What Ukraine agreed with the IMF: how a Memorandum changed people’s lives.

Ukraine a few days ago agreed on the final version of the Memorandum of cooperation with its main creditor – the International Monetary Fund (IMF). As a result, this month the government expects to receive next loan tranche of one billion dollars. The terms of the Memorandum for a few months discussing politicians and public figures, as you know, the IMF recommended Ukraine to raise the retirement age, to open the land market and keep the price of gas at economic levels. The document itself is still not released, but part of the agreement revealed by Finance Minister Alexander danyluk. The website “Today” has found how the Memorandum with the IMF can change the lives of Ukrainians.

A Memorandum kept secret

Another fourth of March the head of the IMF mission in Ukraine Ron van Ore confirmed that Ukrainian authorities have agreed on an updated version of the Memorandum on economic and financial policy. “This will allow us to conduct a third review of the program of cooperation involving the use of the extended financing facility, as well as approve the technical report on economic situation”, – said the representative of the mission. That the negotiations were successful, on his page in the social network said the Finance Minister Oleksandr danylyuk.

The conditions of the loan are traditionally kept secret. Earlier, the Minister sotspolitiki Andrey Reva said that IMF urges Ukraine to raise the retirement age, it is also known that, according to the IMF, Ukraine needs to open the land market.
The final version of the Memorandum did not show even the MPs. The leader of one of parliamentary fractions has said: if the government did not publish the text of the Memorandum, the legislators filed a complaint to the constitutional court. Unofficially, the MPs say that the document is decided not to publish “because of the difficult social situation in the country.”

The managing Director of the International monetary Fund Christine Logard. Photo: archive

Recall that in 2015 Ukraine signed with the IMF’s expanded lending program for four years. The last tranche of a billion dollars was in September last year, just Ukraine should receive credits 17.5 billion. Ukraine to receive the next tranche agrees to do “homework”, as described in the Memorandum. So, last year, the Ukrainian authorities have promised to develop a mechanism of monetization of subsidies to reduce norms of energy consumption, to gradually resolve the pension age, to tighten the criteria for receiving the minimum pension, reduce the hospital staff and give them autonomy.

How to change the life of Ukrainians after the signing of the Memorandum

The market land. Ukrainians sell the land for agricultural purposes are not entitled to, instead, concluded a lease agreement with the shareholders. Has signed a 4.7 million contracts for a total area of 16.6 million hectares – half of the entire land of private ownership. Often the rent is low, but otherwise to dispose of his property, for example, to sell the land, the Ukrainians have no right. The IMF last year recommended that the Ukrainian authorities to allow the sale of land.
Ron van Ore confident that the existing moratorium on the sale of land does not develop the agricultural sector and does not allow to use the land as collateral to obtain loans. “For Ukraine it is important to move forward with land reform and to submit to Parliament new legislation that will allow the sale of land”, – said the IMF representative.

Prime Minister Vladimir Groisman has recognized that one of the key points of the Memorandum turnover of lands. However, exactly when and how Ukraine will have the market, is currently unknown.

“How many years of land markets almost don’t exist in fact and de jure. In practice it is, lands are bought, sold, everything is gray, the strange schemes,” said Minister of Finance Oleksandr danyluk, noting that it is necessary to ensure that the land market is earned, especially for the agricultural sector.

“How many years of land markets almost don’t exist in fact and de jure. In practice it is, lands are bought, sold, everything is gray, the strange schemes”, – said the Minister.

Pension reform. Vice-Premier of Pavairosana on one of his press conferences said that raising the retirement age in the Memorandum. The main recommendation of the Fund to reduce the pension Fund deficit and to make the existing system fair. Now the Cabinet of Ministers is finalizing the draft pension reform, which, according to Groisman, would eliminate the multibillion-dollar deficit in six years.

As told “Today” in the Pension Fund, officials are considering the possibility to oblige to pay a tax to the pension Fund of all working Ukrainians without exceptions. “In the world applies the obligation of payment of insurance contributions for the whole working population. We’re still studying this and other methods. But there are methods, such as voluntary involvement, and compulsory payment”, – says Mykola Shambir.
Some of the new pension system has already been voiced in the Cabinet:

Pensioners will be banned from working. According to the Minister sotspolitiki Andrey Reva, will affect not all Ukrainian pensioners, but only “the rich.” So, thousands of Ukrainians receive pensions of more than 10 thousand hryvnia, and some pensioners, for example, judges who on retirement receive more than 200 thousand hryvnia. Pensioners with high pensions, assume in the Ministry, can deny to work (then you have to choose: either salary or pension).

Ukraine will receive credit tranche of one billion dollars. Photo: inforesist.org

Experience will reduce, and it will be available. According to the law, in 2021-m retired can qualify for the Ukrainians with a total experience of no less than 30 years, those in the country only 8%. Insurance experience will be reduced to 15 years from the first of January 2018, announced in the Ministry. This will be an opportunity to buy itself 15 years of insurance experience. For 704 UAH per each month. In 10 years you will have to pay 84 480 hryvnias, and for 15 years, 126 720 hryvnia.

Ukraine last year has promised the IMF:

  • gradually resolve the pension age
  • to reduce the list of those who before retiring;
  • to tighten the criteria for receiving minimal pension;
  • to create the conditions under which it will be profitable to declare actual income (unshadowing of wages);
  • from 2017 to Fund supplements to pensions from the state budget, not PF;
  • to expand the base of taxpayers ERUs;
  • consolidate the legislation on the pension system (currently there are 20 laws).

To change the situation in the banking sector. As noted by danyluk, the Memorandum also provides for a gradual reduction of the state share in the banking sector. “Now we own as a state 55% of the banking system. This is a very high proportion, and we need as soon as possible to improve the performance of these banks so that they do not “distort” competition and plan how to get out of these banks, because it is clear that the state can not possess 55% of the market, it harms economic development,” – stated the Minister.