Mission Impossible or Why the IMF froze its financing program

Sourse: Mind

On February 2, the IMF mission left Ukraine, noting that “more progress is needed to complete the first revision of the program”. Ruslan Redka, the Managing Partner of Legal House, shared with Mind his thoughts on the reasons and what should be expected of this IMF decision.

There was the third IMF mission in a row, which ended in nothing. This means they will give us no money in 2021. And it’s not even about the Fund’s money. There will be no money from others as well. Professional investors will not believe in Ukraine, and investment money will not come …

Again, we will not see the $ 10 billion Ukraine crucially needs to boost economic development. Furthermore, we are not only standing still but most likely are rolling back. After all, as the Black Queen from “Alice in Wonderland” by Lewis Carroll used to say: “You need to run as fast just to stay in place, but to get somewhere, you have to run at least twice as fast!”. So we don’t even standstill… We are rolling into the abyss.

Why is Mission impossible again?

Nothing new here. Ukraine once again did not fulfill its obligations, once again broke its word, deceived.

  1. Judicial and Anti-Corruption Reforms failed. Over the past two years, we have not made any progress in this direction. We all remember the Constitutional Court’s decision on the proposal of the people’s deputies, where most of them were deputies of Opposition Platform “For life.” This decision abolished liability under Art 366-1 (“Inaccurate declaration”) and Art 368-5 (“Illegal enrichment”) of the Criminal Code of Ukraine. “We have taken down NABU. Now we will take out the Supreme Anti-Corruption Court “- this is how the deputy of the Opposition Platform “For life” Vasyl Nimchenko put it on October 6.
  2. Energy reform. Everything is according to the classics: while the world prices for gas and oil were falling, we were fine, market prices worked for us. But, as soon as gas and oil prices began to grow, market regulation ended, and we returned to the mode of manual regulation, setting fixed prices. After all, it is impossible to subject “our voters” to the stress of price increases, which is bad for the rating.

And it’s all the same that we will again throw much money into the social sector, and not into development. Does not matter. The main thing is that “our voters” are satisfied now so that the rating does not fall. After all, making economically sound decisions = hitting the rating, after all, carrying out adequate reforms = destroying the rating.

The positive effect of reforms and decisions is not visible immediately, only after a while, but the rating is needed now. Unfortunately, for now, power doesn’t have politicians and managers ready to make unpopular but correct decisions, who are ready to sacrifice their popularity and exercise the reform in order to gain recognition later, and not now. They need the glory now, so we have what we have.

  1. The IMF has its significant concerns on a budget of Ukraine and the size of its deficit – UAH 276 billion and how Ukraine will pay off UAH 600 billion of obligations on external and internal debts this year. And yet – returning to the budget issue – the IMF wants clarity on how we spent the money allocated for fighting COVID-19 and asks (for real?) to conduct an audit in this respect. No one is in a hurry to carry out this audit, because the money was spent not on medicine, as it supposed to be, but, for example, on the roads, “for the implementation of measures to pay off debts by the decision of the International Center for the Settlement of Investment Disputes,” etc. And why should we spend money on COVID-19 – we are already defeating or have defeated it…

Are we learning from the experience of Tanzania?

Here, as well as in the situation with the purchase of vaccines, Ukraine is somewhat reminiscent of Tanzania. They are even more “hard cored”: the EU allocated $ 27 million to Tanzania to fight COVID-19, and after the money came in, the President of Tanzania said the country was free of COVID-19, and they did not need vaccines, medicines, masks, antiseptics and other “garbage.” Furthermore, he said that “the people will be cured with prayers” and promised to “buy in Madagascar a drink based on wormwood, which, it is believed, can cure a patient with coronavirus”.

Certainly, the EU did not expect this and demanded an explanation from Tanzania, but so far, no one has followed. It seems Ukraine looked at this and was puzzled with “Well, it was possible that way?”. And then decided, why should it explain anything, strain, and conduct an audit. It is good enough.

It is crucial to return the IMF mission. We require investment – without it, our economy cannot grow. We need to restore trust, which means that we need to keep our word. Reforms must be carried out. The authorities must learn to be responsible and not be afraid to bear liability for unpopular but correct decisions.