Grounds for reform and countless debts

This week may well mark an important phase in the restoration of full cooperation between Ukraine and the International Monetary Fund — and, consequently, with other international financial organizations. Kyiv is preparing to play host to Paul Thomsen, Deputy Director and Mission Chief, European Department, IMF, and Thanos Arvanitis, mission chief for Ukraine. It is doing its utmost to improve Ukraine’s position during talks with the Fund.

Says Iryna Akimova, first deputy head of the Presidential Administration: “I am absolutely convinced that IMF money isn’t what Ukraine needs in the first place — for money is a secondary issue. Rather, we need a positive signal to the effect that our cooperation will continue.” Akimova is sure that a compromise will be achieved during the talks with the IMF, and that this will allow to resume cooperation before summer.

What inspires this hope given the current situation, which differs from the time when Yanukovych’s first government rejected IMF monetary injections in conditions of powerful Ukrainian economic growth? First, the current administration is relying on a single and rather strong (let’s face it) mechanism, the vertical of power that allows to implement a dynamic economic policy. “We will lower budget deficit and stabilize public debt; we will ease the tax burden and expand the basis of taxation. We will lower the inflation rate, secure loans for the economy and develop the financial market; we will enhance the regions’ financial and disbursement autonomy,” promises the president of Ukraine. The question is: Will he be able to make his government keep these promises? Anyway, the first 100 days in power show that this administration is determined to act in a decisive manner, and that it knows how to go about carrying out immediate and long-term tasks. Speaking of reforms, the head of state informed about plans to complete privatization and at the same time secure effective management of state property. He also promised to achieve a free trade-area and visa-free regime with the European Union.

The IMF appears to be accepting Yanukovych’s reform action plan, albeit with a degree of criticism. “This is an excellent basis for achieving consensus in terms of reforms. The next step will be a detailed action plan with concrete measures, deadlines, interim objectives, and implementation responsibilities,” says Max Alier, IMF Resident Representative in Ukraine.

Without a doubt, those in power will receive enough sharp criticism, possibly along with constructive assistance, from the strong Ukrainian opposition — from both its political and financial wings. Viktor Pynzenyk, ex-Finance Minister, currently head of the Ukrainian Reforms Relief Foundation, warns that the current administration may overdo it with crediting, including foreign loans: “The previous government increased Ukraine’s public debt for 2009 by 127.5 billion hryvnias. The current administration has decided to outdo it and increase this debt by 313 billion over two years.” He is echoed by the head of the “united opposition,” Yulia Tymoshenko who says that Mykola Azarov’s government has failed to secure an increase in social payments by justifiable economic measures: “All this has been done using the banal source of monetary emission. Over the period Yanukovych has been in office these emissions for budgetary needs have done as much as our government did over two preceding years. Mind you, I’m talking about several months, a hundred days!