IMF team leaves Ukraine with­out new loan prom­ise

Eco­nomic re­struc­tur­ing progress in­ad­e­quate

Kuwait Times - - BUSINESS -


The In­ter­na­tional Mon­e­tary Fund said yes­ter­day its team had ended a visit to Kiev with­out see­ing suf­fi­cient eco­nomic re­struc­tur­ing progress to re­lease a new loan to Ukraine this year.

The im­pov­er­ished and war-scarred for­mer Soviet repub­lic had been hop­ing to re­ceive a $1.3-bil­lion ($1.2-bil­lioneuro) tranche pay­ment in Novem­ber from a res­cue pack­age of $17.5 bil­lion agreed with the Fund in 2015. But Kiev has only seen $7.6 bil­lion of that money due to foot-drag­ging by pop­ulist law­mak­ers in par­lia­ment over deeply un­pop­u­lar belt-tight­en­ing mea­sures pre­scribed by the Fund.

The IMF last re­leased a $1-bil­lion tranche pay­ment in Septem­ber that Kiev had ex­pected to see last year. A state­ment from the Fund’s mis­sion said the pro-Western gov­ern­ment still needed “some time” to adopt all the eco­nomic pre­scrip­tions man­dated un­der the fouryear pro­gram.

“While good progress has been made, the au­thor­i­ties need some more time to im­ple­ment poli­cies to en­sure medium-term fis­cal sus­tain­abil­ity-in­clud­ing adop­tion of the 2017 bud­get con­sis­tent with pro­gram tar­gets-safe­guard fi­nan­cial sta­bil­ity, and tackle cor­rup­tion,” the IMF team said.

“Dis­cus­sions on these poli­cies will con­tinue in the pe­riod ahead.” Ukrainian me­dia re­ported the IMF had out­lined five points that Kiev must com­ply with in or­der to re­ceive fu­ture pay­ments.

The first in­volves ob­tain­ing cap­i­tal to keep 12 large and sys­tem­i­cally im­por­tant banks afloat. An ear­lier cen­tral bank stress test found that 28 of 39 lenders checked lacked the re­quired cash at hand to sur­vive another po­ten­tial eco­nomic cri­sis.

The Fund also wants the gov­ern­ment to start grad­u­ally rais­ing house­hold bills for gas and cen­tral heat­ing to “mar­ket lev­els” start­ing in March 2017. Ukraine has al­ready slashed its util­ity sub­si­dies and saw loud street protests from pre­dom­i­nantly pen­sion-age peo­ple who can­not af­ford the new bills.

But econ­o­mists view Ukraine’s sub­si­diza­tion of its en­ergy sec­tor as one of the largest drains on the state bud­get. The IMF also wants the gov­ern­ment to turn its loss-mak­ing state gas and oil com­pany into a prof­itable ven­ture by the end of 2017.

It fur­ther would like to see Kiev speed up its pri­va­ti­za­tion ef­forts and sim­plify its out­dated tax sys­tem.

Ukraine has pulled out of a dire twoyear re­ces­sion by record­ing nine con­sec­u­tive months of eco­nomic growth. But the Fund’s state­ment said that Ukraine’s gross do­mes­tic prod­uct “is still very low-just 20 per­cent of the EU av­er­age, the sec­ond low­est level of all cen­tral and east­ern Euro­pean coun­tries.”

It also noted that “tan­gi­ble re­sults in pros­e­cut­ing and con­vict­ing cor­rupt high-level of­fi­cials and re­cov­er­ing pro­ceeds from cor­rup­tion have yet to be achieved”.

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