Tuesday, March 10, 2015

For Ukraine, the Battle to Bolster a Crashing Economy Is as Dire as Combat in the East | RAND

by Olena Bogdan

Ukraine's fight to control its destiny is underway not only on its eastern battlefields but also in the halls of its parliament and in those of global financial institutions. The struggle to keep the former Soviet state afloat economically has been daunting, as the nation's parliament has fallen into disarray and failed to enact major economic reforms.

The country's gross domestic product fell by an estimated negative 8.2 percent by 2014's end. Government reserves have fallen to $7.5 billion, the equivalent of less than two months of imports. Ukraine's economic woes could get worse: If Western creditors, and the International Monetary Fund in particular, do not approve a recently negotiated $17.5 billion package, the nation will be deemed to be in default.

Ukrainian lawmakers could help improve the economic situation, particularly by dealing better with the national budget. But their recent deliberations inspired little public confidence.

The parliament launched its consideration of the 2015 budget at the end of 2014, laboring until 4 a.m. Dec. 29 to barely approve it — 233 of 450 of them voting in favor. The nationally televised discussions had lasted two weeks, and, at one point, lawmakers said the budget had undergone so many changes they needed a timeout so amendments could be incorporated into a plan that all could see. Rather than waiting, lawmakers jumped ahead in their deliberations.

The budget was published Jan. 1 to meet a legal deadline. But Ukrainian leaders quickly termed the budget provisional and said it would be subject to revisions as soon as January. A number of amendments were passed earlier last week (March 2).

That left a handful of top Ukrainian negotiators with the tricky task of persuading international lenders at a critical moment to provide billions of dollars more in aid without evidence the country would undertake reforms needed to enable it to repay the debt.

Complete story at - For Ukraine, the Battle to Bolster a Crashing Economy Is as Dire as Combat in the East | RAND

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