government for resignedly following IMF instructions. Taking into account the increasing of this criticism, the prospects for Ukraine to receive the fifth tranche become rather vague. And without the fifth tranche the country is again at the abyss of sovereign default. The International Monetary Fund can just once again rewrite its rules to continue lending to even those countries that defaulted on their debts to the Fund itself. Well, it is quite possible - after all, Washington still sees in the IMF an instrument for pursuing its policy in Ukraine.

Valentin Katasonov
Strategic Culture Foundation
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