IMF Wants more Reform for Ukraine
The writing is on the wall for Ukraine. Fortunately, France heard the cry and decided to help bail out Kyiv. This is the easy part. The hard part is cutting the budget deficit and further structural reforms — mostly privatization of state assets. Selling the last big government telecomm won’t be enough to save the day. The moratorium on selling agricultural land to foreign interests must be lifted.
Ukraine recovery tied to global outlook, reforms-IMF
Thu Mar 5, 2009 8:32pm EST
By Lesley Wroughton
WASHINGTON, March 5 (Reuters) - The International Monetary Fund’s mission chief to Ukraine, Ceyla Pazarbasioglu, said on Thursday the country’s recovery from an economic crisis depends on global conditions and the government’s commitment to structural reforms.
Addressing the Washington-based Peterson Institute, Pazarbasioglu said an IMF mission would visit Ukraine within a “couple of weeks” to discuss adjustments to the country’s $16.4 billion IMF program agreed in October in the face of a sharper-than-expected contraction in domestic economy.
While the country does not have a balance of payment gap, the sharp economic downturn has caused a fiscal deficit.
The IMF has said if Ukraine secures additional financing from outside sources it would support a budget deficit of 3 percent of gross domestic product or higher. The IMF program currently provides for a budget gap of 1 percent of GDP.
“We don’t think all of the deficit which is likely to take place can be financed and it would likely monetize it, and we think that would be dangerous,” she said, “Therefore, structural reforms or actions … to solve these issues from a medium-term perspective are necessary.”
“We hope over the next weeks these issues will be clarified,” she added.
Pazarbasioglu said cutting Ukraine’s budget would require harsh measures since expenditures are mostly comprised of wages, pensions and social transfers.
“We do hope they get additional support to address their challenges in terms of fiscal issues,” she added.
Pazarbasioglu welcomed a “political truce” last week among senior Ukraine leaders who have constantly been at odds over a variety of issues, which hampered efforts by the country’s financial authorities to implement the IMF program.
“I do hope this political truce holds because I don’t think the country can afford not having that right now,” she said.
“There is a need for consensus, there is a need to explain to the public exactly what is going on and not to hide behind some numbers or positive stories because the country is in a difficult situation.
“It can only get out if this is acknowledged and the strategy to get out is implemented,” she added. (Reporting by Lesley Wroughton; Editing by Carol Bishopric)
Tags: deficit, France, IMF, joel bucher, Kyiv, reform, tymochenko, ukraine, World Bank
