Ukraine and the IMF

[Gotno Gizmo]

Many Ukrainians were unhappy about their country negotiatiating a loan from the IMF. One young student I spoke seemed reluctant that his country should become indebted to "capitalst bankers". I didn't sympathise with his point of view at the time, but the more I read about the recent IMF loaning arrangements to the ailing European economies, the more sceptical I become about the IMF's dealings and who infact is the real beneficiary of these arrangements.

An American lady who says that she is now "living in exile" and has written these comments about IMF activities on a website:-
This is how the IMF protection scam works:

Step 1: The IMF offers you a loan (as they did Hungary in July and Ireland in November).
IMF loans come with draconian conditions – structural adjustment programs, intended to open your country to foreign corporations. There is an immediate demand for your government to slash public spending – on education, health care, social services and basic needs, such as clean drinking water. Forcing a country to privatize their public water services immediately creates a market for multinational water monopoly to move in. Likewise forcing them to privatize health services (all industrialized countries, except for the US, have national health systems) creates more favorable markets for drug and health insurance companies.

Step 2: If you refuse the loan, the ratings agencies waltz in and bankrupt your country by downgrading your credit rating. Since the 2008 economic collapse, all industrialized countries have been running large deficits. And because it’s political suicide to raise taxes on the rich, they borrow the money they need to run government services from Wall Street investment banks. With a low credit rating, Goldman Sachs can jack your interest rate as high as 8%, and your country goes broke trying to make the interest payments.Economic Blackmail vs CIA/Military Intervention
Apparently the IMF has greatly refined their technique since the seventies and eighties – relying more on economic pressure than brute force. As John Perkins describes in his 2004 Confessions of an Economic Hit Man, third world countries that refused IMF loans used to be threatened with covert CIA destabilization and regime change – or even political assassination. Obviously economic blackmail is a less expensive and more predictable approach.

[Gotno Gizmo]

At the recent press conference of the IMF the following report was made in connection with the IMF loan to Ukraine.
I will be watching with interest what impact the "Fiscal adjustment " will make upon the already stressed low wage earners and others within the country. The report reminds me of the company reports that I used to read when in employment. They where always assertive and upbeat, but never negative.

“Ukraine’s satisfactory performance under the economic program supported by the Stand-By Arrangement, along with strong policy commitments for the coming year, are supporting a steady recovery in confidence and broadening of economic activity. The authorities remain committed to timely implementation of fiscal, energy, and financial sector reforms that are essential to achieve program objectives. Sustained implementation of reforms will help entrench macroeconomic stability, boost confidence, facilitate access to capital markets, and promote more balanced and robust growth.
“Fiscal adjustment remains at the core of the program. In the near-term, swift approval of the 2011 budget consistent with program targets, along with tight control over budget execution and efforts to improve tax administration, will be crucial. Longer term fiscal sustainability depends crucially on structural reforms in the areas of pension, public administration, and state-owned enterprises. In this regard, the timely approval and implementation of the pension reform legislation submitted to parliament will be key.
“Recent steps to strengthen the financial position of Naftogaz, including through revenue collection improvements, are also important. Further efforts, including gas price increases and structural reforms, are needed to create a more viable and transparent energy sector.
“Important progress has been made in rehabilitating and restoring confidence in the financial system, including private bank recapitalization and steps toward strengthening the supervisory framework. It is now timely to expedite the implementation of measures necessary to tackle the problem of sizeable impaired assets in the banking system that are hindering financial sector’s support for a sustainable economic recovery.”

[Gotno Gizmo]

NRCU News Release:

It was disclosed by the IMF Resident Representative in Ukraine Max Alier at a press conference, that the Executive Board of the International Monetary Fund could offer the next tranche of the loan in two weeks to Ukraine.

He reminded that the IMF Mission recently visited Ukraine. "Within the frames of the program, USD 15-16 billion should be transferred to Ukraine. USD 3.4 billion will be in that particular tranche. The analysis was carried out and USD 1.6 billion was signed in the form of a loan to Ukraine."

[Gotno Gizmo]

Ukrainian unions demand IMF end harmful loan conditions]

The ITUC-affiliated FPU today planned a demonstration in front of the IMF's office in Kiev and demanded that the Fund put an end to loan conditions that have led to cutbacks in social programmes, notably a pension reform bill that would decrease living standards of Ukrainian pensioners. Ukrainian trade unions have made proposals that would increase contributions to the pension systems by reducing informality and avoid the cutbacks, but these have not been taken up in the current pension reform bill. Ukraine has had two crisis loans from the IMF since October 2008; the current one is for $15 billion.

[Gotno Gizmo]

Article taken from the People First Foundation website:-

IMF warns against worsening conditions for business

Following an official International Monetary Fund (IMF) visit in February, Max Alier, IMF Resident Representative in Ukraine, noted that despite short-term macroeconomic improvements, problems in the economic system of Ukraine, tax legislation and customs regulation are worsening. Regarding the agricultural sector, Alier mentioned that the totally non-transparent distribution of grain sales quotas might force all foreign investors out of the agro-industrial complex altogether. The IMF representative stated that the restoration of the Ukrainian economy hinges on the issue of insecure loans and the protection of creditors' rights. Foreign investors, among them "ArselorMittal Kryvyi Rih", inform that VAT debt is increasing by 300 million UAH every month.

Although Ukraine continues to be characterised as a nation of great potential, the IMF representative clearly stated that business conditions in the country are getting worse. The failure of the authorities to act might jeopardise the rates of national growth together with the development of Ukraine's potential. The next tranche of $1.6 billion would be better secured if the government implement pension reforms before the end of the month. However, even if these funds are successfully acquired one has to question how the allocation process will be monitored to ensure that the money reaches those causes for which it was intended.