Yesterday the IMF Board of Directors decided to allocate 1.39 billion dollars to Ukraine in the framework of the second tranche within a two-year "stand-by" lending program. Ukraine's Prime Minister Yatsenyuk considered this decision as "a sign of support and confidence in the Ukrainian economy." Taking into account the total amount of the first tranche of IMF, the funds allocated to Ukraine will be about 4.51 billion dollars. It is expected that payment will be held in the coming days. About 1 billion that the Ukrainian government planned to use to cover the budget deficit, and 400 million will be used to replenish the reserves.
However, the head of the Analytical Center for Financial Studies of the Financial Research Institute of the Ministry of Finance, Igor Varyash, believes that compliance with the requirements of the IMF may lead to an inability to settle the chaos in Ukraine. "No matter how hard the Ukrainian leadership is trying to convince the IMF that they are doing their best, that they are bringing forward all the necessary legislation, that they are implementing all the recommendations of the IMF, none of it is very successful. Firstly, it is impossible to worsen dramatically the living standards of the population without a second "Maidan" overthrowing this government. The IMF demands that the country stop spending more than it earns and reduce social benefits. Secondly, it is impossible to comply with the decision of the IMF if a fifth of the economy is gone. If 20% of GDP has gone away, it is impossible to execute the decisions taken when the economy was in a completely different state," he said.
Varyash is convinced that the Ukrainian leadership is in a very difficult situation. "Without Russia's help there would be no talk with the IMF, none of it would have happened. The $8 billion loan has actually been frozen by Russia, it does not require it back. This means that Russia is in fact helping Ukraine and the EU understands that very well, and the IMF too. Since Russia does not demand the debt to be paid, does not demand a default, Ukraine has a theoretical ability to crawl out of this situation. In the first half-year, instead of planned profits Ukrainian enterprises suffered 10 billion hryvnas in losses. This means that they can pay back neither the interest, nor the main part of their debts. The banking system is in a state of crisis, so are businesses. This means that the tax base has fallen, so there is an economic disaster," the expert said.
Member of the Development Center of the Higher School of Economics, Sergey Pukhov, said that the IMF's conditions are tightening. "The new conditions differ greatly from those of the first tranche," he said. "If the first tranche assumed, for example, reduced costs and certain conditions with respect to the cost of housing services, now we are talking about mortgages and the abolition of VAT exemptions. Another important point of negotiations is foreign currency loans. The questions are, how will this affect the banking system and what will the impact on the population be? The IMF is concerned about the banking system, and the government of Ukraine - about the country's population," the expert said. According to Pukhov, the reason why these conditions are so tough is that they were designed in order to force Ukraine to live within its means. "But the IMF is likely to make concessions by the end of September in order to resolve these issues," he said.
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