Ukraine is waiting for the fourth tranche from the International monetary Fund from December 2016. The Fund promises to give $ 1 billion. after approval of the updated Memorandum, the terms of which will be fulfilled by the country. It is expected that Ukraine will have to raise the retirement age and to open the land market. Tranche puts at risk the insulating foreign policy Presidnet USA Donald trump and the voice of the USA in IMF – significant, experts say. The government needs the money to replenish foreign exchange Fund, payments on the loans and closing holes in the budget. If the country does not conduct structural reforms, the IMF suspended its cooperation with Ukraine. What if Ukraine refuses to tranche learned website “Segodnia”.
Why the IMF does not give Ukraine a loan
The international monetary Fund has promised to hold a meeting in Ukraine after the revision of the Memorandum of cooperation. As the voice of the USA in weighty IMF, this year Ukraine will be more difficult to get the tranche due to tightened foreign policy trump, the Executive Director of the International Fund blazer Oleg Ustenko.
“The IMF will be more pragmatic and will remain dependent on the United States. The Fund voting weight of a country depends on its share capital, and the U.S. share of 16.5%. The package of 15% gives a right to block decisions”, – said the expert.
Ukraine is important to get the tranche, while the pragmatism in US foreign policy began to be destabilized and trump is not appointed to the Board of Directors of the IMF his man. The managing Director of the IMF Christine Logard in the middle of January, said that left to settle a few moments.
The managing Director of the International monetary Fund Christine Logard promised to soon solve the issue of the tranche. Photo: www.ticinotoday.ch
“I have every reason to believe that the last few technical details that need to be addressed in the next couple of days, will lead to positive result” – said Logard in Davos after talks with Poroshenko.
The IMF Board of Directors will not be exact considering the issue of the tranche up to February 6, according to the schedule published on the website of the Fund.
“For starters, you need to Poroshenko met representatives of the administration trump. When you find a common language with the President of the United States, then we can expect a tranche. The IMF decision is probably the decision States,” adds the President of the Ukrainian analytical center Alexander Okhrimenko.
That Ukraine will have
The country must guarantee the International monetary Fund that could repay the loan. Without reform and economic growth is impossible. Therefore, in the Memorandum with the IMF prescribe the conditions that shall I try to follow. In the document the President, the head of the national Bank and Minister of Finance agree to “patch holes” in the budget and make reforms that ensure that the economy will grow and Ukraine will be able to pay off the loan.
“The international monetary Fund imposes three conditions for all countries to reduce the budget deficit, stabilize the exchange rate and, most important, an immediate structural reform. If the first two to run the government, then reform it is difficult for Ukraine”, – said the Executive Director of the International Fund blazer Oleg Ustenko.
What will be the new Memorandum with the IMF, it is impossible to predict, says Alexander Okhrimenko. Recently in one of the Ukrainian media published allegedly the draft Memorandum with the Fund. It talks about raising the retirement age, the monetization of subsidies, land reform, the audit of PrivatBank, the establishment of a register of recipients of social payments and the creation of a legislative framework for anti-corruption courts and other offices.
“The Memorandum is a secret document. That is published – perhaps in the draft, and possibly fake. Rather, it is a memo written by the government to the IMF. This proposal, which the IMF will agree or not. What will be the final Memorandum, we can not guess,” – said Alexander Okhrimenko.
Without reforms Ukraine risks losing IMF program. Photo: voicesevas.ru
Oleg Ustenko sure that this time Ukraine will have a pension and land reform, to end the privatization and monetization of subsidies.
“Last year the Pension Fund deficit amounted to 6.4% of GDP – is catastrophically much. This is due to the lack of growth and poor investment climate. There are two choices – to cancel the pension in the Central Asian countries, or even pensions to the minimum – but the Ukrainian mentality will not accept such steps. Raising the retirement age to 63 years will do nothing – this is only delaying the problem,” – says Ustenko.
Monetization of subsidies needed in order for the Ukrainians to decide to spend money on insulation of homes, or pay for communal. Privatization needs to be done, while state-owned enterprises have not completely lost their value.
“We privatization does not increase revenue to the state budget and reduce the burden on taxpayers in the future,” – says Ustenko. The earth may attract the investors to Ukraine. But all the land to sell do not need. “There may be compromise – there is a large amount of public land, not shares, you can start with them. That should be enough,” he adds.
“I understand that Ukraine is not ready to assume such commitments and negotiations on more realistic for Ukraine conditions. High probability that the obligations of Ukraine will not perform and this will slow down the cooperation with the IMF”, – said Oleksandr Parashchiy.
The assistance programme of the IMF ends in 2019. Until that time, Ukraine’s economy should recover and the country to pay the loans. This requires that GDP grew 5% annually, says Oleg Ustenko. But in 2016, the economy grew by 1.8%, and in 2017 is expected to increase by 3%. If the IMF will give a loan, it will be more demanding of Ukraine, in the absence of structural reforms and economic growth, the Fund may suspend cooperation with the country.
What if tranche will not
Ukraine is important not installment himself, and the cooperation with the International monetary Fund. The IMF is the last point of contact of the country in acute economic crisis. If the Fund will cease cooperation with Ukraine – it will be a signal to other lenders and investors who are closely watching the decision of the organization.
“Money is of course necessary to replenish the gold tranche of Ukraine and to cover holes in the state budget. But from this tranche depends on the continued cooperation with other partners: the European Commission, the European Bank for reconstruction and development, European investment Bank. Failure in the lower tranche of Ukraine in the financial ratings and bring the country closer to a potential default,” – said Andrew Novak.
If the international monetary Fund will not give a loan, the country will either have to borrow money from foreign exchange reserves or seek creditors in the foreign markets at high interest rates, says Oleg Ustenko. Of 15.5 billion dollars in reserve can take Ukraine $ 4 billion and the rest of the IMF money.
“When foreign exchange reserves reduced by such amounts as it may cause serious disturbances of the creditors of not only Ukraine, but also business. This can hurt private businesseswho are in need of loans. Once the foreign creditor will see that the IMF program is stopped, it does not want to Fund entrepreneurs,” – says Oleg Ustenko.
Ukraine to continue cooperation must fulfill the conditions under which it is signed. According to Alexander Okhrimenko, Ukraine for two years made little pension reform is delayed, and the land annually to block the deputies of the Verkhovna Rada.
The international monetary Fund has opened a four-year EFF program for Ukraine in the amount of $ 17 billion. in March of 2015. She suggested conducting a quarterly review of the program and the allocation of the country in 2015, in four tranches in 2016 – four more. However, the country received three tranches: the first for $ 5 billion. in March 2015, the second at $ 1.7 billion. in August 2015, and the third for $ 1 billion. in September 2016.