The usual practice of cooperation of almost all countries with the International Monetary Fund (IMF) suggests, that the country’s authorities, experiencing enormous economic problems, tend to rush assistance to the creditor - the IMF. Usually, these actions are quite explainable and very clearly motivated by the authorities of the borrowing country. For all that, there is nothing paradoxical in the fact that the initial requirements of the IMF are almost always carried out unconditionally. As a rule, it refers to “monetary package”, the fast stabilization measures, which should enable the National Bank of the borrowing country. Ukraine, as a developing country, revolves, often in need of a different financial support. One of the long-term financial partners of Ukraine in this sphere as a lending institution is the International Monetary Fund.
The four-year program of financial aid to Ukraine was approved by the IMF Board of Directors on March 11, 2015. The program provides the allocation of the fund of 17.5 billion dollars, and of all international lenders in four years - 40 billion dollars. In March 2015, it was transferred the first tranche of 5 billion dollars, in August - the second tranche of 1.7 billion dollars. Now, the country expects to release the third tranche, of volume 1.7 billion dollars. One of the obstacles along the way, was a long adoption of the Ukrainian budget, based on the reforms agreed with the IMF. Now, the IMF is faced with a dilemma: it is impossible not to give money Ukraine, but it is also impossible to give money a country where corruption is rampant and government continues to steal. Experts believe, that the requirements of the IMF in the next year will be tightened (History of Lending Arrangements, 2016).
The IMF lending program for Ukraine actively helps the country in social, economic, energy and political development. Thus, the recommendations of the IMF to Ukraine, to change the tariff policy in the sphere of housing and municipal services, help the energy industry of the country reach the breakeven. The absence of losses is the main purpose of the recommendation of the IMF for Ukraine, as it was stated to the agency after a visit to an energy conference IHS CERAWeek (Houston, USA), by the head of the Subcommittee on Strategic and Investment Committee on Energy of the Verkhovna Rada of Ukraine. At the same time, the Ukrainian government takes into account the difficulties of the population in terms of the transition to higher tariffs, by providing targeted subsidies. Tariffs for electricity, gas, heat and hot water for the people in Ukraine has been raised several times in the past year, while the tariff for electricity was increased more that twice. The total for two years, until March 2017, the electricity rates will go up in five stages, and will increase by 3.5 times. This scheme will help the citizens of Ukraine to move gradually to the new prices (IMF, 2016).
In addition, the macroeconomic stability, achieved in Ukraine in 2015, was achieved thanks to this money fund. Ukraine without the IMF’s money will not be able to exist, then it may again increase the pressure on the Ukrainian hryvnia (the Ukrainian currency). Approximately by the summer of 2016, Ukraine will be able to survive without the IMF’s money, but then, all of its stock will run out. The IMF is the universal mechanism, that forces the Ukrainian government to make necessary reforms.
As the program from the fund moves of the enhanced requirements begin to concern areas related to fiscal policy of the country, we are talking about the structural reforms. In the case of Ukraine it is the fight against corruption, deregulation of business, judicial, public sector and public administration reforms. In general, all that will have to ensure the qualitative changes in the Ukraine. Today, thanks to innovation, falls the level of corruption in Ukraine, but it is still high.
Also, the allocation of loan to Ukraine from the International Monetary Fund for a total of almost 16 billion dollars, was preceded by the development of a list of reforms that were originally approved by the US, and later transferred to the IMF for review. Among all reforms, in the first place is the pension reform. Some of the reforms mentioned in the correspondence of American diplomats and the memorandum like the increase in gas prices for the population by 50%, and the restriction of the simplified taxation practice are already implemented and gave their first positive results.
