Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Camdessus Praises Ukraine's Program

KIEV -- Ukraine's new austerity program won the praise of IMF Managing Director Michel Camdessus on a weekend visit, opening the way for $1.8 billion in loans to help Kiev stabilize its teetering economy.


Camdessus also said he has mediated an agreement in principle on resolving the problem of Ukraine's huge debt to Russia, The Associated Press reported.


The IMF chief, arriving after the conclusion of a $6.3 billion loan agreement with Russia on Friday, described the austerity program as one which "truly involves tough adjustments, especially regarding budget and credit emissions, but it is also a balanced program which seeks to protect the neediest.


The backbone of the program is laid out in Ukraine's new budget, drafted in consultation with the IMF. The budget, now endorsed by the government and soon to be debated by the parliament, commits Ukraine to reducing its budget deficit to 3.5 percent of gross domestic product. Inflation is to be reduced to 3 percent by the end of the year and exports are to be liberalized.


Camdessus said the debt agreement involves Moscow restructuring part of the $2.5 billion it is owed by Kiev, and Ukraine pledging to pay on time for gas and oil shipments from Russia.


"At their request, I have accepted that an IMF representative will be at the table during Russian-Ukrainian negotiations on the debt," Camdessus added after a meeting with Ukrainian President Leonid Kuchma, The Associated Press reported.


Encouraged by the signs of reform in Kiev, officials from Western donor countries are scheduled to meet in Paris on March 21 to pledge backing for a $1.5 billion IMF standby loan and for the second half of the IMF's systemic transformation facility loan, valued at approximately $375 million.


Final approval would await passage of the budget by the Ukrainian parliament and a signing-off by the IMF board in Washington at the end of the month. Camdessus said he received assurances from the Ukrainian parliamentary chairman, Olexandr Moroz, that parliament will adopt the budget soon.


Parliament has recently shown some signs of rebellion, however. Deputies this month for the first time voted down an economic reform bill sponsored by the president that was intended to promote foreign investment.


The leader of the Communist Party, Petro Simonenko, also denounced the International Monetary Fund as "an agent of Western imperialism" in a speech at the party congress Saturday. The communists form the biggest faction in parliament, holding 86 of 450 seats.


Within the government, however, there are already signs that reformers are consolidating their position. The old-guard Prime Minister Vitaly Masol, who openly opposed some measures introduced by the pro-reform Kuchma, has now tendered his resignation. The resignation must be approved by parliament but the country's former head of the security service, Yevhen Marchuk, has been appointed acting prime minister pending final action.


Marchuk, an ally of the president, appears committed to reform. In a television interview following his designation as prime minister, Marchuk said, "The economic reform course of the president cannot be changed."