KYIV, Ukraine—The Ukrainian government is failing to meet its obligations to the International Monetary Fund (IMF) over a $16.4 billion loan package and economists are worried.
If the IMF funding stops, the repayment of external debt could cripple the country, said Igor Burakovsky, director of the Institute for Economic Research and Policy Consulting.
“If the country does not return the external debts, then there will the issue of bankruptcy of the state,” he said.
Other effects would be far-reaching, he said, having a flow-on effect to linked programs with the World Bank and the European Bank for Reconstruction and Development.
Member of the Ukrainian Parliament, Arseniy Yatsenyuk, said last week that to date Ukraine’s foreign debt is approximately 100 billion dollars.
Gas Company Issues
Part of the conditions of the IMF loan package is a reform of the state-owned gas company, Naftogaz, in order to relieve the state budget that supports the company.
Ukraine made the obligation to increase gas prices by 20 percent for households from Sept. 1, and then continue with quarterly increases until prices were brought in line with costs.
An element of the agreement is that gas price increases for households would be complemented by a social safety net to protect the most vulnerable in society.
“Not much has yet been done in this regard, and so we have some concern about that,” said an IMF spokesperson on Thursday.
Trade unions fought against the increase in gas prices, and won a court case to halt the increases.
“My talks with the [IMF] mission chief allow me to conclude that they are greatly disappointed at the way Ukraine is acting, as the country is not only failing to comply with the obligations it had undertaken, but is misinforming [the IMF] about their implementation,” the Presidential Secretariat’s first Deputy Head, Oleksandr Shlapak told Ukranian media.
Draft 2010 Budget
Ukraine has already received three parts of the loan from the IMF, but each time relations have become strained, as the government fails to fulfill certain conditions from the IMF.
Experts are not saying whether the IMF will provide Ukraine the fourth part of the loan, or whether the government will be able to fulfill the necessary conditions to obtain the money.
Last week, Ukrainian President Viktor Yushchenko said that five conditions of six conditions according to IMF Ukraine have not yet been fulfilled. Representatives of the IMF and World Bank are helping Ukraine officials prepare a draft budget for 2010 now.