A Time to Please Voters And the IMF
National Bank Governor Serhiy Tihipko’s August 29 announcement that Ukraine intends to pay back International Monetary Fund loans worth $1.8 billion including interest before the end of this year, six years before the deadline, could well be called good news, quite rare for this country. It is also clear that this might have far-reaching socioeconomic and political consequences for Ukraine.
Dwelling on this point, Mr. Tihipko was trying to prove that this country was quite prepared to take this extraordinary measure owing to an increased gold and hard currency reserve (the National Bank’s naked reserve alone crossed the $5-billion mark the other day) and an excellent foreign trade balance (the export-import ratio was almost $3.2 billion last year and is expected to be over $2.7 billion this year). Yet, Mr. Tihipko does not consider this as anything against the IMF. On the contrary, consultative cooperation will continue. Moreover, Ukraine still hopes to join the “precautionary standby arrangement” whereby a $730 million loan will only be given in a, God forbid, emergency, Mr. Tihipko said. The National Bank head repeatedly emphasized that if Ukraine finally settled its accounts with the IMF, it would be viewed in the world as an accurate payer, which would in turn attract investors. An expected golden rain of investments is perhaps the chief official slogan of this action. Of lesser importance is the claim that this country will save $40 million on interest payments over these six years.
The NBU has sent letters to this effect to the president and cabinet. There is no doubt that this action will be taken. Still, it is not quite clear why, making public its decision, the National Bank tries to somewhat veil the true sense and goal of the proposed “exploit.” As is known, Ukraine will have to reach the peak of its international debt payments next year. In his instruction, the president emphasized in no uncertain terms that this is being done in order to reduce foreign debt servicing expenses. Yet, Mr. Tihipko did not say a word about this.
The NBU chief said almost nothing about political consequences. Still, asked if this measure was aimed at eliminating the influence of creditors on the election campaign, he said he saw no IMF political pressure on Ukraine. Simultaneously, evil tongues recall that Tihipko himself has not denied rumors about his possible participation in the forthcoming presidential race, where each scores points with his own spin technique. For example, the government is putting the food market in order with a hand of iron, and the Left suddenly became “authors” and active implementers of a new version of the political reform. An up-and-coming politician, the NBU head did not present himself for the first time exclusively as strong advocate of the stable hryvnia, although he stressed that the Constitution prescribes him to do precisely this. What is now his top priority is stable prices and “a 5- 6%, maximum 7%, inflation rate that we plan to achieve by the year’s end, so the people see for themselves that everything is stable in Ukraine and we know how to regulate all things the way we regulate the hryvnia rate.” But this is just by the way, so to speak. The image of one who delivered you from unpopular foreign debts may bring dividends... “A time to give,” Mr. Tihipko said convincingly. “A time to please,” political technologists say, commenting on the strategy of the just-unleashed election race.
INCIDENTALLY
According to Ukraine’s Prime Minister Viktor Yanukovych, early repayment of the Ukrainian IMF debt will be discussed by the cabinet and decision “will be made on a collective basis.”
“Yes, we would like to do this. But we shall see. I cannot say for sure that this decision will be made,” he emphasized.
