Publication: Monitor Volume: 4 Issue: 145

The International Monetary Fund (IMF) delegation, in Kyiv since July 23, and the Ukrainian government yesterday moved closer to finalizing the conditions of a US$2.5 billion EFF (extended fund facility) credit. The IMF expects President Leonid Kuchma to reduce the expenditure side of the state budget by presidential decree in order to overcome the parliament’s resistance to deficit-reduction measures. Other outstanding issues include liberalization of import and export tariffs, changes in value-added and excise taxes, deregulation of private enterprise and other measures intended to ease the “tax pressing” while broadening the tax base.

The IMF’s delegation chief, Muhammad Shadman-Valavi, stated yesterday that Kyiv “has made some progress” on these issues, but that the final decision at the IMF Board’s upcoming meeting will depend on the outcome of the current talks. More senior IMF officials, not directly involved in the Kyiv talks, have suggested in recent days that they might insist on parliamentary confirmation of the presidential decrees, in order to guarantee that Ukraine will in fact adhere to the conditions of the credit.

The new parliament, however, has adjourned for the summer recess after instructing the government to guarantee full funding of all the existing social programs and welfare benefits. That would guarantee a large and inflationary budget deficit. (see the Monitor, July 27) Parliament chairman Oleksandr Tkachenko, an old-guard leftist, told the IMF delegation that most deputies, state officials and the population at large do not understand the economic reforms or even the basic terminology of the discussions. (UNIAN, July 27 and 28; Eastern Economist Daily (Kyiv), July 28 and 29.