The $17 billion is eight times the normal quota.
Usually a country will be able at most to borrow just twice its annual
quota. However, the Ukraine loan is four times even that amount,
indicating that the IMF was very anxious to grant the loan even though
past loans have not worked out well, as when a loan was made previously in 2012:
Given that the new loan is even larger and more out of line with normal practice, this indicates how anxious the IMF is to tie Ukraine into western international financial institutions. On August 29 the IMF signed off on the loan. The IMF signed off on the loan even though Ukraine was in effect fighting a civil war, was suffering from capital flights, and their balance of payments was in a state of collapse.
This article suggests the loan supported Ukrainian currency long enough for Ukrainian oligarchs to move their accounts to hard currency accounts in the west. The war in the east is further damaging an already faltering economy destroying basic infrastructure for power generation, water, and even hospitals. Many citizens are internally displaced or fled to Russia. Yet an IMF press release praised the Ukrainian government: “The IMF praised the government’s commitment to economic reforms despite the ongoing conflict.” John Helmer has calculated that of the $3.2 billion disbursed by the IMF at beginning of May this year, $3.1 billion had disappeared offshore by the middle of last month. It appears that the financial situation is worsening and that another $5 billion may be needed over above the IMF loan of $17 billion.
President Poroshenko one of the oligarchs may be threatened from the right by another oligarch, Igor Kolomysky, who has his own private militia. Given that Poroshenko has not yet been able to defeat the separatists and economic austerity measures demanded by the IMF will decrease his political popularity, it is possible that there could be another coup by forces even more to the right and nationalist. Ukraine's debt is not dominated in Ukrainian currency but dollars and euros. With Ukrainian currency falling in value the Ukraine needs to gain dollars and euros to finance its debt. To do this, Ukraine will need to sell off its resources to western interests, often at fire sale prices, and in return it will receive the dollars and euros it will need to finance its debt.
There are clear links to the US at this stage. Senate Bill 2277 directs the US Agency for International Development(USAID) to guarantee loans for the development of oil and gas in Ukraine, Moldova, and Georgia. There are links to the Obama administration as well in all of this. Vice-president Joe Biden's son recently was appointed to the board of Burisma a Ukrainian company although it is registered in Cyprus. The Ukrainian government has even helped using its military:
There is pressure from the IMF and World Bank for Ukraine to deregulate its agriculture.The Investment Finance Corporation of the World Bank has advised Ukraine "to delete provisions regarding mandatory certification of food in the listed laws of Ukraine and Government Decree," and also "to avoid unnecessary costs for businesses" by regulations on pesticides and food additives.
As part of its efforts to punish Russia for thwarting plans to orient the Ukraine more towards the west and to reliance on western funding, there are various plans afoot to ensure that the IMF loans to do not for the most part go towards paying off the huge debt that the Ukraine owes Russia. Anna Gelpem. a former UK Treasury official wants a $3 billion bond negotiated by Russia's sovereign wealth fund to be declared by law foreign aid rather than a commercial loan. She said:
The Executive Board of the International Monetary Fund has decided that Ukraine is expected to engage in post-program monitoring1 with the Fund, following the expiration on December 27, 2012 of the 29-month Stand-By Arrangement (SBA) with exceptional access (SDR 10 billion; US$ 15.2 billion; 729 percent of quota). The program went off-track with only two purchases made in the total amount of SDR 2.25 billion (about US$ 3.4 billion). As of June 30, 2013 Ukraine’s outstanding credit to the Fund was SDR 5.27 billion (about US$ 8 billion; 383.8 percent of quota). The Board's decision was adopted on a lapse-of-time basis2 on Friday, July 26.
Given that the new loan is even larger and more out of line with normal practice, this indicates how anxious the IMF is to tie Ukraine into western international financial institutions. On August 29 the IMF signed off on the loan. The IMF signed off on the loan even though Ukraine was in effect fighting a civil war, was suffering from capital flights, and their balance of payments was in a state of collapse.
This article suggests the loan supported Ukrainian currency long enough for Ukrainian oligarchs to move their accounts to hard currency accounts in the west. The war in the east is further damaging an already faltering economy destroying basic infrastructure for power generation, water, and even hospitals. Many citizens are internally displaced or fled to Russia. Yet an IMF press release praised the Ukrainian government: “The IMF praised the government’s commitment to economic reforms despite the ongoing conflict.” John Helmer has calculated that of the $3.2 billion disbursed by the IMF at beginning of May this year, $3.1 billion had disappeared offshore by the middle of last month. It appears that the financial situation is worsening and that another $5 billion may be needed over above the IMF loan of $17 billion.
President Poroshenko one of the oligarchs may be threatened from the right by another oligarch, Igor Kolomysky, who has his own private militia. Given that Poroshenko has not yet been able to defeat the separatists and economic austerity measures demanded by the IMF will decrease his political popularity, it is possible that there could be another coup by forces even more to the right and nationalist. Ukraine's debt is not dominated in Ukrainian currency but dollars and euros. With Ukrainian currency falling in value the Ukraine needs to gain dollars and euros to finance its debt. To do this, Ukraine will need to sell off its resources to western interests, often at fire sale prices, and in return it will receive the dollars and euros it will need to finance its debt.
There are clear links to the US at this stage. Senate Bill 2277 directs the US Agency for International Development(USAID) to guarantee loans for the development of oil and gas in Ukraine, Moldova, and Georgia. There are links to the Obama administration as well in all of this. Vice-president Joe Biden's son recently was appointed to the board of Burisma a Ukrainian company although it is registered in Cyprus. The Ukrainian government has even helped using its military:
“Ukrainian troopers help installing shale gas production equipment near the east Ukrainian town of Slavyansk, which they bombed and shelled for the three preceding months, the Novorossiya news agency reports on its website citing local residents. Civilians protected by Ukrainian army are getting ready to install drilling rigs. More equipment is being brought in, they said, adding that the military are encircling the future extraction area.”Kolomoysky is reported to a major investor in Burisma. He was appointed by the Ukrainian government to be governor of Dnipropetrovsk a south-central province. In the Eastern Ukraine there had been opposition to fracking even before the Maidan demonstrations.
There is pressure from the IMF and World Bank for Ukraine to deregulate its agriculture.The Investment Finance Corporation of the World Bank has advised Ukraine "to delete provisions regarding mandatory certification of food in the listed laws of Ukraine and Government Decree," and also "to avoid unnecessary costs for businesses" by regulations on pesticides and food additives.
As part of its efforts to punish Russia for thwarting plans to orient the Ukraine more towards the west and to reliance on western funding, there are various plans afoot to ensure that the IMF loans to do not for the most part go towards paying off the huge debt that the Ukraine owes Russia. Anna Gelpem. a former UK Treasury official wants a $3 billion bond negotiated by Russia's sovereign wealth fund to be declared by law foreign aid rather than a commercial loan. She said:
“The United Kingdom can refuse to enforce English-law contracts for the money Russia lent,” thereby taking “away creditor remedies for default on this debt.”Gelpem suggests an even more extensive repudiation of debt:
Ukraine may claim that its debt to Russia is “odious.” This applies to situations where “an evil ruler signs contracts that burden future generations long after the ruler is deposed.” She adds that “Repudiating all debts incurred under Yanukovich would discourage lending to corrupt leaders.”Gelpem suggests that it be a universal principle that contracts that are "used to advance military and political objectives..should lose their claim to court enforcement". This should mean then that the IMF loan to the Ukraine need not be paid off. That would help out the Ukraine most of all. As the appended video shows the IMF loan comes with many unpopular provisions.
No comments:
Post a Comment