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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

An Unenviable Stroke of Fortune

2 February, 1999 - 00:00

Delegation of creditors are again ready to believe government promises

By Iryna KLYMENKO,The Day
The first round of talks with the International Monetary Fund mission ended
on January 26 in Kyiv. As The Day predicted, the government failed
to get a final answer to the question of whether Ukraine would still get
its loan.

IMF mission head Muhammed Shadman-Valavi hastened to calm any trepidation,
saying that this intermediary stage of negotiations does not mean the end
of the IMF mission's work in Ukraine. "We have agreed to suspend discussion
for a few days and then resume it," said he. The government seems to have
to be content with what little it has. "The talks were successful for Ukraine.
As of today, I see no problems and think we can hope for positive recommendations
of the mission to be submitted to the IMF Board of Governors," said Natalia
Nesterenko, chief of the Cabinet of Ministers department for relations
with international financial organizations.

The Ukrainian News Agency quotes an informed government source as saying
that next week Ukrainian representatives, including National Bank Governor
Viktor Yushchenko, Deputy Premier Serhiy Tyhypko, and perhaps the Prime
Minister, will meet IMF and World Bank officials in Washington, DC. The
source specified that the visit is aimed at a final discussion of the results
of the extended financing facility (EFF) program for the past few months
as well as of the conditions for the program's continuation. Should the
mission make positive recommendations, the IMF Board of Governors may decide
later in February to issue the EFF installments for November, December,
and January totaling about $230 million.

It should be noted that behavioral motives of the borrower (the Ukrainian
government and the National Bank) are more transparent than the creditor's
in this endless negotiating process. There is a category of eternally unlucky
borrowers who still contrive each time to persuade a sponsor (note, not
creditor) to believe them one last time and give them money. Strange but
true is that the five years of absence of the serious reforms, which the
West has every reason to consider it has paid for, still has not brought
home to the mission members the illusory nature of assurances "to correct
everything rapidly, in a matter of two weeks." And should one really trust
the Prime Minister that the government is on the point of "carrying out
the structural, including administrative, reform," so indispensable for
continuing the EFF program? In other words, this is a promise to do something
not only the government but President and Verkhovna Rada lack the political
will to do.

Meanwhile, one thing forces the IMF to do precisely what our domestic
pseudo-reformers expect. It was noticed that the fund never undertakes
actions capable of provoking an immediate financial collapse. Yes, the
fund might postpone a decision, thus blackmailing the inconsistent politicians.
It may insist on something, promising certain compromises, but it will
never be openly push a country into financial chaos. It something else
entirely if such chaos happens anyway (the government's first endurance
test will come because of its accepted a "currency thaw" under IMF pressure).
This is a case where Western partners will show an all too firm capitalist
pragmatism. In fact, the current strategy of Ukraine's political leadership
boils down to one simple tactic: let's hold out a day or two, and then
suck out everything we can.

 

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