Will Ukraine get off with hand slap from IMF?

IMF First Deputy Managing Director Stanley Fischer does not rule out that Ukraine will have to pay off its IMF loans ahead of schedule as punishment for supplying the Fund with false information, the Dow Jones Agency reports.

Mr. Fischer told journalists the IMF Board of Governors was so far considering what kind of measures can be taken in connection with the facts showing that in 1996-1998 Kyiv reported inflated data on its gold and hard-currency reserves. Under existing rules, the IMF can punish Ukraine by insisting that it redeem the outstanding loans well before the deadline.

Meanwhile, after returning from Washington, Prime Minister Viktor Yushchenko has mostly been speaking about the success of his negotiations with the IMF leadership, mentioning reluctantly the violations, referred to as cheating in the Western media, committed by the National Bank of Ukraine when he headed it. And then? Has the IMF’s stand become tougher of late or has Mr. Yushchenko managed to portray it so that it seems to be more favorable toward Ukraine?

Commenting on a possible early payment of IMF loans by Ukraine, Professor Oleksiy Plotnykov, Doctor of Sciences (Economics), chair of the international currency and financial relations department at the National Academy of Sciences of Ukraine, told The Day, “Ukraine, of course, has no money to urgently pay off the previous loans. Moreover, the payments to be made will further aggravate the economic situation. The state could be forced to resort to emission, with all that this implies. Besides, the relationship with the IMF and the World Bank is sure to be complicated, if not ended. Naturally, this would seriously impair the image of Ukraine and its current prime minister who was implicated in the manipulation with IMF money.”

Oleksandr Narbut, deputy chairman of the Taxpayers’ League of Ukraine, gave a slightly more favorable assessment of the events: “In my opinion, Stanley Fischer’s statement in fact shows consistency in IMF’s attitudes. There was a similar example of a not terribly correct loan management by Pakistan. So that state returned the loans received on the basis of doctored statistics. Mr. Yushchenko understood the logic of this decision well before he flew to the United States. As we know, he himself advanced the idea of returning the stand-by loan borrowed during that period (about $200 million). The piquancy of the situation is that the loans in question have already been paid off, for they belonged to the short-term category. So the amount to be returned could turn out to be small and the punishment light, at least at first glance, with no far-reaching consequences for Ukraine. On the other hand, the very fact of taking this punishment will allow us to speak about renewed full-scale cooperation with the IMF. However, the degree of the IMF’s trust in and friendliness toward Ukraine will change, naturally, while its attitude will become more exacting. The IMF is unlikely to repeat its mistake, the more so that the fund’s new leader is going to assume a tough attitude toward debtors. Given the inevitable change in IMF strategies, we should not expect the IMF to decide on the resumption of credit to Ukraine as soon as in June, after the visit of another mission to Kyiv. This means the government will have to draw up urgently a package of measures aimed at improving this country’s real balance of payments.”