The IMF mission returned to Kiev. Will you give money?

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Миссия МВФ вернулась в Киев. Дадут ли денег?

Another International monetary Fund mission started its work in Ukraine on 3 November. We are talking about verifying the implementation of necessary reforms for the allocation of Kiev loan of $1.3 billion through 2016.

In mid-September, the IMF issued Ukraine a third tranche of $1 billion, although that decision meant breaking their own rules of the Fund, as Kiev, do not pay to Russia, the debt on the bonds for $3 billion, has made a technical default and in this state, the country can not qualify for financing from the IMF.

But the IMF ignored its own norms, which were untouchable for decades, and until the end of the year Ukraine may receive $1.3 billion, and in 2017 another $5.4 billion.

All in all, the financial aid program of the IMF involves the allocation of $17.5 billion over 4 years. In March 2015, the country received the first $5 billion, and in August, another $1.7 billion By the end of 2016, the total amount of allocated funds could reach $2.3 billion.

All the conditions of cooperation between Ukraine and the IMF spelled out in a special Memorandum, although the question of allocation of funds often involves a political aspect, so the decision on the allocation of new funds can be made even with failure of individual items of the Memorandum.

The IMF has demanded from Ukraine?

Traditionally the IMF is a very hard choice for the necessary changes at the legislative level in many sectors.

So, for example, from January 1, 2017 Ukraine should cancel the special VAT regime for agriculture. That is, Ukrainian farmers will lose their preferential tax treatment, although their competitiveness compared to the European farmers and so is at a very low level.

Considering that the average subsidy in the EU is around 400 per 1 ha of agricultural land, it is not about the presence of Ukrainian goods in Europe, although with the new conditions even in the domestic market they may prove to be uncompetitive.

Also, the country will continue to rise in prices. The rates of excise duties on spirits should be increased by 50%, beer – by 100%, tobacco – by 40%, gasoline and diesel fuel by 13%. This means that real income will continue to decline, but the rate may be even higher than it is now.

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Traditionally affected the most vulnerable segments of the population, especially pensioners, who from January 1 next year will have to pay a pension tax to incomes of physical persons at the rate of 18%.

And that’s not counting the fact that the number of persons who are eligible for early retirement will be reduced by 40% and raised the age of early retirement to 57 years. In this case next year Kiev should control the income of those who receive various allowances, although the mechanism remains unclear.

The Memorandum notes that will be introduced “an opportunity for the EMB to use a wide range of investigative techniques, including undercover operations, intercepting communications, accessing computer systems and controlled delivery, without having to use infrastructure of other institutions, as well as protection registration processes, pre-trial cases and court rulings regarding the conduct of the investigation by limiting access to information around the investigators to NAB and anti-corruption Prosecutor’s office before handing the case to court or close it”.

Ukraine needs to change the civil and commercial codes to give the legal possibility to arrest the account before the court decision.

And, of course, when it comes to increasing revenues and reducing costs, includes not only the direct change in the law. The quality of life of Ukrainians will decrease gradually because it is required by the IMF. Now it is believed that if a family has a car, appliances or a Bank Deposit, subsidies for housing and communal services she did not put.

It is expected to actively reduce spending on health care, education, culture and public transport. That is, the requirements of the IMF is not limited to an increase in gas prices, that the people of Ukraine have already managed to experience for yourself. According to the Association agreement with the EU and common European standards of internal energy prices should not be less imported, that is, the authorities do not have a right to take measures to reduce them, as it has to regulate the market.

Kiev ignored the IMF?

It is curious that the Ukrainian authorities often just ignore a particular provision of the Memorandum, although this may be a formal denial of future credit. Apparently, in Kiev there is little doubt that the money will still be given, although this Memorandum is essentially a guide to action. It is from the fulfillment of the terms depends on the future allocation of the next tranche.

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For example, until October 2016, the Verkhovna Rada had to adopt the law on the market opening of agricultural land that fits into the concept of liberalization of the land market. But on 6 October, a law was passed extending the moratorium on land sales until January 1, 2018.

Such position of deputies of amazing, because now Ukraine is living solely from tranche to tranche. Without financial assistance from the IMF Kiev would have to declare a full default, and the economy, despite the infusion of billions of dollars of foreign aid, did not manage to run, and any shock can quickly return to a state of recession.

By the way, do the authorities make promises that do not meet the requirements of the IMF.

“Can arrange it so most people live on a minimum pension? I do not like it… our Next decision we must make is to modernize the pension system, restore them in the pension system of social justice. We will criticize that these steps will be enough strong and sharp. We will make sharp steps, while Ukraine will have serious economic growth and people will not get decent wages and pensions,” — promised Prime Minister Vladimir Groisman.

However, the minimum pension in Ukraine should be extended from December 2016 to 1600 hryvnias, that is more than 40%. The IMF experts, in addition to the requirements of the Memorandum will also assess the draft budget and the reasonable expenses of the government, so the decision to raise pensions can be canceled. The same applies to promises about raising wages.

The IMF itself, with quite a positive Outlook on the credit-financed economy, not in a hurry to raise forecasts for Ukraine. The pace of GDP in 2017 is expected at 2.5%, and inflation – in the region of 8.5%. As for 2016, but this year the economy could grow by 1.5% and inflation is about 13%.

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