Photo: finstat.infoUkraine could remain without IMF money. As already wrote “Country”, November 22, the Foundation’s mission after a week of negotiations with our government, left Kiev without a decision on the loan. Question about the new program (Staff Level Agreement) hung in the air.
Both sides of the negotiations are trying to save face and claim that all is not lost. So, the IMF noted that in the preparation of this agreement, “progress”, but it will require “further discussions”, which, supposedly, will last in the coming weeks. This is stated in the statement of the head of the mission Ron van Roden.
Prime Minister Alexey Goncharuk also said that they came to an agreement with the IMF, “close enough”.
And the Minister of Finance Oksana Markarova said that the fact of departure of the IMF mission without a signed agreement does not mean the failure of negotiations and delays with the loan.
“Zrady no. Actively move towards the harmonization of the program,” she said.
However, it is not the fact that in the end the parties about the contract.
“Technically, we have already performed all the “wishlist” of the IMF, laid down in the previous memoranda: discocephalinae adopted budget, cleared of all social commitments on tariffs, stricter selection of subsidianes, cancelled the list of strategic objects, not privatizeable, is a decision on the land market. But it remains a major obstacle to money – Privat. The IMF fears that it will be returned to their former owners, and the issue of compensation funds, which at one time poured into the nationalized PrivatBank will simply be buried. And it is unclear how this problem will be solved”, – said “the Country,” economist Viktor Skarshevsky.
That is, an episode of the series “servant of the people”, in which the President is sending to the IMF in W@PU, can not be completely excluded.
“Country” is understood, whether Ukraine will receive money from the IMF and what will happen to the economy and the dollar, if we refuse to credit.
Credit and Kolomoisky
About “PrivatBank factor” in deciding the next IMF loan wrote in his Telegram channel journalist and former people’s Deputy Serhiy Leshchenko. According to him, IMF Ukraine has put forward new requirement: to pass a law that would make it impossible to return banks to the previous owners. Allegedly because the Foundation is trying to guarantee that will not return PrivatBank Igor Kolomoisky.
“The adoption of this act before the holidays in the IMF, which will begin just before Christmas, and, accordingly, the allocation to Ukraine of money before the new year – called into question. The Parliament has only two weeks in session this year, the last session day of 20 December,” writes Leshchenko.
He also added that in the corridors of power already discussed the draft law that was reviewed in the IMF. The project, in particular, suggests that in an appeal against actions of the authorities the courts should consider, are these decisions based on “public interest”.
Obviously, the IMF decided to err on the background of another of the revelations of the oligarch Igor Kolomoisky. In a recent interview he said that very soon he will return PrivatBank. Before he even advised the President Zelensky “send the IMF” and not to pay previous debts. Say, it’s easier to declare a default.
Prime Minister Alexey Goncharuk, speaking at the Royal Institute of international Affairs Chatham House in London, denied the words Kolomoisky and assured that the oligarchs have no influence on the government and the President. But not the fact that he believed. Especially that dealing with the court of PrivatBank is clearly delayed. There is already a decision on the recognition of the nationalization of the Bank is illegal, and the verdict on the appeal of the national Bank is deposited all the time. The next meeting is scheduled for December.
“The IMF actually wants to force the government to intervene in the judicial system, and to guarantee that the court is not hi decision in favor of the former owners of PrivatBank,” says Skarshevsky.
However, about how the Ukrainian judicial system, international lenders are well aware. Therefore, most likely, they will insist on the adoption of such a law.
While all the details of this bill are unknown. Economist Alex Kush does not exclude that it will be not only informed about the nationalized banks (including PrivatBank), but in General about the banks that were closed in recent years.
And it’s even on hand to the national Bank, which will in one fell swoop to close proceedings “bancada” 2014-2015, although the elimination from the market of many financial institutions and raises questions on the legality of all procedures.
But this law in case of its occurrence, may be beneficial and himself Kolomoisky, as the courts will be able to make decisions, if not on the return of nationalized property, then at least compensation for it.
And, as already wrote “the Country”, he PrivatBank Kolomoisky hardly necessary as his capital largely provides state government bonds which the national Bank will simply take. But the liabilities on deposits in “PrivatBank” will remain and it will very quickly become bankrupt.
