Wednesday, March 18, 2015

Revealed: The harsh terms of IMF loans agreed by Ukraine gov't - New Cold War: Ukraine and Beyond

By Ivan Katchanovski (University of Ottawa), March 9, 2015

  Ukraine for sale under IMF oversight

 Leaked documents, which were previously kept secret by the leaders of Ukraine, show that as a condition of getting a new IMF loan, the Ukrainian government agreed inter alia to the following: raising prices for natural gas and heating to households to the level of prices for imported natural gas by April 2017, starting with the first increase in April 2015 cutting 20% of state employees in 2015 reducing the number of higher education institutions from 802 to 317 and raising the retirement age by 5 years.

Such economic policy would increase the household prices for natural gas by more than ten times and bring the combined utility payments for energy to the levels approaching or exceeding wages and pensions of a significant percentage of Ukrainians. Such price shocks would be coupled with expected continuation of the economic crisis, which has already resulted in three fold devaluation of the Ukrainian currency, significant declines in GDP, industrial output, real wages, and export and significant increases of inflation and unemployment.

 The Ukrainian central bank has asked the IMF to maintain its current practice of parallel exchange rates and currency controls, which include an official lower rate set by the central bank and much higher black market exchange rate. The IMF agreement does not include political conditions, such as ending the civil war in Ukraine and democratization of its increasingly undemocratic political system.
The agreement and the economic policy based on the Washington Consensus fail to address key institutional issues that would prevent such shock therapy from working in Ukraine, such as corruption, property rights, social capital, and oligarchic capture of the state. The current agreement with the IMF is likely to be only partially implement as was the case with previous such agreements.

In either case, ordinary Ukrainians who were misled by the Maidan opposition leaders/current government leaders and the Ukrainian media with promises of EU standards of living, are likely to suffer the economic shocks without any prospects of reaching EU standards of living in the next years and decades.

 Complete story at - Revealed: The harsh terms of IMF loans agreed by Ukraine gov't - New Cold War: Ukraine and Beyond

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