Clinton Credited With Securing IMF Loan

KIEV, Ukraine -- U.S. Secretary of State Hillary Clinton’s visit to Ukraine played the key role in the International Monetary Fund’s decision to agree on a $14.9 billion loan, Deputy Prime Minister Serhiy Tyhypko said Tuesday.

Deputy Prime Minister Serhiy Tyhypko

Tyhypko unsuccessfully held talks with the IMF for more than four months, until the Washington-based lender suddenly indicated Friday it was ready to resume the lending.

Tyhypko said Clinton’s visit to Ukraine and her meeting with President Viktor Yanukovych on Friday had played the “greatest role.”

Clinton “confirmed strategic level of partnership between Ukraine and the U.S. and that had become an important signal for the IMF to finish difficult many-month talks over resuming cooperation with Ukraine,” Tyhypko said.

The IMF loan announcement came hours after Clinton’s meeting with Yanukovych and came as a surprise to many analysts because the government had been lagging far behind in many reforms.

Tyhypko’s comments suggest the IMF decision may be politically motivated rather than being justified by the progress toward economic reforms.

Since the election of Yanukovych to the presidency in February, Ukraine has been swiftly drifting towards close political and economic partnership with Russia, slowing down its pro-Western course.

With its budget facing a major deficit, Ukraine resorted to borrowing $4 billion from Russia in June under terms that have never been disclosed by government officials, signaling possible political concessions.

The resumption of lending by the IMF makes Ukraine’s borrowing more transparent and does not require foreign policy concessions compared with similar deals with Moscow, analysts said.

Clinton made clear to Yanukovych that the Obama administration is not troubled provided his intent is simply to come up with a more "balanced" foreign policy, involving Russia as well as the European Union and the United States.

But Clinton expressed concern about a string of incidents in which Ukrainian journalists and civic activists have complained of facing harassment or censorship.

"I've discussed the importance of defending these rights with your president," Clinton told students at the 19th-century Kiev Polytechnic Institute on Friday evening. "He has made a commitment to uphold Ukraine's democracy, to uphold the rule of law, to maintain respect for human rights."

The IMF Board of Directors is expected to meet late July to finally approve the 2.5-year loan to Ukraine, and Ukraine will have to implement a number of reforms, such as hiking domestic gas prices, by then.

Tyhypko said that the IMF lending will let the government and private companies ease access to borrowing from international capital markets, and will also open lending from the World Bank, the European Union and the European Bank for Reconstruction and Development.

“The agreement with the IMF will become a signal to foreign creditors that the economy of Ukraine is ready for properly using foreign investments,” Tyhypko said.

Source: Ukrainian Journal