Therefore, Kolomoisky has long hinted that it would suit perfectly a compensation or “zero option”: the state retains “PrivatBank” itself, but recalls the requirements on bad debt companies tycoon.
However, the IMF is unlikely to be satisfied with any compromise, the outcome of which will “forgiveness” Kolomoisky his debts. In fact, in the same interest and the Ukrainian state – to force the oligarch to return to the “PrivatBank” billions of dollars his firm received in the form of loans, but not returned.
The land issue
The second problematic issue, the IMF calls the law of the land market. More precisely, the version of the law, which was adopted by Parliament in first reading, providing for a reprieve until 2024 for the purchase of land by foreigners.
While Zelensky promised a second reading to put in the law a provision, according to which the sale of land to foreigners will be allowed only after the referendum.
All of this greatly displeased the IMF, whose experts even say that it is better then not to lift the moratorium than to enter a sale of land restrictions for foreigners (say, then it will buy up cheaply the Ukrainian Agroaliance).
The sources of the “Country” in the Parliament unanimously saying that land of the law will not stand a chance at all to pass the second reading, if there will make a rule about the sale of land to foreigners. Moreover, he promised Zelensky rule about the referendum. And if it will not for the second reading, it will look like a straight Scam.
Therefore, it is most likely that if the IMF categorically does not suit the current version of the law, it can generally in the second reading not to take, as it was then, in fact, useless. After all, the main motive of its adoption was to meet the requirements of the Fund.
And if the law is not satisfied, then it is easier not to accept, and to extend for another year the moratorium.
And do we need loans?
In the new program, which is discussed by the Ukrainian government with the IMF, we are talking about credit tranche of USD 5 billion within three years.
Technically, the money does not go to the budget – they replenish foreign exchange reserves of the national Bank.
“If you understand this loan completely will go on repayment of debts of the same Fund. Just for the next three years we will have to return on the same loans of about 5 billion,” – said Viktor Skarshevsky.
But if the loan will not, it turns out that these 5 billion, Ukraine will have to pay out of their funds.
“Foreign exchange reserves the money is, that is, to bring them back we can, however, gold reserves are a little thin,” says Skarshevsky.
Thus, according to the economist, the IMF loan to Ukraine by and large do not really need.
Moreover, according to Skarshevsky, cooperation with the Fund “perpetuates poverty” in Ukraine.
“The IMF requires a maximum reduction of budget expenditures, and this means that there is no possibility to invest in the industry, to develop exports and give businesses tax incentives. Plus the authorities are unable to Fund at the proper level social programs, even if there is such a possibility. For example, Ukraine could reduce energy prices, particularly gas for the population due to cheaper gas domestic production. But the IMF insists on the “market price”. And as we sit on a credit needle, the IMF, on economic development can be forgotten,” – said Skarshevsky.
The head of the Ukrainian analytical center Alexander Okhrimenko also sure that the country is quite complete without a loan from the IMF.
“We live without money for a year, but no catastrophe occurred, and the dollar, contrary to expectations, not on 50 hryvnias”, – he said.
And yet there are a few “buts”. A loan from the IMF is a kind of guarantee for other external creditors, and buyers of Ukrainian government bonds, and it is the latter ensure the stability (and even strengthening) of the hryvnia by buying Ukrainian securities bundles. That is, if the loan is not, then the pyramid of government bonds runs the risk of stagger and collapse, collapses the hryvnia.
“We will be forced to replace loans to the IMF of internal and external loans, which are more expensive to maintain. This will even more worsen the situation of the “patient” (Ukraine – Ed.) and sooner or later will threaten the fact of debt servicing, especially in the upcoming crisis. Consequently, the risk of social frustration and the subsequent social explosion is increasing dramatically,” he wrote on his page in Facebook the economist Alex Kush.
In the latest report of the national Bank on economic stability says that for 5 months of 2019, the volume of international reserves decreased by $ 1.4 billion due to high payments on foreign obligations.
“In may, the government bought from the NBU is almost the entire volume of currency necessary for the repayment of a sovereign Eurobond of one billion dollars, issued under the guarantee of the United States. But the recent placement of Eurobonds worth 1 billion euros will allow to replenish the reserves,” – says the report of the national Bank.
In other words, Ukraine is constantly teetering between debts in order to intercept the money to pay on old debts.
