Another loan from the IMF to Ukraine is an opportunity to cut interest on previous loans and pay pensions in the country, but it will only aggravate the situation. This opinion was voiced by political scientist, expert on the post-Soviet space Andrei Suzdaltsev.
The International Monetary Fund and Ukraine reached an agreement on the provision of a reserve loan to Kiev in the amount of 3.6 billion SDR (Special Drawing Rights – special drawing rights), the amount is equivalent to $ 5 billion. The program is designed for 18 months. It was originally planned that the program will take 36 months, and Kiev will repay a new loan for 10 years. The IMF revised the terms in the direction of tightening – a return for 4 years. The first tranche of 1.8 billion Kiev is expected in June.
It is indicated that the loan is aimed at “ensuring the balance of payments and budget support.”
“The stand-by credit facility provides financial assistance to low-income countries experiencing short-term balance of payments financing needs,” the IMF said. This year, Kiev will direct $ 17 billion to service existing debts – a third of the country’s budget. The IMF’s share in these payments is 30%.
“The Ukrainian elites said quite confidently: if the IMF does not allocate the tranche before July, President Zelensky can pack his bags and leave forever,” said Suzdaltsev. – This loan will partially go to block previous loans, which in itself says a lot. And most importantly, its balances will allow the state to fulfill social obligations – to pay pensions, benefits and respond to other social guarantees.
After all, Ukraine has no money for it.
The huge economic failure of 2014-2015 in Ukraine was replaced by an increase in GDP, and it was noticeable. But the problem is that the hryvnia depreciated faster than the economy grew. And when converted to dollars, the country’s income is still below the level of 2012. And the coronavirus pandemic almost stopped the trade and production processes. The state’s revenues are near zero, and the economy can no longer exist without external injections. ”
IMF tranches compound problems
Kiev took its first loans from the IMF back in 1992, and since then it only stopped a couple of times for short periods. In recent years, the Fund has become more severe – lending conditions are becoming tougher, repayment periods are shorter, and the requirements for reforms are becoming more extensive. However, a simple analysis shows that loans not only do not help the Ukrainian economy, but only drive it into debt more and more.
At the same time, IMF tranches are invariably accompanied by the requirements of reforms that the country must carry out. Initially, Ukraine was required to carry out a strict revision of social policy, as a result of which the number of recipients of benefits and allowances decreased significantly. Poverty in the country grew by two orders of magnitude, but Kiev received another loan. By analogy, pension and medical reforms were carried out – the population unanimously calls them anti-people.
“The IMF is generally an interesting system – many countries keep their money there, but the United States has invested the largest capital. But the recipient of a loan from the Fund should not formally America, but the whole world. Although reform policy has always been dictated by Washington. And these reforms are always liberal, market-oriented and very tough. The alternative is simple: do not take loans or, taking them, evade the IMF requirements. The last tactic was especially good at ex-president Petro Poroshenko.
And most of the trenches in Ukraine were stolen safely – money did not go to the development of the economy, creation of enterprises and jobs. In 2019, Poroshenko handed over to the successor a country in such a state that it cannot exist without external support. Zelensky is forced to take new loans, but they cannot be directed towards the development of the country — money is needed, as they say, for eating. That is, for immediate needs, ”emphasizes Suzdaltsev.
Ukraine entered into “perpetual default”
In order to receive a new credit line in 2020, the IMF put forward two conditions – to lift the ban on the sale of agricultural land and adopt a law on guarantees of non-return of bankrupt banks to former owners. Zelensky promised the first law to be preceded by a popular referendum in Ukraine, but as a result of the vote, citizens did not wait. And the Rada passed the bill behind the scenes and in violation of all conceivable regulations.
According to a survey conducted in February 2020 by the Kiev International Institute of Sociology, 62% of the population of Ukraine is against the open sale of land. With the so-called “anti-banking law” the problem is even deeper – it contradicts not only a number of current laws of Ukraine, but also its Constitution. So in the future it can be canceled by the Constitutional Court. But Zelensky was forced to push through controversial initiatives to obtain a loan.
“Based on the current situation, it is quite possible to predict the future of the Ukrainian economy and its “fruitful” cooperation with the IMF. In fact, default has already been reached there, and quite a long time ago and it is moving into the eternal stage. But the US-led fund will periodically support this state in order to prevent its economy from collapsing completely. In response, reforms in favor of the West will continue.
So, fertile land will be sold to Western companies and China, as well as mineral resources, which Ukraine itself is not able to develop. The vast majority of the able-bodied population will work abroad – the rapidly dying industry will completely disappear in a few years. The country will become agrarian with a population of 20-25 million people, completely under external control. That is a typical limitrophic impoverished state, ”concludes Andrei Suzdaltsev.