UKRAINIAN RELATIONS WITH IMF COULD WARM,

The IMF is ready to debate EFF financing, if state budget revenues rise and the expenditures are reduced so that the deficit does not exceed 2.5% of the GDP.
Noting that this figure may slightly increase in case salary arrears are paid, the IMF mission supported President Kuchma’s decision to have Parliament debate the question.

Reuters Photo

IMF Managing Director Michel Camdessus wants to reach an understanding

In general, this support may be considered a hint about warming the relationship spoiled after the scandal concerning violations of the government memorandum indices, followed by suspending stand-by credits. We can also hope that Serhiy Tyhypko’s efforts to save this financial friendship will be successful.

As to the President, it should be noted, that his preoccupation made him irritable at the last cabinet meeting. After lashing out at the government and Prime Minister, he began to sing the same old tune about the main thing: budget expenditures and revenues. “After tremendous efforts we managed to decrease the budget deficit 2.5 times in 1994-96,” he said. Today, according to the President, it has grown to 6.7%. “If nothing changes, the budget deficit will double by 1999. And it should be 1.2-2%, according to the experts,” he added.

To tell the truth, I cannot believe that we can actually achieve such a nice deficit index with the kind of economy we have. The IMF must be thinking the same thing, since they are used to working with financial and economic indexes, not promises. In any case, even if the new IMF mission agrees to grant Ukraine approximately .5-2.7 billion through the EFF financing line, nothing is likely to change unless the state learns how to save money not at the expense of budget organizations and salary arrears, but by intelligently managing its expenditures and revenues. This, however, is on the edge of the fantastic, national production is for the most part dead, and domestic bonds are totally unprofitable. The debts for energy are growing, and taxes and privatization do not bring much in. And the coming presidential elections will not help fill the budget, as experience shows.