Ukraine between the Devil and the Deep Sea. What are pre-conditions of IMF for releasing loans to Ukraine?
Dispatch News Desk News agency reports from Kiev: Maidan Euro crises now reaching to its ultimate results as international forums are demanding withdrawal of subsidies on gas and no hard cash is coming from western countries and IMF is dictating its terms for release of loans. What structural reforms IMF needs from Ukraine and what are the preconditions of the IMF’s stand-by agreement? One should have a look of these facts to understand financial situation that will face by Ukraine soon
Ukrainians look very happy that World Bank and International monitory Fund (IMF) are coming to help this country after its political fight with Russia. However no pro-west political party is sharing information with people about what are the demands of IMF to release loans. According to IMF records and North American media, following are demanded reforms from IMF:
47% to 66% increase in personal income tax rates
50% increase in monthly gas bills and 40% increase on gas tariffs for heating companies
7% increase in taxes on agribusiness
35% currency devaluation against the dollar year-to-date
GDP growth will shrink by 3%
Inflation will rise to 12-14% during the next twelve months
Subsidies withdrawal from Naftogaz
Restructuring of Naftogaz
Now pro-west political parties are negotiating with leadership of European Union and United States for agreement to facilitate Ukrainian emigration to Western Europe and a free trade agreement with USA. Facilitation and releasing work visas to Ukrainians for western European countries for getting jobs need approval from European Parliament. Between 22 and 25 May 2014 elections to the European Parliament will be held in all member states of the European Union (EU) and only the new parliament can decide any relief to Ukraine for allowing Ukrainians to get ease for work visas therefore there is no hope for immediate relief coming from European Union.
March 27, 2014 documents include statement of IMF Mission Chief to Ukraine Nikolay Gueorguiev and this statement indicates that:
“Ukraine’s macroeconomic imbalances became unsustainable over the past year. The (until recently) pegged and overvalued exchange rate drove the current account deficit to over 9 percent of GDP, and a lack of competitiveness led to the stagnation of exports and GDP. With significant external payments and limited access to international debt markets, international reserves fell to a critically low level of two months of import in early 2014. The 2013 fiscal deficit was 4½ percent of GDP, and the government accumulated sizeable expenditure arrears.
“Energy sector reforms will focus on reducing this sector’s fiscal drag, while attracting new investment and enhancing efficiency. A key step is the commitment to step by step energy reform to move retail gas and heating tariffs to full cost recovery.
“Reforms to strengthen governance, enhance transparency, and improve the business climate will be central elements of the program. Policy measures in these areas will include adoption of a new procurement law to close loopholes allowing evasion of a competitive procedure; measures to facilitate VAT refunds to businesses; and an independent quarterly audit of the Naftogaz accounts.
