IMF Reported Hesitant Over $1.6 Billion Release

KIEV, Ukraine -- The Ukrainian government is showing signs of hesitancy in its commitment to economic reform and the IMF is now watching keenly how a planned overhaul of the pension system progresses before it releases $1.6 billion of fresh credit, Reuters reported.


A slowdown in commitments under the $15 billion IMF program, with only modest economic growth in sight, coincides with renewed political tension following moves to prosecute former Prime Minister Yulia Tymoshenko.

She is charged with misusing public funds while in office, which she denies.

Spooked by huge demonstrations late last year against proposed tax reform, Prime Minister Mykola Azarov is now suggesting that an IMF-backed plan to raise the retirement age for women might be scrapped if the public comes out against it.

The International Monetary Fund's stand-by program is a big factor in allowing Ukraine to borrow on the international debt markets at a relatively low price.

The Fund has said that Ukraine is broadly meeting targets.

But it does not want any backsliding over raising the pension age and the issue will figure large in discussions when an IMF mission starts a 10-day visit to Ukraine on Tuesday.

Under the deal with the Fund, Ukraine is to receive $15 billion credit over two and a half years, which could be a valuable spur for renewed investor interest.

The program is key to the government's efforts to revive its economy, which is dominated by steel exports, after a 15% contraction in 2009.

Reforming the ex-Soviet republic's inefficient tax system is another part of the program agreed with the IMF -- but here too progress has been mixed, Reuter reported.

At the initiative of President Viktor Yanukovych, parliament watered down a proposed tax code after up to 10,000 small entrepreneurs vented their anger in the biggest protests against him since he came to power a year ago.

Despite popular anger now, Yanukovych has tightened his grip on power through local elections that have left his Regions Party in powerful positions across the country.

Though popular opinion has moved against him over tax reform and also over a 50% rise in domestic gas prices, he appears to have bought time by avoiding an early parliamentary election.

Source: Ukrainian Journal

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