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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

IMF Again Has Problems With Ukraine

17 November, 1998 - 00:00

As early as November 6, the IMF Board of Directors decided to give
Ukraine the second $78 million installment within the extended funding
facility (EFF) program. However, the IMF mission is still in Kyiv, and
experts view this as an indication of certain problems: the mission plans
to conduct additional negotiations before the scheduled money is transferred
to Ukraine.

The IMF statement to the Ukrainian government reads to the effect that
the mission is concerned about the many problems related to the continued
fall in budget revenues, delay in raising state-regulated prices, unsatisfactory
implementation of administrative reform, and slow pace in reforming the
energy and agricultural sectors. In addition, the IMF mission warns that
the possible monetary emission discussed by some (including the President)
would exacerbate the risk of inflation and aggravate the situation in the
currency market. An anonymous source informed the Ukrainski Novyny Agency
that the EFF was not canceled, but the IMF was greatly concerned about
budget revenues and the progress of structural reform. The final decision
on granting the $78 million tranche will be made after November 20, the
source said.

"The situation that came about is no surprise," said The Day's
expert Oleksiy Plotnykov, Doctor of Economics, "because Ukraine, despite
official declarations, has not made much progress on the path of reforms."
The optimism of presidential adviser Valery Lytvytsky is not understandable.
Everyone capable of objectively appraising of the economic situation in
this country cannot help but see the vagueness of privatization, extremely
low level of budget revenues, and virtually complete absence of structural
reforms. Surprisingly, the argument heating up over the $78 million, an
insignificant sum to the IMF (earlier, the Ukrainian government expected
to get $125 million) This can mean that the Ukraine's fulfillment of the
terms of the Memorandum (signed between the IMF and Ukraine but still not
made public) is very poor.

Most likely, said Plotnykov, the IMF will give Ukraine the promised
second tranche, but on additional terms, which would include provision
of full transparency of budget revenues, regular NBU audits, as well as
guarantees on keeping state secrets like the size of the NBU reserves.

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