“High foreign currency payments will continue over the next five quarters Ukraine will spend the average $ 2.6 billion on a quarterly basis, and from mid-2019 to late 2021 the government and the NBU must pay in currency of more than $ 20 billion. If no new external loans, international reserves fall. So for the next few years of repayment and servicing of foreign currency debt – a source of potential risks for financial stability”, – stated in the report of the national Bank.
But there was nothing said about another risk is gas. Ukraine earns annually on the transit of Russian gas to Europe via our GTS $ 3 billion, which in the absence of transit agreement from next year we lose.
Plus, if the contract is not, there is the threat of a sharp rise in price of gas (up to UAH 11-13 per cubic meter during the high season), which hit the utility tariffs for the population and will become a real problem for business.
If gas and will not agree and will stop the transit, it will significantly strengthen Ukraine’s dependence on the IMF. And conversely, if the agreement on the transit and supplies of gas from Russia at a discount all the same signs that Ukraine’s balance of payments significantly improved, and hence the dependence of the IMF will be reduced.
What will be the decision on the transit, is still unknown. The situation should definitively be clarified in the beginning of December.
But the Foundation is interested that Ukraine does not come off with credit to the needle. And not only because is afraid of no return previous debts.
“In theory our country can be left without the credit support, but this option disappears tranches channel of external influence on the Ukrainian power”, – says Alexei Kusch.
According to him, Ukraine is now profitable to lend, “because the package of new conditions for signing of a Memorandum of cooperation, the IMF may obtain and model the maximum liberalization of the land market, and “new” labour code that takes zero rights of employees, and a massive sale of the most liquid objects of state property”.
Better than the IMF
According to Viktor Skarshevsky, the budget for 2020 has been drawn up without taking into account the IMF money. There is not inherent to the high expectations of large revenues from other creditors, which theoretically would have been possible in the case of the adoption by the Fund of a positive decision on Ukraine.
For example, the World Bank expected a total of 50 million dollars, and from the European Union a penny. But there are plans for borrowing in foreign markets Eurobonds for $ 4 billion. And the conditions there are not so much dependent on the mood of the IMF as from world market (although the relationship with the Fund and affect the price of borrowing).
“Borrowing costs for us will increase and if, then only slightly – a maximum of 0.5%. In General the market situation of external debt is favorable: the rate, as many European Central banks reduced, and in some countries, and generally go into minus. Such cheap debt in the world already at 13 trillion dollars,” Skarshevsky said.
4 billion dollars raised on foreign markets, Ukraine needs to service domestic debt.
But the biggest hopes of the authorities to the speculators. And this year, it is planned to build up the pyramid of government bonds.
“It is budgeted from the sale of government bonds 231 billion, and to repay at the old location will need to be 161 billion the interior debt will grow to 69.3 billion or $ 2.5 billion, at the rate budgeted for the end of 2020 (27.5 USD),” said Skarshevsky.
The factor of government bonds is to the country far greater risk than a lack of credit from the IMF, said Skarshevsky.
“Formally, the hryvnia government bonds, but they are tied to foreign speculators, therefore, are foreign currency risks. If holders of our debt securities start to take profits and withdraw dollars out of the country, the dollar will dramatically collapse,” the economist said.
Previously, experts have calculated that the factor of government bonds may inflate the dollar to 30-35 hryvnia, and, if the speculators happen to panic, and above.
In this regard, the IMF loan Ukraine needs as a kind of sedative for buyers of government bonds.
But if you break out the global crisis and fall in exports of Ukrainian products, followed by the economy, it is unlikely to help.
“Currency risks for Ukraine are also reduced earnings from exports (and the price of metals has now fallen to minimum for last three years) from the workers. The latter will be listed in our country less money because trying to settle in Europe and to carry families,” concluded Skarshevsky.
In any case, due to uncertain relations with the IMF Ukraine should take care of the search for alternative sources of funding, not to lose the existing flows of currency in the budget from the transit of gas and to end the war in the Donbas, which will free up significant budget resources and also to attract funds from international donors for the reconstruction of the region.
With this in mind, the importance of negotiations on the Donbass and gas rises sharply. In the event of their success, the dependence on the IMF can be seriously minimized or even reduced to zero.