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Ukraine: Bankers Disillusioned With IMF Offer To Stabilize Currency

By Stefan Korshak and Viktor Luhovyk

Kyiv, 28 November 1997 (RFE/RL) -- This week's news of the release of an additional $103 million by the International Monetary Fund (IMF) to help support Ukraine's currency, the hyrvnya, met with mixed reaction in Kyiv. But, RFE/RL reports from Kyiv the preponderance of reaction was marked by continue disillusion.

"Over the short term, the IMF loan will help stabilize the currency," said Assistant Director of the Lviv-based West Ukrainian Commercial Bank, Hanna Siniuk, told RFE/RL. "But that kind of money just won't go far enough to fix financial problems here."

Most bankers interviewed by RFE/RL said the only real way to stabilize the currency lies in overhauling the financial market, rather than in an infusion of foreign cash.

"I simply do not see how it is in the national interest to take even more money from the IMF," said Arcada Bank Chairman of the Board, Konstantin Palyvoda. "Taxpayers are going to have to pay that money back with interest someday soon. How long can we keep living on other people's money?"

Some analysts went further, expressing outright surprise that the IMF had decided to provide more money to what they see as an often corrupt and generally inefficient Ukrainian government.

"They (the IMF) have to be crazy to provide additional funding to Ukraine," said Odessa-based financial analyst Andrei Reputushenko. "No one in his right mind could believe that Ukraine is actually going to pay that (loan) back. It's good money after bad."

Ukraine continues to make on-time interest payments to the IMF on the first installment of a total $542 million stand-by loan program. But, increasingly it has had difficulty meeting political and economic targets set by the IMF as triggers for further borrowing.

An IMF executive board statement this week expressed guarded optimism in the Ukrainian economy, noting that national industrial output appeared to be on the verge of an upturn, and that inflation was under control. But industry specialists here argued that the IMF's conclusion that Ukraine is on the right track, although perhaps a good move politically, was simply bad business from an economic point of view.

"You need real reform," said banker Palyvoda. "Until the government begins supporting the development of a real economy, any short-term money fixes are like a single drink to an alcoholic, who has no more money: it just delays the final crisis."

The IMF's current short-term, stand-by arrangement with Ukraine was negotiated in August, after months of talks over a $2.5 billion, three-year Extended Fund Facility loan. The IMF refused the longer-term loan, citing Ukraine's failure to meet several conditions.

The short-term, stand-by arrangement was suspended in September, because Ukraine failed to meet budget deficit requirements. This week's IMF loan made available two installments of that short-term, stand-by agreement.