The International Monetary Fund has delayed a bailout for Ukraine over worries that President Vladimir Zelensky will not recoup $150 bln looted from Ukrainian banks, including PrivatBank, which was controlled earlier by the billionaire Igor Kolomoisky, the US business daily The Wall Street Journal reported with reference to its own sources.
The IMF appears to overlook Zelensky’s reluctance to return PrivatBank to Kolomoisky who is under investigation in the US. President was warned that he must pursue the missing money to deliver on his vow “to clean up a financial system sapped by fraud, money laundering and theft.”
One of the richest men in Ukraine, Kolomoisky actively supported Zelensky during the presidential campaign. He returned to Ukraine from self-imposed exile in May after his protégé won the presidency.
Representatives of the National Bank of Ukraine (NBU) responded to The Wall Street Journal’s publication by saying they are committed to allaying the IMF’s worries and recovering the missing funds. But after all, the Fund is leery of pledges as Ukraine has failed to fulfill any stipulation when granted bailout packages over the past two decades, which reportedly grew out of systemic corruption.
The NBU offered earlier the conditions on the loan for Ukraine to the IMF, which contain no gas price hike, but do have land sales. The extension of the Fund’s program also envisions a number of other reforms to be carried out, which are unpopular with the population, but positive from the economic viewpoint.
US President Donald Trump, who has stopped providing real help to Kiev, may well be playing a certain role in the current situation. Ukraine’s support to Hillary Clinton, Trump’s key competitor, in the past presidential election in the United States, has also had a negative impact on the relationship between the two countries. Later the scandal around the talks of the two countries’ presidents did its part as Trump asked his Ukrainian colleagues to investigate into activities of former US Vice President Joe Biden’s son, who is considered “a big friend of Ukraine.”
An International Monetary Fund mission visited Kiev during September 12-26 and left the country saying that discussions would continue. According to the central bank’s first deputy governor Kateryna Rozhkova, the Fund suspended the talks with Kiev particularly “due to the dispute on nationalization of PrivatBank.” Ukrainian Prime Minister Alexei Goncharuk has said that the country managed to reach an agreement with the IMF’s representatives on a new visit to Ukraine that is due in the first half of November. Whether the meeting will take place and whether the new cooperation program with the IMF will be signed remains to be seen.
Co-founder of the Ukrainian Institute for the Future Anatoly Amelin expects the failure to extend the IMF’s program to effect negatively both the possibility of borrowing western funds and the cost of borrowings.
“The IMF’s refusal will impact our reputation. Moreover, the IMF’s loans are fairly cheap – 3%, whereas in case of entering foreign markets that will be as high as over 7%, meaning at least twice as expensive,” he said.
Today Ukraine is independent of the relations between Zelensky and Kolomoisky, just as of the tycoon’s standoff against international financial structures. The question is whether Ukraine will get by without the IMF’s help. The risk of the national currency crash and default persists. Neither Zelensky nor the Fund can allow that to happen for several reasons: for President it can store up the loss of his post, while for the IMF – major reputational loss. As things currently stand some party should accept concessions. If Zelensky demands the return of funds from Kolomoisky that may threaten the coalition and lead to early elections. That is why any false move by the Ukrainian president may be fatal for the country.
“I expected that decision of the IMF,” Vladimir Bruter, an expert at the International Institute for Humanitarian and Political Research, said in an interview with the InfoRos portal’s correspondent. “First, the country’s budget for 2020 suggests no obvious solution of the foreign debt problem, which is a principal matter for the IMF. If Ukraine has no idea how to repay debt, how can it be granted loans? Second, the government’s program and budget for 2020 look unbalanced, which could also have been a reason to postpone the decision. Third, the political account that the US will be demanding cooperation on anticorruption issues from the Ukrainian leadership and delay the IMF’s decision until that moment cannot be ignored as well,” he explained.
According to the expert, Zelensky is not going to undertake any fundamental actions in the current situation. “Ukraine has got accustomed to that. Another couple of millions of citizens will probably leave the country and send money back home. There is a sense that it is what today’s Ukrainian authorities hold out hope for. What other options are there if production sites are being closed for service businesses to appear there that are opened with guest workers’ money? Ukraine appears to be waiting for more guest workers’ money and shifting with the resources and reserves it currently has,” Bruter concluded.