Standby loan at arm’s length

An International Monetary Fund mission, which had arrived in Ukraine on October 25, finished its work a day ahead of schedule, leaving this country without a long-awaited decision and, what is more, without the next loan installment. Yet Max Alier, IMF Resident Representative in Ukraine, sounded almost optimistic: “Progress has been made on policies to complete the second review under the Standby Arrangement. We have decided to take a pause to enable some additional technical work to be carried out.” What exactly work? The Fund does not go into this kind of details but still promises to resume the discussion “in the near future.”

However, Ukraine’s former first deputy minister of finance Ihor Umansky has told the media that the Ukrai­nian leadership did not have even a single meeting with the IMF mission. “When the mission came, nobody [from the Ukrainian leadership] met it. I spoke to [the mission members],” Umansky says. “They were shocked. They worked on the level of experts, but, whenever a difficult problem arose, our bureaucrats were quick to shift the blame to Azarov who had refused to meet the mission.” Incidentally, this visit of an IMF mission to Kyiv began on a downbeat note: it is on October 25 that the prime minister said again that Ukraine did not need an IMF loan linked to a household gas price hike.

At first glance, it is quite logical. If Azarov, i.e. Ukraine, does not need an IMF loan, which the whole country has more than once heard him say, then why should he meet these missionaries? The result, too, is self-explanatory. “The mission is leaving empty-handed. It is difficult to imagine that, given this level of mutual misunderstanding, an agreement could have been reached. The government refuses to raise [household gas] rates,” a source close to the negotiators told Reuters.

But the premier’s spokesman Vitalii Lukianenko has denied Umansky’s statement. “The report that the Ukrainian leadership failed or even refused to meet the IMF mission is either an incompetent lie or a provocation on the part of those who, as is known, lied so much in 2009 that they thwarted cooperation with the IMF,” the spokesman said in very harsh terms. “The IMF mission met ministry and agency heads every day. The mission was intensively monitoring the way Ukraine is implementing the cooperation program. Prime Minister Mykola Azarov also met the mission several times.” According to Lukianenko, Azarov thinks that the mission’s efforts to evaluate and review the cooperation program, as well as the consultations in Kyiv and Wa­shing­ton, were rather constructive and positive. “The IMF insists on raising the rates in any case. But we are saying we are finishing the talks with Russia, and whether or not to raise the rates will depend on the deal we are going to clinch,” the premier’s spokesman told Reuters.

Then what about the statement the Ukrainian premier made in Belgrade? He seemed to acknowledge that Ukraine had not been working “closely enough” with the IMF in the last while. “After finishing the negotiations with Russia on the gas price and other conditions, we are going to work closely with the IMF mission on modifying the cooperation program for 2012,” he said. On the other hand, commenting on the flying visit of Ukraine’s Finance Minister Fedir Yaroshenko and Vice-Premier and Minister for Social Policies Serhii Tihipko to New York and their talks with the IMF, while the IMF mission was still in Kyiv, Azarov noted: “There are, of course, some problems and differences in the assessment of the prospects of Ukraine’s economic development next year and about budget revenues, but I do not think these diffe­rences are all too important.”

Azarov is speaking as if it is he who issues a loan to the IMF. But our creditors might be thinking quite differently. Speaking of the impact of the next wave of the global economic crisis on Ukraine, the Advisor of Ukraine’s President Roman Shpek said the other day it was critically important for this country that the current macroeconomic, fiscal, and budgetary policies receive support and understanding from the International Monetary Fund. “It is, first of all, the government and the National Bank that must say a decisive word,” the expert says. “Commercial banks are doing so and are prepared for this. This will enable us to be more resistant to what may occur on international financial markets and have a certain effect on Ukraine.” In a word, the well-informed advisor is dropping quite a broad hint that we are at odds with the IMF.

Valerii HEIETS, full member of the National Academy of Sciences, member of the Board of the Ministry for Econo­mic Development is a well-known economist who never resorts to hints and ambiguities. Addressing the ministry’s extended board, he said in no uncertain terms: “Ukraine seems to be unlikely to derive support from the International Monetary Fund before the end of the current political process.”

Oleksandr KENDIUKHOV, chair of the All-Ukrainian League of Academic Economists, said to The Day: “I do not think the relations between Ukraine and the IMF have broken down altogether.” At the same time, he noted: “In all pro­bability, the IMF is fed up with giving Ukraine the loans that go down the drain, melt away, and are used nobody knows what for.” “As a result, there are no changes in the economy,” the expert says. “While crediting Ukraine, the IMF has always wished us to make structural changes to the economy. But this never happened. As a result, the loans failed to produce the desired effect, and the IMF’s interest in cooperating with our country took a steep downturn. This began a long time ago. Besides, today the IMF and its principal members have to mobilize resources for bailing out the European Union. Accordingly, this created a shortage of credit resources as well as new, more urgent, fields where they should be utilized. Yet I do not think that Ukraine will remain without a loan in this situation because otherwise, given the current pattern of national production, this country will face extremely negative social consequences. Therefore, if we fail to take an IMF loan, we will have to look for other creditors. I think China will be one of them. That country has already credited over 100 billion dollars to the developing coun­tries. Russia, too, can increase its impact on Ukraine by way of giving us loans. Naturally, this will affect our country’s independence.”