Ukraine and The IMF: An Uneasy Cooperation
DOI:
https://doi.org/10.18533/ijbsr.v4i7.572Keywords:
Conditionality, Economic Growth, Gas and Heating Tariffs, IMF, UkraineAbstract
The paper discusses the role of current political developments in Ukraine, the history of Ukraine-IMF cooperation, the estimation of the effect of IMF financing on Ukraine’s economic growth, and the role of the IMF conditionality in controversial issues of increasing flexibility of the national currency, raising gas and heating tariffs, and implementing broad-based economic and governance reforms. Based on results of the estimation of a modified production function, the hypothesis of a positive effect of IMF credit on Ukraine’s economic growth has been rejected. The analysis of specific requirements attached to a 2014 standby loan, all of which were accepted by the new government of Ukraine, shows that they will drastically reduce standards of living. Moreover, the government will have to perform magic by reducing the state budget deficit, on the one hand, and significantly boosting subsidies to the needy to compensate for the rising cost of municipal services, on the other hand. The ups and downs in Ukraine-IMF cooperation demonstrate that the Fund’s means of enforcement of conditionality contracts are quite limited.
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