IMF loans are slipknot for Ukrainian economy

By Vestnik Kavkaza

Last week the Board of the International Monetary Fund approved the second tranche of stabilized loans to Ukraine - $1.39 billion. After talks between the Ukrainian President Poroshenko and the head of the European Commission Barroso, the head of the Ukrainian state said that the EU could provide Ukraine with a third tranche ($1 billion), but it would be done only if the IMF finds it necessary. Meanwhile, Western and Russian experts fear that payments for the IMF loans would lead to the hryvnia’s collapse and destroy the Ukrainian economy, as happened in Greece several years ago.

Vladislav Ginko, an economist, an employee of the Institute of Natural Monopoly Economics of RASHGS, is sure that the second tranche of the IMF financial aid won’t save the hryvnia, as its exchange rates have fallen to a critical minimum. “The Western mass media calls the IMF tranches “financial aid,” but we shouldn’t forget that these are loans which have to be paid off, paid off with interest; and it is the citizens of Ukraine who will pay through taxes,” Ginko says. “The money is not given for free. Arseny Yatsenyuk is fighting for a loan slipknot for Ukraine.”

Vladislav Ginko draws attention to the Ukrainian banking sector: “The IMF stated that if the hryvnia’s exchange rate is 12.5 to the dollar, the banking sector of Ukraine will collapse. We can see that today the dollar costs more than 15.2 hryvnias. And there no dollars in Kiev exchange offices, and dollars can’t be bought even for 16 hryvnias. This is a fact which is hushed up by the Kiev authorities, speaking about the military activities in Ukraine and hiding the economic disaster which they created.”

The economist thinks that the Ukrainian authorities shouldn’t hide behind military activities and should admit that they have worsened the living standards in the country. As for the IMF, Ginko believes that even though it sounds strange, it needs a strong hryvnia: “Why do they need a strong hryvnia? They want to fill the Ukrainian market with European goods. Germany’s foreign trade surplus is almost 200 billion euros. The EU countries are whining: “Why does Germany have such a big foreign trade surplus? It doesn’t let France, Spain, Italy trade!” This surplus will come to the Ukrainian market. And of course the hryvnia can stabilize, as happened in Russia in the 1990s (6 rubles = $1), but at what cost? They will cut social expenditure radically and increase taxes.”

Vladislav Ginko gives a negative forecast for the Ukrainian economy: “You [the Ukrainian authorities] will reduce imports, then loans will come, you will put a slipknot on Ukraine, as a result the hryvnia will stabilize, but industry, agriculture, and the social sphere will be destroyed. This is a disaster that will have consequences for decades. You pay $75 to a teacher per month; I remind you that, according to UN methodology, if citizens of a country spend less than $5 daily, it is absolutely poverty. Let’s turn it into $75 – this will be double absolute poverty.”