The IMF and Ukraine are working on plans for a second loan
covering the period up to 2012, Sergii Tigipko, the deputy
prime minister who heads Ukraines negotiating team, said
The Ukrainian side has asked for a $19 billion
package, but Tigipko told Emerging Markets there
is no final decision yet on the sum. Issues under
discussion with an IMF mission currently in Kiev include
confirmation from our side of the revenue side of
the budget, where improvements in the work of tax and customs
authorities are proposed, and the expenditure side.
He said the finances of Naftogaz Ukrainy, the state oil and
gas company, were a key focus. Under its first loan programme
launched in the aftermath of the Wall Street meltdown in
September 2008 the IMF had, unusually, acknowledged
Naftogazs operational deficit of around $3 billion as
part of the national consolidated budget deficit.
The economic agreement made last month with Russia
which included a 30% discount on gas sales in return for a
25-year extension on the lease of the Black Sea naval base, and
collaboration in the atomic and aerospace sectors is
profitable for Ukraine from the economic
standpoint, Tigipko said.
However he acknowledged that these agreements had been
concluded quickly, and were not public enough. He
added: It was absolutely necessary to change our
relations with Russia, which [before the presidential election]
were completely unconstructive. Russia is our biggest trading
partner, and size of foreign trade with countries of CIS
(Commonwealth of Independent States) is bigger even that the
Tigipko added: We had to amend the agreements on gas
imports concluded last year by [former prime minister] Yulia
Timoshenko. Tigipko said a programme of structural
reforms was under discussion with Fund officials.
But the government in which Tigipko and other
reformers have joined a
team dominated by president Viktor Yanukovichs Party
of Regions was accused of shying away from the harsh
decisions needed to balance the budget.
Viktor Pynzenyk, Ukraines former finance minister,
accused Mykola Azarovs government of continuing the
policies of a hidden budget deficit and social
populism started under Timoshenko.
I dont see any fundamental difference
between the financial policies of this government and the
previous government, Pynzenyk told Emerging
Markets. These people are not reacting to the
problems. They are continuing with the policy of social
Pynzenyk is sceptical that the government can achieve the
target set by the IMF for this year of a 6% consolidated budget
deficit. He estimates that the consolidated public deficit was
12% of GDP last year, and will be 16% of GDP this year.
On social policy, Pynzenyk said, pensions and [public
sector] wages are increased. So there is no reason to think
that expenditure will be reduced. To think the deficit will be
reduced is unreal.