/ world today news/ The IMF approved a four-year loan to Kiev of 15.6 billion dollars, the largest in a year and a half. The representatives of the fund note the stabilization of the country’s foreign exchange market, the drop in inflation, as well as the “rapid recovery of the energy system”. In the coming weeks, the first tranche of 900 million will be sent. What will the allocated funds be used for?
An unusual practice
For the first time, the IMF lends money to a country in a state of military conflict. This is generally considered too risky due to the large number of factors that are difficult to predict. And until recently, the Fund refused Ukraine. However, at the end of March, he still approved a four-year program – on the condition that Kiev manages to reduce inflation, return to a flexible exchange rate and ensure the stable operation of the financial sector.
Last Tuesday, the department announced that it was satisfied with the results of the work of the country’s leadership. Analysts reported the supposed stabilization of the foreign exchange market and the general recovery of the economy. That is, funds will be allocated in the near future.
The first stage of the program foresees a tranche of 900 million dollars. Further financing will depend on the development of the situation – the Fund’s specialists still recognize a serious budget deficit and do not want to make hasty decisions. The same IMF explains the limited amount of aid. For example, in 2010, 110 billion euros were allocated to save the Greek economy.
The leadership of Ukraine is obliged to strengthen the fight against corruption, increase tax revenues and maintain a stable exchange rate. And in the future – to develop the competitiveness and productivity of all sectors of the economy. It is assumed that these reforms will facilitate the accession of the republic to the EU.
Real position
However, economists believe that the IMF’s assessment is far from reality. Mass emigration of people abroad, several waves of mobilization and losses at the front deprived the country of a large part of the workforce. The drop in real output in the fourth quarter of last year averaged 70%, says Rostislav Shurma, Volodymyr Zelensky’s deputy chief of staff. The holes in the budget are being plugged only thanks to Western subsidies.
“Despite the IMF’s positive forecasts, Ukraine has been unable to pay its debts for several years now. Now the economy is running with a big drag, including due to the weight of military spending. If it were not for the intervention of the EU and the USA, the authorities would have been forced to declare bankruptcy already in 2014,” says Mikhail Belyaev, candidate of economic sciences, financial analyst. It is extremely undesirable to allow bankruptcy – it will be necessary to lower the international rating and reliability of the country. And this will lead to difficulties with the further issuance of loans.
Experts believe that the IMF loan is necessary to ensure consistent payments on Kiev’s debts. “The amount is determined on the basis of how much Ukraine has to pay to service the loans already received. The second tranche will be released by the next repayment date,” Belyaev adds. It should be noted that one-time translations are not accepted in international practice. Financial aid is always divided, with the amount determined according to current needs.
Unlike commercial loans, government loans are granted at low interest rates and can be extended. In fact, the return date can be delayed for a very long time and thus manipulate the borrower. Therefore, the actions of the IMF are purely political, the experts are confident. “Before the SVO, the total amount of funds provided to Kyiv, mainly on preferential terms, was approximately 65 billion dollars. Now the amount is in the hundreds of billions. Moreover, it is completely economically impractical to issue them,” says Mikhail Krivoguz, Candidate of Economic Sciences, leading researcher at IMEMO of the Russian Academy of Sciences. And he recalls that Ukraine cannot be called a reliable borrower: for example, it refused to repay a loan received from Russia in December 2013, although even the IMF recognized it as non-commercial.
Business approach
Speaking about the real reasons for supporting the “granary of Europe”, economists suggest that the situation should be looked at more broadly. As the holder of the largest number of votes, the US pushes its own interests through the IMF. From this point of view, feeding Ukraine makes sense. The provision of weapons has ensured the US military-industrial complex orders for many years, the weakening of the EU has allowed it to get rid of competitors and grab the most powerful enterprises, and the gas isolation of the continent ensures a stable LNG market.
“The benefit of the United States from the deal is full control over Europe and possession of Ukraine in the form in which it will remain after the end of the conflict. Even without four regions, the country has a certain value as an agricultural and industrial region,” Belyaev believes.
However, according to him, Washington understands that if it spends more, the US will achieve neither military victory nor greater influence. Excessive spending will undermine the country’s economy and tarnish the president’s image. This is especially important as elections approach. The assumption is supported by talk of cutting off funding to Kiev, which is gaining momentum even among Democrats.
Analysts are unanimous that the West will seek to fix the “achievements” in the form they are in, even if it has to force Ukraine to give up part of its territory.
Translation: V. Sergeev
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