Ukraine and the IMF
Ukraine and the IMF
Money for interest and it ain't for free...
The International Monetary Fund (IMF) has agreed to a $15.6 billion loan to Ukraine, still pending final executive board approval. Scott Simon notes that this “will be the first time the IMF loans to a country at war.”1
This is a reminder that a huge amount of Western financial "aid" to Ukraine is in the form of loans. Not that going into debt during wartime is anything new in the world. But if Ukraine winds up at the end of the war with Weimar Germany levels of debt, that's problematic.
FRANCE 24 English reports2:
IMF loans are made in Special Drawing Rights (SDRs), which are denominated to a basket of five currencies: the US dollar, the euro, the Chinese renminbi, Japanese yen, and the British pound. So Ukraine can't reduce its debt burden by inflating its own currency, the hryvnia.
The [Ukrainian] finance ministry had been unwilling to tap domestic bond markets or raise revenues instead. It has since changed course, paving the way for a $15.6bn loan agreed between the IMF and Kyiv last week, which still requires approval of the fund’s executive board.
An end to monetary financing, use of domestic bond markets and measures to increase tax revenues have been hard-wired into the IMF deal.
Economists feared Ukraine could fall into a hyperinflationary spiral last year because of money-printing to make up for delayed disbursements of financial aid from the EU.3
If Ukraine is going to survive as a functioning state, it will have to have massive debt relief, something neoliberal economics regards as one of the worst kinds of heresy.
Scheherazade Rehman explains more about the agreed-upon IMF loan, and even draws the touchy c-word (corruption) into the picture:
The loan itself is actually for 2 1/2 years, but it will unfold in two stages. The first is a year to year and a half will be devoted to building, fiscal, external, price and financial stability. Basically, they'll focus on something called revenue mobilization. Now, this is a usual thing the IMF does. You know, they tell the country, increase your tax collection; eliminate monetary financing; rely on your own domestic debt markets. Now, this is a little bit of, you know, tongue in cheek because a country at war can't do any of these things. But they also have said in this first tranche of money - is that you need to strengthen your governance and anti-corruption framework, because some news has been coming out of Ukraine about corruption of the money coming in.4 [my emphasis]
Standard lazy everyday conversations about anything that looks like “foreign aid” involve lazy assumptions about corruption. Even though foreign aid is mostly anything but charitable donations to the sick and the poor.
SIMON: I think you've mentioned a couple, but the IMF is known for attaching conditions. So in this case, the conditions is clean up corruption, improve your governance?
REHMAN: Yeah, and increase tax collection. You know, when they lend money, as you well know, country's already in trouble, and they come with very harsh conditionalities. Everybody is fully cognizant that they're not going to be able to do that, not until this war is over. So this is a lifeline for them to help them humanitarianly, to help their governance and to keep a government in place, with the eventual goal of, when things go back to a new normal, after the war, they will anchor their policies in sustainable financial policies and have a gradual economic recovery and promote long-term growth. [my emphasis]
Rehman’s “sustainable financial policies” that produce “a gradual economic recovery and promote long-term growth” are buzzwords for neoliberal austerity economics and “shock therapy” of the kind that devastated post-Soviet Russia and other ex-Soviet countries. A result that had more than a little to do with promoting authoritarian oligarchic rule. Something that in theory the “democracy” side in the New Cold War Democracies-vs.-Autocracies scheme should theoretically be reluctant to promote.
A war for Ukraine’s national sovereignty and democracy ideally would not degenerate into a war for Blackrock profits.5
Simon, Scott & Rehman, Scheherazade (2023): The IMF's $15.6 billion loan to Ukraine will be its first to a country at war. NPR 03/25/2023. <https://www.npr.org/2023/03/25/1166059867/the-imfs-15-6-billion-loan-to-ukraine-will-be-its-first-to-a-country-at-war.> (Accessed: 2023-26-03).
War-torn Ukraine to receive first loan from IMF. FRANCE 24 EnglishYouTube channel. (Accessed: 2023-26-03).
No more ‘dangerous’ money printing to fund war, vows Ukraine central bank chief. Financial Times 03/26/2023.<https://www.ft.com/content/02743321-f7be-44f6-87f2-dce7280482b6> (Accessed: 2023-26-03).
Scott & Rehman, op. cit.
Wilkins, Brett (2022): Common Dreams 12/29/2022. <https://www.commondreams.org/news/blackrock-ukraine> (Accessed: 2023-26-03); Alexandra Semenova (2022): Yahoo! Finance 12/28/2022. <https://finance.yahoo.com/news/blackrock-ceo-larry-fink-ukraine-president-zelensky-investments-184938062.html> (Accessed: 2023-26-03);