A new round of negotiations between Ukraine and the IMF has started as has the period of new discussions and arguments. The discussion has been going on for quite a long time about the appropriateness of the new IMF’s loan and whether the loan will be received this year if any time at all. This year Ukraine has already paid off the greater part of the IMF’s loans. That is why the talks, that it should, perhaps, repay the remaining part of the loans altogether and never take new ones from the IMF, constantly arise in Ukraine, and not just Ukraine. Indeed, Ukraine has shown that it is able to pay off the IMF loans without major problems, using its own resources. However, another question comes up or, to be more precise, another task: how to recover the benevolence of foreign investors to Ukraine; and it is going to be difficult without the IMF.
It has come to be so that the IMF’s benevolence to a certain country is akin to the blessing to foreign investors to invest in that country. Too many investors believe the IMF to be one of the main characters of the world financial market; that is why its benevolence or discontent is the best rating for the country. That is why it is not so important for Ukraine whether to take or not to take new loans as to recover the IMF’s benevolence. This is needed to avoid the formation of the opinion in the world market that the IMF is not willing to give a new loan to Ukraine because the fund does not trust this country.
That is why, while Ukraine’s government is repaying the old IMF’s loans, it is negotiating with the fund the renewal of the cooperation and the opening of the new line of credit. The expectation from the Association Agreement signature between Ukraine and the EU largely causes to hope that the agreement will cause to take a fresh look at Ukraine, and not only on the part of the IMF. The Agreement with the EU should show all foreign investors and international financial organizations that Ukraine – is an independent European country which has chosen its way to Europe. And although they are trying to present it as Russia’s satellite, but it is not true. Ukraine has long been neither Russia’s vassal nor satellite. Ukraine is purposefully moving to the EU, although it understands that this road could be long. But this road must not be and should not be turned from – either by Ukraine, which is going to the EU, or by the EU, which must understand that in the future Ukraine will become its member.
But this all is the strategy. To make this strategy a reality, Ukraine does need the IMF’s credit program. This will allow relieving pressure around the discussion about the amount of the gold and exchange reserve, will lower pressure on the exchange market on the part of exchange speculators. And most importantly – the new agreement between the IMF and Ukraine could provide for Ukraine a steady flow of investment much better than the IMF loan itself. And this investment is needed, first of all, to reconstruct the production capabilities in Ukraine; as today it is clear that Ukraine can become the EU member only when its industry will not be a burden for the EU but a real help.
At the moment one of the main obstacles in the process of the negotiations with the IMF is the difficulty with the gas price rise for the population in Ukraine. Although this rise is considered to be a simple solution to the problem of Ukraine’s state debt, but it definitely will not really improve the situation with the budget. Any gas price rise for the population will make the Ukrainian government consider looking for money in the state budget for social benefits to the disadvantaged people, who will find it difficult to pay high gas prices. As a result, again billions of hryvnias will need to be spent from the budget to pay social compensations. For this reason the Ukrainian delegation offered a compromise settlement which is aimed at the reduction of the natural gas consumption by the population due to the fulfillment of the significant energy saving programs.
Besides, Ukraine has begun to vigorously produce shale gas which is twice cheaper that the gas which Ukraine has to purchase from Russia. But Ukraine has got one more trump card. At the moment Ukraine is trying to persuade Russia with the help of its European colleagues to review the contract of gas supply and to find a compromise on the issue of the gas price reduction. It would make it possible either to completely avoid rising gas prices for the population or to make it less painful. This is exactly the way to solve the difficult question of rising gas prices for the population with the IMF. It requires resorting to complicated combinations and negotiations but in our world this is the only way to really make the country not only rich but economically stable and affluent.