Debt rally

In these hot days the Ukrainian shadow government, which did not show much activity earlier, went silent for good and has not produced anything worthy of media coverage even with regard to such highly debatable issues as raising the retirement age and gas prices for the population. In these conditions, the government is increasingly insistent and even tries to use force rather than normal discussion; in particular through a statement of its press service that demanded to stop political speculations in connection with the resumption of Ukraine’s cooperation with the International Monetary Fund.

In view of this one wonders what and from whom the government has the right to demand in our country? No one challenges its right to demand normal work from numerous government officials and even municipal officials, as well as from all other employees who are financed from the state budget. However, if we turn to the Constitution, it does not contain even a hint that the Cabinet of Ministers has the right to demand anything, except abidance of the law, from citizens, experts, the mass media, and all the more so from the opposition. Even the memorandum signed by the Ukrainian government with the IMF, which is not subject to ratification by the Verkhovna Rada and thus has no legal binding force for citizens, is not mandatory at all. Therefore, the very form of public address (no specific addressee is indicated) raises the suspicion of legal ignorance and thus adequate satisfaction.

However, one can understand the essence of the statement itself. Citizens are advised to listen to the moans and promises of the government. For example, the statement emphasizes that it is important for Ukraine to receive a new IMF loan, because this “will make it possible to restore the financial system, secure the stability of hryvnia’s exchange rate, enhance the attractiveness of the country for investors, and regain the trust of the international community; this will eventually lead to a higher standard of living of the Ukrainian people.” The authors argue that the current, unpopular measures were inevitable because they were used by the previous government headed by Yulia Tymoshenko, which “bought Russian gas for USD 330 and sold, flirting with the population before the elections, for USD 50.” “By covering the difference with borrowed money, she [Tymoshenko] effectively paid for her elections using IMF loans. In this way, aspiring for power at any cost, Tymoshenko drove Ukraine and each one of us, including Ukrainians that are yet to be born, into colossal debts,” says the statement. From December 2007 through February 2010 state debt has more than tripled, and reached 316 billion hryvnias. “The unjustified gas price unbalanced the economy and became a real problem for the state and family budgets,” reads the statement. “However, because it is impossible to live on debt forever, there is a need to change, based the laws of market economy, the price [on gas] for the population by raising it by 50 percent. There is simply no other way to preserve Ukraine’s economic independence, stabilize its finances, cut the state debt, and stop the ruination of the domestic oil and gas industry, and housing and communal services.”

However, who told our government that the debt rally, just like the rally of domestic gas prices, is the only alternative? A representative of the Cabinet of Ministers should go to the nearest supermarket and study the prices of ordinary bottled water of Ukrainian and foreign making. It turns out that the prices differ. In this heat most of our citizens prefer the domestic product which costs, naturally, half or a third of a foreign one. Wouldn’t it be good to set the prices on an equal level? The reasoning would be the same as with gas. And what effect it would produce! How high would our oil and gas industry rise — it also extracts large amounts of water from its oil wells! Absurdity?

However, when this trick can be pulled off with gas, why can’t the same be done with water? And you say there is no alternative to yield to the dictate of the IMF.

This alternative does exist. MP Vasyl Khmara, member of the Party of Regions and head of the largest trade union association in Ukraine, said the other day, “The president is personally against it [fulfillment of the IMF demand to raise the retirement age]. He understands that sooner or later we will need to return to this issue…Under the current conditions and current standard of living this must not be done, and I am sure that we will not meet this clause of the agreement.” He added that this obligation could not have been avoided when the memorandum was being signed with the IMF, because this was a principled position of the fund. “In the past and in the previous memorandum similar demands were set,” continued Khmara. “And they were not fulfilled. I believe that this part of the obligation will likewise remain unfulfilled. However, it was impossible to remove it because this was a categorical demand of the IMF aimed at making money work.” The MP has doubts that the IMF will discontinue cooperation with Ukraine if it refuses to fulfill the requirements included in the memorandum. “Obligations have been assumed; cooperation has been launched, and I believe that now the IMF will not refuse further cooperation,” said Khmara.

Ukrainian communists have a different approach. Their leader, Petro Symonenko, suggests holding a national referendum on further cooperation with the IMF. The position of the left-wing sources is clear: it enables them to keep their electorate.

What surprises is the fearlessness of Serhii Tihipko, the “firm IMF follower” and “strong Ukrainian,” and vice prime minister for economic issues. He disagrees with both Khmara and Symonenko. He is totally unafraid of the responsibility for unpopular reforms. In his words, the IMF demands regarding pension reform in Ukraine should be fulfilled in order to avoid the bankruptcy of the state. Tihipko hopes that he will be heard on the other side of the ocean and assures that Ukraine will fulfill all its obligations before the IMF, despite statements made by certain politicians. There is no arguing with the vice prime minister here: the state has to honor its obligations. However, the question is who it should consider its main and foremost creditor: citizens, many of whom fail to reach retirement age, or international financiers?

Meanwhile, Ukraine is becoming the largest debtor of the IMF — it is now second only to Romania. According to IMF data, Ukraine owed a fifth of the total debt of all countries to the IMF on standard crediting programs. The recently approved stand by credit for Ukraine is the fourth largest credit line, yielding only to Greece, Romania, and Hungary. If money under this program is issued in full and on time, 2013 will be the peak year for payments to the IMF (USD 6.3 billion). According to the calculations of IMF experts, in order to service its fo-reign debts in 2013, Ukraine will have to pay the total of 21.3 percent of its GDP and 41.3 percent of revenue from commodity and services exports. A fair share!