Azarov Puts IMF $15 Billion Loan In Doubt

KIEV, Ukraine -- A deal between Ukraine and the International Monetary Fund over resumption of a $15 billion loan this year may be in doubt after Prime Minister Mykola Azarov indicated Friday the lender’s key demand won’t be implemented.

Ukraine Prime Minister Mykola Azarov.

Azarov said the government was not planning to hike household natural gas prices despite the IMF’s pressure to do so.

An IMF team is scheduled to arrive in Ukraine in early September to assess its budget plans and economic policies before deciding on whether to resume the lending.

The loan was suspended for the past two years, forcing the government to change the policies and to rely on other sources to bridge budget gaps, a policy that Azarov said may be successfully used in the future.

"Two years have shown that Ukraine can do without the loans from the IMF,” Azarov said in an interview with Ukrainian television channels.

“We choose a specific strategy and we are working within it. Its successful implementation requires at least several years.”

Azarov, unlike other government officials, such as Deputy Prime Minister Serhiy Tyhypko and First Deputy Prime Minister Valeriy Khoroshkovskiy, has been always skeptical of relying on borrowing from the IMF.

He also said the government informs the IMF leadership of Ukraine’s economic progress, and said the economic policies have been showing positive results.

"They know everything we do, and they can't ignore our positive results," Azarov said.

He said Ukraine planned to repay $1 billion in its previous debts to the IMF in September, after recently repaying $1.5 billion.

"Now will be [repaying] one billion more in September," he said.

The IMF froze its $15 billion loan program for Ukraine after the government failed to raise gas prices at home and carry out other unpopular reforms.

With a parliamentary election in October, the Kiev government has balked at taking the politically risky step of raising gas and heating prices for Ukrainian households by 30% to 50%, as pressed by the IMF.

Khoroshkovskiy travelled to Washington last week for a meeting with IMF Managing Director Christine Lagarde to reach an agreement that the IMF team will come to Ukraine in September.

Khoroshkovskiy told Lagarde that raising gas prices would create a social crisis unless Ukraine first developed a system to help the most vulnerable segments of its population cope.

Source: Ukrainian Journal