Publication: Monitor Volume: 5 Issue: 23

A high-profile Ukrainian delegation headed by Premier Valery Pustovoytenko, Finance Minister Ihor Mityukov and Economics Minister Vasyl Rohovy arrived in Washington yesterday with the intent of persuading the International Monetary Fund (IMF) to resume a US$2.2 billion Extended Fund Facility (EFF) program in Ukraine. Ukrainian President Leonid Kuchma is reportedly optimistic about Ukraine’s prospects of cooperation with international financial organizations and believes that Ukraine has fulfilled most of its obligations to the IMF. Speaking at the plenary session of the recent world economic forum in Davos, Switzerland, Kuchma called on the IMF to understand Ukraine’s economic situation due to the financial crisis in Russia. But for the Russian crisis in 1998, “Ukraine would not have had a GDP decrease,” he claimed, “but an increase of up to 3.5 percent” (Ukrainian television and agencies, January 29-31).

In a long television interview, Mityukov described Kuchma’s January 29 meeting with U.S. Vice President Al Gore as “very friendly.” Mityukov also noted that IMF First Deputy Director Stanley Fischer had said in Davos that Ukraine has “a real potential and a real opportunity to fulfill the EFF program.” Mityukov denied widespread opinion that reforms in Ukraine are faltering. He described the reforms as “consistent” and boasted that Ukraine has not experienced “anything similar” to the economic breakdowns in Russia and Brazil (Inter TV, January 31). The IMF mission–which halted its work in Kyiv a week ago, cancelled a planned meeting with Kuchma, and left for Washington for consultations–must have had a different opinion (see the Monitor, January 20). The mission’s head, Mohammed Shadman-Valavi, meeting with Pustovoytenko, said that the revenue portion of the 1999 state budget was overestimated (Ukrainian television, January 21). The IMF was not happy about slow administration reforms, sloppy tax collection, poor condition of the energy sector, and the state’s excessive involvement in banking.

Pustovoytenko admitted the gravity of the fiscal situation. He reported at a cabinet meeting that by January 20 state revenues totaled 424 million hryvnyas, but that in that period alone a higher figure (437 million hryvnyas) hade been paid on state debts (STV, January 29). In 1999, Ukraine must repay US$1.17 on existing foreign loans. The Finance Ministry plans to borrow US$2.5 billion from abroad this year, of which US$520 million should come from the IMF (Ukrainian agencies, January 22, Zerkalo Nedeli, January 23). If Ukraine fails to persuade the IMF to resume the EFF–some US$335 of which was disbursed last autumn–it may face a default on its foreign debt. The interests on earlier loans are to be paid at the expense of new borrowing. New loans from the World Bank, the European Bank of Reconstruction and Development, the European Union and Japan, which Ukraine hopes to get in 1999, depend on the IMF green light. –OV