UNIAN news agency, April 20, 2017 (with extensive additional reporting further below)
Ukrainian Finance Minister Oleksandr Danyliuk says that Ukraine will not receive a new disbursement from the International Monetary Fund (IMF) if it does not conduct pension reform.
“There are some key conditions for receiving the next tranche. Pension reform is very important. There will be no disbursement without the pension reform,” he said during debates at Hudson Institute, Washington, D.C., when answering a question about conditions for the next tranche under the IMF’s Extended Fund Facility (EFF).
The minister said that reforming the pension system is needed for Ukraine and its people rather than for securing an IMF loan. As UNIAN reported earlier, the IMF Executive Board on April 3 completed the third review of the EFF and approved the fourth $1 billion tranche. On April 5, the National Bank of Ukraine announced the receipt of the new IMF tranche, which together with the second disbursement of the European Union macro-financial assistance received the day before would allow increasing international reserves to $16.7 billion, the highest level since the middle of 2014.
The receipt of the fourth tranche of the IMF loan is an unprecedented event for Ukraine since the country had earlier suspended the implementation of loan programs at earlier stages, while the IMF halted its financing after the first, second, and third disbursements. The IMF urged Ukrainian authorities to accelerate structural reforms to achieve faster and more sustainable growth, starting with the privatization and development of the agricultural land market. The IMF also stressed that corruption needs to be tackled decisively.
Ukraine cannot any longer delay comprehensive pension reform, including by raising the effective retirement age, the IMF said.
IMF urges Kiev on corruption and pensions after new aid
By Natalia Zinets and Matthias Williams, Reuters, Monday, April 3, 2017
KYIV – The International Monetary Fund urged Ukraine on Monday to raise the pension age and do more to tackle corruption after announcing the payout of $1 billion in new aid to the war-torn country.
The IMF is propping up Ukraine’s economy with a $17.5 billion bailout decided in the spring of 2015, helping it climb out of recession following the annexation of Crimea by Russia in 2014 [sic] and the outbreak of a Russian-backed separatist insurgency [sic] in its industrial east.
Ukraine’s President Petro Poroshenko and the government cheered the new aid as a vindication of their reform efforts. Prime Minister Volodymyr Groysman said it would help attract global investors and keep the hryvnia currency stable.
But the Fund, while praising Ukraine’s economic recovery and lower inflation, urged the authorities to implement structural reforms and tame high public debt. “Corruption needs to be tackled decisively. Despite the creation of new anti-corruption institutions, concrete results have yet to be achieved,” IMF First Deputy Managing Director David Lipton said in a statement.
“The urgency of structural fiscal reforms to ensure medium-term sustainability has increased, as pressures to raise wages and pensions are building,” he said. “Ukraine cannot afford to delay comprehensive pension reform much longer, including by raising the effective retirement age.”
Lipton also said it was important for Ukraine to safeguard the independence of the central bank. Central Bank chief Valeriia Gontareva has hinted that she might soon resign, citing protests that included someone leaving a coffin at her door.
Kiev is expecting a total of four tranches of aid this year. So far, counting Monday’s aid, it has received $8.38 billion in total under the program launched in 2015.
Finance Minister Oleksandr Danylyuk said the next tranche could come in May.
In March, the IMF delayed its decision on disbursing new aid in order to assess the impact of an economic blockade that Kiev imposed on separatist-held [sic] territory. [See note below.] Gontareva called the new aid “a real vote of confidence by the international financial community”.
The central bank in a statement [IMF statement dated April 4, here] also said, citing IMF experts, that the blockade would have only a moderate impact on growth and would not threaten Ukraine’s inflation target.
Earlier on Monday, Ukraine launched an electronic register that will automatically refund value-added tax (VAT) owed to exporters, implementing an IMF-backed reform aimed at tackling endemic bribe-taking in the tax service and improving the investment climate.
Note by New Cold War.org:
Amidst its reporting of ‘Russian-backed seperatism run wild’ in eastern Ukraine, Reuters, like the rest of Western media, can’t bring it upon itself to report the truth of the “economic blockade” of Donbass (eastern Ukraine) to which it refers in its report. The blockade was mounted with impunity by armed, Ukrainian ultra-nationalists beginning in February 2017 and then endorsed by the government in Kyiv the following month. This follows the pattern of the blockade of Crimea mounted by extremists in the fall of 2015 and then made official by the government in December 2015.
Ukraine receives IMF support but must accelerate reforms
Ukraine receives a $1 billion installment of its $17.5 billion financial support for the reform program of the government, following the IMF’s review of the state of the country’s economy. While the economy is slowly recovering after a severe crisis in 2014-2015, the country must still break with a legacy of weak governance and stop-and-go reforms to generate the sustainable growth it needs for higher incomes and better social conditions….
(Read the full IMF statement and view the related charts and graphs at the original weblink above.)
Notes by New Cold War.org:
1. “Reforms” is code language by the IMF for ‘cuts to social spending and social programs’.
2. One of the charts in the IMF report shows per capita GDP for countries in eastern Europe (and Turkey) for the years 2005 and 2015. Ukraine is the only country to have suffered a decline between those years.
Ukraine’s per capita GDP is the second lowest in Europe, just above Moldova, at 21 per cent of the European Union average. Russian GDP per capita, by comparison, rose by 50 per cent between 2005 and 2015, to reach 64 per cent of the EU average. Ukraine’s GDP declined by 6.6 per cent in 2014 and 9.8 per cent in 2015. The IMF says it rose by 2.3 per cent in 2016.
Ukraine’s social minister discloses who gets highest pension
Ukrainian Social Policy Minister Andriy Reva says the maximum pension in Ukraine is set at UAH 58,000, or about US$2,165, while retirement payments are capped at UAH 10,740, or about $400.
The vast majority of 12 million Ukrainian retirees receive even smaller amounts, according to television Channel 112 Ukraine.
“We have 19,200 pensioners who receive over UAH 10,740, of which 18,000 people obtain between UAH 10,000 – UAH 20,000, and nearly 2,000 pensioners receive over UAH 20,000. Today the highest pension in Ukraine is UAH 58,000. Nobody gets pensions worth UAH 100,000 or more in Ukraine. The maximum pension is set at UAH 58,000, which is paid to a Hero of Ukraine, who is a test pilot. All other pensions are lower,” Reva said.
The minister says pensions exceeding the UAH 10,000 limit are not right; however, their cancellation will not solve the problem of the Ukrainian Pension Fund’s deficit.
Reva also stressed the need to build a three-tier pension system in Ukraine. As UNIAN reported earlier, the government plans to raise pensions from October 1 as part of the pension reform, which, according to preliminary estimates, would involve 5.6 million Ukrainians. The government also pledges to abolish taxes for working pensioners.
The government’s pension reform does not provide an increase in the retirement age, but offers other tools to build a fair and deficit-free pension system.
According to a statement by the International Monetary Fund (IMF) after an IMF Executive Board meeting on Ukraine early in April, the country cannot any longer delay comprehensive pension reform, including by raising the effective retirement age. The list of structural benchmarks of the IMF’s Extended Fund Facility (EFF) includes the adoption of legislation on pension reform by the end of April.