Publication: Monitor Volume: 4 Issue: 81

Although Ukraine’s political and economic situation does not differ dramatically from Russia’s, the IMF is showing no interest in throwing money at Kyiv. Instead, a two-week Fund mission to Ukraine concluded on April 21 with the understanding that any resumption of funding must await a significant policy breakthrough in Kyiv.

Like Russia, Ukraine during the past six months has combined low inflation with economic stagnation, allegations of government favoritism and corruption, sharpening tensions between the executive and the legislature, and a political interregnum in the aftermath of last month’s parliamentary elections. In contrast to Russia’s, however, the Ukrainian economy’s deviations from IMF targets are viewed by the Fund as sufficiently serious to freeze disbursements from the $540 million Standby Credit approved last year. Only $240 million was disbursed, before the credit was suspended earlier this month.

Ukrainian officials have responded to these developments by attempting to pull together yet another economic reform program. Deputy Prime Minister Serhy Tyhypko announced this weekend that the government will soon approve a package of laws intended to reduce from 50 to 35 percent the share of Ukraine’s GDP redistributed through the public sector. Administrative reforms are to tighten Ukraine’s public finances, merge some 31 off-budget funds into the central budget, and reform health care and education. (Russian and Ukrainian agencies, April 25, 26)

According to Tyhypko, these measures would satisfy the “preconditions” the IMF has set for the release of Kyiv’s long-sought (but still-unfinalized) $2.2 billion Extended Fund Facility. However, Ukraine’s prospects for adopting reform initiatives would seem no brighter than they were prior to last month’s elections, and parliamentary opposition to such proposals has been a near-constant feature of Ukrainian politics since independence. Kyiv’s chances for increased IMF funding would seem to depend on a reformist breakthrough at home, a change of heart by the IMF, or both. At present, neither seems particularly likely.