Foremost, among essential for the execution measures, which are listed in the documents of the Wikileaks, is a pension reform. Ukrainian government must raise the retirement age - two years for men and three - for women, also eliminate the right to early retirement and the principle of one year for two, at the hazardous enterprises. Also, according to the IMF requirements, the Cabinet of Ministers of Ukraine has prepared a draft of the Tax Code. Under the new law, the tax on personal income will be increased by 5%. Besides, the IMF can be considered positive reforms in the field of social development. Thus, the Ukrainian government has to balance the social situation due to the point subsidies. Moreover, the hospital must be paid at 70% of salary, but not less than the minimum of subsistence (Yukhanano, 2016).
Many benefits will bring the reforms in the political sphere. The IMF urged the Ukrainian government to reduce the quantity of ministries to 14 (now there are 20). Also, the government must leave only one vice-prime minister, cancel the post of Minister of the Cabinet of Ministers, eliminate six ministries, subordinate all government ministers agencies. The Tax Administration, Customs, the State Property Fund should enter the Ministry of Finance. Besides, it is needed to limit the excessive salaries of government officials.
The Ministry of Health of Ukraine, after consultation with representatives of the IMF and the World Bank completed the preparation of draft laws on reforming the health care system. This legislative package will be tabled in the Verkhovna Rada (the Supreme Council of Ukraine), immediately after the agreement in the Cabinet of Ministers, promised the Minister of Healthcare of Ukraine. Under the new law, developed the state or the social package, due to which the most vulnerable groups of the population will have a larger list of medical services. These packages are free for all groups of citizens. As to the pricing policy in the field of medicine, thanks to the new law, expect the fairly quick results of these actions - within two to three months the price of medicines is to fall by 20-30%. Also, according to the strategy, it is planned to reduce the number of permits for the start of the pharmaceutical business. It becomes easier to conduct such a business, therefore, it is hoped that the medicine on the Ukrainian market will be more numerical. (Interfax-Ukraine, 2016). The Strategy developers hope, that the conditions in the hospitals will be better. After all, according to this document, the hospital will be autonomous in management and finances. Also, they expect to reduce corruption in the Ministry of Healthcare. The Ministry of Healthcare will get rid of most factors, that are not inherent to the normal structure. The first is that from 2015 is planned to withdraw the purchase of medicines from the Ministry of Healthcare. The international organizations like the UNICEF and the World Health Organization will deal with the medicine purchase in Ukraine (Mokrushyna, 2015).
Thus, experts believe that the IMF’s decision is a signal to international investors about the favorable outlook for the state of the Ukrainian economy. The IMF loans are the cheapest loans in the world. They contribute to economic recovery and stabilize it. The fact of the IMF’s lending of the national economy, as such, said that the IMF expects the solvency and development of Ukraine in all its sectors. The beneficial effects of the IMF, as a lending institution, on the Ukrainian economy will manifest itself in the reduction of public deficits, increasing the positive balance of payments and the stability of the national currency.
References
Yukhanano, A. (2016). “Factbox: Ukraine's history with IMF bailouts”. Reuters. Retrieved 7 March 2016, from http://www.reuters.com/article/us-ukraine-crisis-imf-idUSBREA1O1DT20140225
History of Lending Arrangements (2016). “History of Lending Arrangements: Ukraine”. Imf.org. Retrieved 7 March 2016, from https://www.imf.org/external/np/fin/tad/extarr2.aspx?memberKey1=993&date1key=2012-03-31
Mokrushyna, H. (2015). “Ukrainian Healthcare and the Inept Reforms of New Ukrainian Westernizers”. www.counterpunch.org. Retrieved 7 March 2016, from http://www.counterpunch.org/2015/02/12/ukrainian-healthcare-and-the-inept-reforms-of-new-ukrainian-westernizers/
IMF (2016). “Survey : Ukraine Unveils Reform Program with IMF Support”. Imf.org. Retrieved 7 March 2016, from http://www.imf.org/external/pubs/ft/survey/so/2014/NEW043014A.htm
Interfax-Ukraine (2016). “IMF, reforms key for Ukraine amid political uncertainty – Fitch”. En.interfax.com.ua. Retrieved 7 March 2016, from http://en.interfax.com.ua/news/economic/327288.html
