Thursday, October 2, 2014

Former IMF Official: 'Is Ukraine a Bottomless Pit?' - Russia Insider

Desmond Lachman, former deputy director in the International Monetary Fund's Policy Development and Review Department, observes that "the discussion of Ukraine's external financing needs...[has] the air of the surreal", and will likely cost $100 billion, far more than initially estimated, most of which will have to be paid by the US taxpayer.

Writing in The Hill, Lachman points out some uncomfortable truths:

At a time when the International Monetary Fund (IMF) is estimating that Ukraine might need at least an additional $19 billion of external official support to see it through 2015, the White House has agreed to provide Ukraine around an additional $50 million in assistance. This leaves unanswered the basic question as to from where the remaining $18.95 billion is to be obtained. One would have thought that this question would have been the main topic under discussion during Poroshenko's U.S. visit. This is particularly so considering the very magnitude of the official external support that Ukraine might require to keep its economy afloat and considering that one way or another, the U.S. taxpayer is going to be on the hook for at least a part of this assistance.

The question of Ukraine's external financing needs is all the more important given that it is all too likely that the IMF is lowballing Ukraine's needs in much the same way as it did in its Greek bailout program. Last May, at the time it launched its Ukraine lending program, the IMF estimated that Ukraine might need around $35 billion in official external support. Today, some six months later, it is estimating that Ukraine might need around $55 billion in official external financing. If the repeated upscaling of the financing needs of the IMF-EU Greek bailout program is any precedent, one should not be surprised if the total official bailout cost for Ukraine came closer to $100 billion rather than the $55 billion that the IMF is now estimating.

Complete story at - Former IMF Official: 'Is Ukraine a Bottomless Pit?' - Russia Insider

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