Ukraine’s citizens will have to pay more in taxes to cover for their leaders’ gross mismanagement of the nation’s economy. This has led to rising debt and investigations into how much of the $13 billion in lending from the National Bank of Ukraine to the nation’s ailing banks may have been embezzled or otherwise misspent.
The public debt increased by 43 percent this year alone, reaching $35 billion, nearly a third of the expected gross domestic product this year. Meanwhile, the International Monetary Fund continues to dole out cash to Ukraine, having already lent most of a $16.4 billion credit line.
The IMF has clearly been too soft on Ukraine’s morally challenged leaders. The IMF has allowed the country to borrow more while wiggling out of tough conditions. The recipient government has not properly overseen the money it has received – and the IMF itself admits it is the financial “doctor” not the “cop.”
The government, meanwhile, has not introduced market prices on natural gas prices, needed to bring solvency to the state gas company, or adopted other essential reforms. Meanwhile, the debt just piles up on Ukrainians. The IMF is clearly no longer doing average Ukrainians a favor in continuing to lend to such a reckless and irresponsible government.
Kenneth Rogoff, a Harvard University professor and former IMF chief economist said this week: “People think the IMF is tough. The truth is it finds it almost impossible to say no. The IMF is lending in places like the Ukraine and Eastern Europe and over time it’s just going to let them dig a deeper hole.”
The case of Nadra Bank is a good example. Nadra, now in government receivership, received nearly $1 billion from the NBU last fall to improve its financial health. It was able to do that partly thanks to IMF lending. Now it looks as if half the money was used to buy hard currency from the NBU at a privileged rate and re-sell it at a higher commercial price, while much of the remainder may have been embezzled by top bank managers.
Because few in the NBU or in government are watching the store, some at Nadra Bank evidently ended up very rich on other people’s money. Now the top brass, including former president Igor Gilenko, are in hiding. To her credit, Prime Minister Yulia Tymoshenko blew the whistle on Nadra in December. But the NBU and the nation’s law enforcers were suspiciously slow in taking action.
And the IMF? Its mission is currently visiting Kyiv to decide on whether to lend Ukraine another $3.8 billion installment before year’s end. However the IMF justifies extending further credits, its self-important representatives should drop the pretense that they are acting in the interests of Ukraine’s citizens.
