Ukraine update - Q1 2016
FT: IMF warning sparks Ukraine pledge on corruption and reform
Christine Lagarde, the IMF’s managing director, said on Wednesday that Ukraine needed to make a “substantial new effort” to invigorate reforms, warning that without such a push “it is hard to see how [a $40bn IMF-led rescue of the economy] can continue and be successful”.
The unusually blunt statement marked a huge turnround for the IMF, which along with the US has been among the biggest backers of the government in Kiev.
... Suspension of its four-year, $40bn IMF-led support programme would have been a big blow for the government
The tension surfaced again on Tuesday when Ukraine’s economic minister resigned to protest pressure on his ministry from an oligarchic businessman with ties to Mr. Poroshenko.
The minister, Aivaras Abromavicius, a Lithuanian and one of the foreign technocrats appointed to root out corruption, said that a businessman, Ihor Kononenko, had lobbied to have his loyalists appointed managers of a government-owned ammonia fertilizer company to skim off the profits.
“I don’t want to be a smoke screen for obvious corruption or a marionette for those who want to return control in the old style,” he said.
The Economist: “Dissatisfaction with the country’s direction is rising and trust in the authorities is falling ... Not a single government institution has a positive trust rating, according to the Kyiv International Institute of Sociology.”
The Economist: Not exactly profligate: How much has the IMF really given to Ukraine?
In April 2014 Ukraine agreed a $17 billion bail-out with the IMF. Then in March 2015 Ukraine agreed a new, $17.5 billion dollar bail-out. You would be forgiven for thinking that in the last two years the IMF had disbursed $35-odd billion to Ukraine.
In reality, as it does to other countries, the IMF drip-feeds money; it does this in order to ensure that the conditionalities it sets down in the bail-out agreements are being followed.
Ukraine, particularly the finance ministry, is meeting some of these targets. It is embarking on a severe austerity programme (for which the hapless Mr Yatsenyuk is taking much of the criticism). Pensions have fallen by about 40% in real terms in the last two years and the number of teachers has been cut by about 15%. Austerity is highly likely to have cut into growth and reduced living standards.
US News: Ukraine deputy prosecutor resigns, saying cases blocked
Leonid Bershidsky: "Throughout the conflict, Putin has never been constrained by any threat of Ukrainian pushback. He doesn't want overt control of this or any neighboring country, just political and economic influence. In Ukraine, he wants to cripple the country enough that the West will be wary of taking it in, integrating it into European institutions. So far, that plan is working: Ukraine remains destitute and riven by internal strife."
Simeon Djankov: Ukraine: Fantastically Corrupt
This fall in income has embittered ordinary Ukrainians. The rise in inequality, along with the ascendance of a dozen billionaires with close ties to government, have been even more devastating. These oligarchs have benefited enormously from corruption in government to become superrich and have used their riches to buy media companies and seats in parliament and further enhance their influence with future governments.
Ukraine is the primary example in post-communist Europe of captured media used as a tool for currying favors from politicians or for one’s own political career. One of the most watched TV channels is owned by Petro Poroshenko, Ukraine’s president. The other top ten TV channels are also controlled by billionaire oligarchs.
... Ukraine’s previous attempt at getting rid of the oligarchy—the 2004 Orange Revolution—only managed to substitute one set of oligarchs for another. The 2014 Euromaidan revolution has so far failed to change the status quo either.