Wednesday, November 14, 2018 09:47:28 AM
Can the International Monetary Fund say "no" to Ukraine?
Called to the rescue by Kiev, the global crisis lender is under increasing pressure from all sides to give the green light to an aid program, even as it risks its own credibility in doing so.
A team of IMF experts landed in Ukraine on Monday to launch discussions with the authorities, dissecting the economy's problems and shaping an aid plan, even as the new government struggles with the threat of Russia in Crimea and says it needs "at least" $15 billion.
An IMF loan does not appear to be imminent but the expectation is heavy. On Sunday, finance ministers from the seven leading industrial powers-the G8 minus Russia-emphasized that the IMF is "best prepared" to lead a support program for the country.
The United States, the country with the biggest voice in the IMF, has repeatedly said the Fund should be at the heart of any rescue program.
Europe, also holding a strong voting position in the Fund, has the same view.
"No member state will move without the IMF evaluating Ukraine's financial needs," a European source said Monday.
The IMF said last week it was ready to respond to an official Ukraine request for help, just days after a new government took power in Kiev following the ouster of pro-Russian president Viktor Yanukovych.
But the IMF also has its strict operating rules and it must be careful not to offend some member states which have reproached it for having at times given in to Western pressures.
Under its internal rules, the IMF can only lend to a borrower in exchange for implementing austerity policies and a "viable" plan that would take the country's public finances to the point that it will be able to repay.
But such rules were partly abused as the Fund and Europe sought to rescue Greece in 2010, amid political pressure and panic in the eurozone.
In 2013 the IMF admitted that it had approved a Greek program that its own experts could not assure was viable.
The parallel with Greece has its limits. The debt built up by Athens reached nearly 143 percent of the size of its economy in 2010, while Ukraine's debt is less than 45 percent of GDP, according to IMF data.
But some are still worried about the Fund giving in to pressure from its most powerful shareholders to bail out Ukraine.
"The Fund must preserve its credibility and prevent itself from bending its own rules. The Fund cannot afford to be seen as a political tool" of the Americans and Europeans, said Paulo Nogueira Batista, who represents Brazil and 10 other countries on the IMF executive board but said he was speaking for himself.
Moreover, Ukraine does not have a strong record with the Fund. It already has to repay $4.5 billion before the end of 2015, and a past aid program was halted after it backtracked on some promised reforms.
With the authorities in Kiev new in their jobs and the government still fragile, the same worries remain about how they will adhere to a new program.
"The capability of Ukraine's government to implement such a program is, of course, a matter of everybody's concern," an IMF source told AFP.