03.10.2022

The government in kiev has submitted to imf conditions. Hard times are ahead for the majority of the population

The international monetary fund (imf) promised ukraine a loan in april. Early last week, the first tranche of $3.2 billion (2.3 billion euros) was disbursed. There is to be a total of $17 billion (12.35 billion euros), paid out in quarterly increments. The last tranche will be transferred in march 2016. If nothing comes in between. As usual, the money is linked to conditions that are very demanding and will mean all kinds of social cruelties for the affected population.

This has been a tradition since the end of the 1970s. First, the so-called structural anpang programs – today they like to talk about reforms – hit the countries of africa and latin america. The romanian dictator nicolae ceausescu also proved to be a docile imf student during this period and squeezed his people in order to be able to pay back his debts to the west. Later it hit 1997 ff. In east and southeast asia, the so-called tiger economies, which have been battered by the asian crisis. Many asian critics at the time accused the fund of having considerably aggravated the crisis with its austerity policy.

Greece was the most recent beneficiary of the imf’s dubious treatment. Chancellor angela merkel, well aware of the imf’s policies, brought the imf on board for the bank bailout program that greeks are currently paying for by slashing their health care, dismantling parliamentary democracy, mass layoffs, abolishing collective bargaining agreements, starving children, and cutting pensions and wages.

Now ukraine. As usual, it was formally left to the loan recipients to formulate the conditions. In a so-called letter of intent, the heads of the government and the national bank laid down the following on 22 december 2009. The imf has a long list of measures to be taken in the near future. Of course, they did not come up with this catalog themselves, but had it dictated to them by imf advisors. But form must be preserved and the appearance of national sovereignty must be maintained.

Minimum wage of 45 cents an hour must not be raised

So what has the new government, which came into office under highly questionable conditions, promised the fund in washington?? Wages and pensions are expected to be capped. The gradual increase in the minimum wage, which had already been decided, will be withdrawn. The wage floor remains frozen until the end of the year. At present, at least 7.3 ukrainian hryvnia (uah, 0.45 euro) must be paid per hour and at least 1218 uah (75.43 euro) per month for full-time employment. On july 1, these amounts were to be raised to 7.49 and 1250 uah, and on july 1 to 1250 uah. October to 7.8 and 1301 uah respectively. This increase by a few euro cents is obviously already too much for the imf.

The alignment of pensions with wages has also been suspended, and there is a hiring freeze for the civil service. The banks, on the other hand, have been given a much more benevolent treatment. They are to be evaluated. If it turns out that they need to increase their capital, the state will step in if necessary. At least if the private owners are not able or willing to do so.

In order to raise the money needed for this purpose, the government undertakes to cap public budgets. This refers not only to the state budget, but also to the budgets of local authorities and health and pension insurance funds. At the same time the citizens will be asked to pay. The already decided reduction of the value added tax will be withdrawn, it will remain at a proud 20 percent.

Ukrainian citizens will also have to pay more for gas and heat in the future. Already to 1. In may, the new masters in kiev, who care so much about the nation that they are starting a civil war over it, promised the imf that the retail price of gas would be raised by 56 percent. As of 1. In july, district heating will follow with a price increase of 40 percent. 2015, the price of both gas and heat will rise by a further 40 percent, and further surcharges of 20 percent each are planned for the following years up to and including 2018.

The goal is to get the state-owned energy company naftogaz out of the red. We may be curious whether it will be privatized afterwards and whether the eventual purchasers will perhaps be able to buy it.On, gaz de france or rwe will remain. One of the measures needed to achieve this is already on the imf’s wish list: the depoliticization of price formation. In the future, price controls will no longer be carried out by parliament, but by an independent state agency. After all, the "letter of intent" but energy cost subsidies for needy households, but leaves open how neediness is defined.

Grain exports will continue to be demanded by means of a vat waiver, the exchange rate must be left to the market

Otherwise, kiev has committed itself to the imf not to introduce any new capital controls and to leave the exchange rate to the market. In doing so, it is giving up two important tools that governments once used to protect their economies before neoliberal ideologues took over. Today, this is only common in east asia, and with results that can be seen.

Finally, an interesting detail is that the expired vat waiver for grain exports is to be renewed. This creates an incentive for exports. In view of the country’s particular fertility and the high world market prices for most staple foods, the suspicion is that agricultural exports are to be especially demanded.

This gives rise to two concerns: first, an orientation toward exports in this sector means that world market prices must also be paid in the interior. Unless the government subsidizes prices, which is unlikely in view of the imf’s dictates. In argentina, these ies have been the subject of heated political debate in recent years.

On the other hand, it is to be expected that ukraine will now also become a magnet for state and private agricultural companies, which have been buying up large estates all over the world for several years in order to secure the food supply of their home countries or to profit from the rising world market prices in view of the shortage. The imf’s credit conditions ensure that they will find cheap labor in the country. And the government in kiev is making sure that the rest of the remaining old industrial centers in the southeast are ground down.

The ukrainians are facing tough economic times – even tougher, because the country’s economic strength has already reached the level it fell back to in 1993. The current unrest and the imf conditions were allowed to lead to a further decline this year and in the years to come.

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