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Ukraine: World Bank Confident Parliament Will Agree To Loans

Washington, 8 March 1999 (RFE/RL) -- World Bank officials say they are confident that Ukraine's parliament will reverse itself this week and ratify agreements on two major loans with the World Bank.

The bank's country director for Belarus and Ukraine, Paul Siegelbaum, says the two loans -- one to buy a new computer system for the Ukrainian Treasury department, the other to modernize Kyiv's district heating system -- were rejected by the Rada last week because the loan approval measures got caught up in the heated political fight over whether Kyiv should join the CIS parliament.

The parliament voted to make that move and to override a vetoed bill on Ukrainian elections, two controversial measures that pushed a number of items on the parliament's agenda into the abyss.

The World Bank's Siegelbaum, in an interview with our economics correspondent in Washington, said the bank's loans to Kyiv got "hit by flying elbows" in bitter political fights which had nothing to do with the World Bank or it's programs with Ukraine:

"I don't think that the parliament in Ukraine is fundamentally a body in opposition to the types of things the World Bank and the EBRD (European Bank for Reconstruction and Development) wants to do. In the past, they haven't been our enemies. There is no reason to believe they are now."

Siegelbaum said that while it is not normal for national parliaments to reject World Bank programs, it has happened before, including among nations that were once part of the ex-USSR.

Now, however, Siegelbaum says he is confident that when those two loans -- and two others -- are represented to the Rada this week, they will be approved:

"The total volume of potential lending under those operations is around $600 million. Some of them will be taken up quickly, including the treasury systems project that involves computer equipment to improve the treasury process, and another loan to improve the district heating system in Kyiv. Others are going to be taken up in a slightly, more extended schedule, including a loan to accelerate the closure of coal mines, and some other things."

More importantly, says Siegelbaum, clearing the way for these loans could open up what has been a log-jam at the World Bank in dealing with Ukraine:

"We told the Ukrainians that if we could put this problem behind us, we can now begin to accelerate the preparation of a whole bunch of other loans -- 7 or 8 of them -- which are at various stages of our processing, but which we've had to hold up because we couldn't rush ahead knowing 'the wall' was there. Because it would make no sense to continue to present loans to the parliament when it was in the mood to reject them."

Siegelbaum says even as the parliament was rejecting the two loans, it did manage -- on a second try -- to accept a $22 million grant from the bank to finance the modernization of plants that use ozone-depleting substances. That was a real embarrassment for Ukrainian officials, says Siegelbaum, because it is an outright grant and will cost Kyiv nothing.

Siegelbaum says while the loans are extremely important to Ukraine, the help with reforms that goes along with the money is actually far more significant:

"The money's the least important part of these loans, it's the reform. Every one of these loans reforms a different part. Whether it's the water system in Odessa or some district heating system in another city or insulating government buildings for energy efficiency, those reforms are going to create value for Ukraine far in excess of the dollars involved in the loan."

Siegelbaum adds that he would "love it" if he could give the reforms without the money because, he explains, Ukraine would have a "healthier economy that wasn't in debt to the World Bank." But since that won't work, he says, it's best that Ukraine borrow the money and get the reform help, in effect, thrown in for free.