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Ukraine: IMF Won't Give Loan Without Reform

  • Robert Lyle

Washington, 24 July 1998 (RFE/RL) - The second ranking official of the International Monetary Fund (IMF) has put it bluntly for Ukraine: If Kyiv can't come up with a way to implement the full reform program, there won't be any new loan from the IMF.

First Deputy Managing Director Stanley Fischer, who has taken a leading role at the fund in dealing with various financial crises, made the comment Thursday in Washington.

It was right after U.S. Vice President Al Gore said in Ukraine that "without continued and even bolder economic reforms, it would be difficult for Ukraine to reach agreement" with the IMF.

Gore said he was convinced the reforms would be forthcoming, but cautioned that in their absence, it would be very difficult to get new loans.

Gore's comments were described by some Ukrainian newspapers as "cold water" on the country's hopes for a new long-term loan from the IMF of around $2.3 billion.

Ukraine is negotiating for the three-year extended facility loan as a follow-on to the regular stand-by loan it got last year. Drawings on that loan were suspended, however, because Kyiv failed to meet the economic performance goals it had agreed to get the credits.

Ukrainian Deputy Prime Minister for Economic Reforms Serhiy Tyhypko, in Washington to meet with IMF officials two weeks ago, said then that the full reform program was being submitted to the parliament and that it had 30 days to accept or reject many of the measures. Most importantly, he said, the parliament would have to adopt the new 1998 budget.

The IMF's Fischer agrees that Ukraine has a "very sensible program" worked out with the fund, but is having great trouble getting it through the Rada.

The Ukrainian situation has many analogies with the Russian situation, said Fischer, "including the problem of getting things done." The problem for Ukraine, he said, is that it doesn't have the same decree power that the Russia government has.

"We would never have been able to make a loan to Russia if they hadn't changed their fiscal policy," Fischer told a Washington seminar. "If Ukraine can't, by some legal means, do what it had agreed to do with us, then I don't know how we can go ahead."

The IMF can't simply hand Ukraine $2 billion and say come back for more when that's used up, commented Fischer. There has to be a very specific program for implementation in place first, he said.

Fischer said that attention to the detail of implementation is what made the Russian rescue package different from other similar programs. "What is different is the very close attention to the Russian government's legal ability to deliver on the entire anti-crisis program, especially on spending and the tax system, he said.

That included detailed plans for using presidential decrees to begin implementing those parts of the anti-crisis program that were not passed by the Duma. However, even in Russia, Fischer says there is still the requirement that some key parts of the program be adopted by the parliament before the fund releases the next tranche or drawing of the IMF's loans approved earlier this week. The next drawing is due in September.

Fischer did not comment on the Ukrainian government's prospects for getting its program through its parliament, but did say that in Russia, there was a sea-change of attitude in the Duma that led to its approving the bulk of the anti-crisis program.

An IMF review team is once again checking on Ukraine's situation, and President Leonid Kuchma says "We really need tangible financial support." He told reporters that the financial crisis in Ukraine is "no less complicated and frightening" than that in Russia. Fischer says he doesn't disagree, but that lacking the same decree mechanism of Russia, Ukraine will have to win parliamentary approval first.