On 3 April the Board of the IMF concluded that the government of Ukraine has fulfilled only five of the fourteen envisaged reforms. However, Ukraine has received another billion dollars in financial support for the reform program. If the decision on granting Ukraine a fourth tranche of transparent? And why the IMF has put forward so many requirements, when it needs to deal only with macroeconomics?
Before answering these questions, it is important to understand what the IMF and what not.
No international organization can not compete with the IMF in efficiency and effectiveness. The Fund has much more money than anyone else. Moreover, its funding is growing with each new challenge. Compared to other organizations, the IMF staff is better qualified, and the level of payment is much higher. The Foundation has a clear mission, and due to the strict hierarchy it functions as the army.
The managing Director or the first Deputy shall order, and the mission of the IMF is dispatched to a new location within a few days. Even in the most difficult circumstances, the agreement may be concluded within two weeks and after two weeks, the IMF Executive Board makes a decision. The next day, billions of dollars can be paid without any governments or parliaments.
The IMF may act thus, because he has a limited mandate. It needs to support macroeconomic stability, that is, to keep the country from defaulting and to contain inflation, which usually means the requirement to control the budget deficit, tight monetary policies and realistic exchange rate policies. In turn, the IMF can offer large and timely payment of loans to bolster the depleted reserves of the Central Bank.
11 March 2015, when the IMF Board adopted the current stabilization program for Ukraine 17.5 billion dollars, he has decided to transfer $ 5 billion immediately. The money was transferred the next day by doubling a tiny foreign exchange reserves of Ukraine.
No one but the IMF would not be able to do so. If the government of a country and tried, he would have had to go through a long and complex process in Parliament, and Ukraine, meanwhile, have sunk deeper would the financial crisis.
Why the IMF has provided Ukraine with the fourth tranche, despite the fact that the government has fulfilled less than half of the Fund’s requirements regarding structural reforms? The fact that Ukraine executed the most important macroeconomic conditions, in particular, balanced the budget. It was expected that the budget deficit in the country will reach 3.7% of GDP, but he stopped and 2.3%, which can not fail to impress. Inflation was somewhat less than required, although the external deficit and found a few more; the exchange rate stabilized in harsh environments.
The question a large number of structural requirements of the IMF seems to be quite justified. These conditions cause the most complaints in Indonesia and South Korea during the Asian financial crisis in 1997-1998. But the IMF cannot ignore the widespread opinion of the need for more resolute struggle against corruption in Ukraine and the work on the restoration of social justice. The formal justification for the IMF requirements to serve macroeconomic goals.
During the last period two essential conditions for the reforms was the nationalization of undercapitalized PrivatBank and the launch of electronic Declaration system for 100 thousand officials. Both conditions are met, and those items that Ukraine still has not fulfilled, was not so important.
To receive the next tranche of Ukraine should carry out at least 16 structural reforms, but two of them are special: the adoption of pension reform by the end of April, and the bill of sale until the end of may. If these two conditions are fulfilled, I assume that the IMF will approve the fifth tranche by June.
Is it good for Ukraine’s cooperation with the IMF? Definitely Yes. Because of IMF loans over the past two years, the Ukrainian currency reserves grew from $ 5 billion to $ 16.7 billion, which allowed to stabilize the exchange rate and curb inflation. Now Ukraine has all the prerequisites for meaningful economic growth.