9 March 2014 — Strategic Culture Foundation
Economy in doldrums, the Kiev junta is urgently reviving cooperation with the International Monetary Fund. On March 4 a team from the IMF was in Kiev to study the books and consider a loan. Kiev hopes to get the first $3 billion in a month. Yatsenyuk rushed to assure the West that Ukraine is ready to meet all the conditions put forward by the Fund. One can imagine how badly it is going to hurt common people.
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Some conditions are already known: to raise the male retirement age by two years and make I three years more for women, to eliminate special pension benefits for scholars, state employees, heads of state enterprises, to limit pensions for those who continue to work having reached the retirement age and the military commissioned officers will retire at 60. The IMF wants the government to do away with child care, things like a baby bonus (a government payment to parents of a newborn baby), gratuitous lunches and free textbooks. Unemployment benefits will be paid out only after six months of uninterrupted work, sick-list benefit will go down to 70% of salary with the compensation counted only from the third day of sick absence. Minimum living wage hikes will be frozen. Municipal enterprises will have to pay 50% more for gas while the price will be increased twofold for private consumers. There will be a 40% rise of electricity costs while utilities payments will go up along with the gas hikes.
Ukraine is to do away with benefits and raise transport taxes by 50% increasing the petrol excise by 60 euros. The simplified taxation system for entrepreneurs will be curtailed, probably to make businessmen happy, while pensioners will be done a favor by having value-added taxes raised for pharmacies pushing up medicine prices by 20 %.
The IMF conditions are going to strike agriculture. Western creditors demand to rescind the moratorium on the sale of agricultural land, the value-added tax easing law for those who reside in rural areas and also subsidies for pork and chicken meat producers. Besides, the International Monetary Fund wants Ukraine to privatize all coal mines and completely abrogate state subsidies for them. Transport, as well as housing and communal services benefits are to be revoked…
These inhuman “reforms” are planned to be implemented in the conditions when the government is nearly broke, it has no money even for funding entitlement programs (civil servants and government – funded organizations, pensions). Arseniy Yatsenyuk acknowledged that the crisis-racked country is on the verge of bankruptcy, the budget has been plundered. The low-intensity coup has been inexorably depleting government funds; something doomed to make the country end up in dire straits. Many remember well the” strike” by entrepreneurs in the western part of Ukraine who refused to pay taxes. State agencies paralyzed, capitals taken away from Ukraine, panic reigning at the exchange, termination of investment programs and boycotts of trade brands staged by the putschists – it all has taken toll depleting state coffers. Another factor to worsen the situation is the refusal of south-eastern regions to recognize the new central government and comply with their financial obligations by transferring due payments to Kiev.
The anti-constitutional activities of putschists have nullified the agreements the Nikolay Azarov’s government reached with the Russian Federation. On December 17, 2013 Russia said it would grant a direct loan to Ukraine by purchasing $15 billion in Ukraine’s Eurobonds. The first $3 billion payment was made before the New Year; the second was slated for February 2014. Along with that, Gasprom and Ukrainian Naftogas amended the contracts concluded in 2009 in order to lower the gas price for Ukraine to the level of $268, 5 per thousand cubic meters to save at least 7$ thousand annually. It makes real aid to Ukraine equal to $22 billion. It all could have been added by implementation of memorandums of intent to enhance cooperation in shipbuilding, airspace industry, the AN-12 aircraft joint project, the construction of a bridge across the Kerch Strait and the plan to do away with trade restrictions in 2013-2014. Even if the West renders an aid package it won’t compensate for the losses suffered by Ukrainian economy as a result of putting an end to the cooperation with Russia.
The first economic results of the Ukrainian coup are already visible. As Gasprom reported, Ukraine cannot continue to enjoy the gas payments discount because it owes Russia $1, 549 billion as an unsettled debt. The total debt to Russia for gas supplied in 2013 is equal to $2,634 billion. Ukraine has to pay off $6, 1 billion in foreign debt payments this year. Summing up foreign debts payments, the $7 billion which Ukraine failed to save being destitute of the gas discount, $3 billion to be returned to Russia – it all makes the total debt sum equal to $18, 734. It exceeds the amount of IMF aid package rendered with attaching strings of destructive consequences for people. With the prices for Russian gas raised, the Ukraine’s external debt will grow by leaps and bounds.
Kiev cannot rely on the remaining $12 billion of the package aid granted by Russia. International rating agencies have already made it felt. On February 8 Fitch dropped Ukraine’s credit score to CCC rating, down from its previous B minus score. On February 21 Standard & Poor’s lowered Ukraine’s long-term foreign currency sovereign credit rating by one notch from CCC+ to CCC with a negative outlook. The agency said” “As a result of the intensifying political turmoil in Ukraine, we consider that continued Russian support up to the committed $15 billion is increasingly uncertain. Should Russian financial support fall short of Russia’s commitments, we expect the government of Ukraine to default on its foreign-currency obligations.”
The Ukraine’s negative foreign trade balance was $8,475 in 2013. It has grown 6 times in the recent 16 years. The EU association agreement, that the Kiev regime wants so much, would increase the negative balance manifold.
The prospects for Ukraine’s high-tech industry are hazy at present. If the south-eastern part of Ukraine gets rid of Kiev’s control, then the chances for the implementation of industrial agreements with Moscow remain. It won’t make life easier for the junta in Kiev, because it’s the government in the capital who’ll have to shoulder the accumulated debts having lost income from a sector of industry. In case the junta establishes its total control over the country’s territory, the enormous industrial potential will be lost.