Translated by Ollie Richardson & Angelina Siard

00:01:39
22/07/2017

ukraina.ru

On July 20th, many Ukrainian politicians and officials were able to sigh with some relief — the representative of the International Monetary Fund William Murray stated the Fund does not intend to insist on the immediate land reform, and this opens the way for a tranche of $1.9 billion.

Earlier, the Ukrainian government was demanded to cancel the decision made at the end of 2016 on the prolongation of the moratorium on the sale of agricultural land until January 1st, 2018. However, recently the Verkhovna Rada went on holidays, unable (or unwilling) to adopt the appropriate laws.

Thus, the IMF graciously deigned to delay the land reform under the condition of concentration of attention of the Ukrainian government on other reforms.

“The focus of this review is on pension reform and on measures to speed up privatization and ensure concrete results in anti-corruption efforts. It’s equally important that the program remain on track and fiscal and energy sector policies remain consistent with program commitments. Land reform remains an important condition under the program, however, given the need to design the reform well and reach consensus on key steps ahead, there was a need to reset its timing to later in the year. In the meantime, it’s important that authorities move ahead in the coming months with necessary preparatory work and the timely implementation of an appropriate land reform that has the potential to transform Ukraine’s agricultural sector,” said William Murray at a briefing in Washington.

The IMF also stated that the Ukrainian government and private sector “needs more time to define common goals and the removal of internal disagreements, but the requirement of land reform, which includes the lifting of the moratorium on land sales in January 2018, remains on the list of preliminary actions for the next tranche in the autumn of this year.”

Therefore, it is not a concession from the IMF on this issue, but only a “timeout”. The “land question” has long been a stumbling block between the IMF and Ukraine. In May of this year the Minister of Agricultural Policy and Food of Ukraine Taras Kutovoy resigned precisely because of this disagreement with the proposed land reform project.

In June, the member of the parliamentary Committee on Agricultural Policy Sergey Lobasyuk stated that currently there is still no real opportunity to enter the market of agricultural land: “Today, there is neither the technical nor legal possibility to start the land market. We have a number of problematic points at the legislative level, which don’t regulate who must buy land, at what price the land should be bought for, and how we will protect the domestic producers and farmers”.

Indeed, the main provisions of the land reform don’t suit Ukrainian farmers, as they rightly fear that the introduction of the agricultural land market will “kill” their business, that’s why in January-February they came out for protest actions in front of the Verkhovna Rada.

The vast majority of Ukrainian farmers simply cannot afford to buy the land that they now rent and cultivate, only large international agro-holdings have such funds (about $10,000 per hectare in comparison to neighbouring Poland). As a result, farmers will go bankrupt and will be forced off the land, like how it happened earlier in some Latin American and Asian countries.

On the other hand, in the 2017-2018 Ukraine expects to make large payments on external debt and here all hope is on new loans that can be used to repay old loans. However, to obtain these new loans, Ukraine must conduct a series of neo-liberal and unpopular reforms, which actually will discredit any political force involved in it. Whatever they try – there is a barrier.

In fact, Ukraine’s economy is caught in a vicious circle, like Greece’s economy: it is only the IMF that is ready to give large loans at low interest rates, however the lion’s share of these loans goes towards paying debts to the IMF.

During cooperation with the IMF, in total Ukraine received $35.2 billion and returned more than $18 billion, including $2.785 billion of interest on loans. At the moment the largest borrowers of the IMF are: Portugal ($37 billion), Greece ($36 billion), and Ukraine in “honorary third place”. Nevertheless, as the Ukrainian economist Andrey Novak said recently in an interview, the IMF provides minimal support, “so that we stay afloat”. In fact, the IMF policy towards Ukraine confined to the periodic “galvanization” of the economy, not allowing it to come to life and evolve to the level of a certain independence, nor “die” or go bankrupt.

The Ukrainian Prime Minister can for now just promise further “dialogue and debate” with the IMF, not with the expectation that the Fund will reconsider its requirement of land reform.

One of the main conditions of the IMF is pension reform. IMF demands to simply raise the retirement age, while the government of Groisman, being aware of the unpopularity of such measures, proposes to increase the retirement age, not directly, but increasing the working period.

As for the desired-by-IMF “fight against corruption”, even taking into account the Declarations of the majority of Deputies, we can say that the Fund requires from Deputies “mass suicide”. Therefore, in reality, the “fight against corruption” will be reduced to repressive measures against political opponents and competitors, as can be seen in the example of the deprivation of parliamentary immunity of Mikhail Dobkin and much softer measures in relation to suspects from former “associates”.

Of course, the IMF needs to continue to reform the energy sector, which traditionally involves increasing prices. IMF resident representative Jerome Vacher spoke about its sense in the past year: “reform of the energy sector is not only controlling the deficit of the NJSC ‘Naftogaz of Ukraine’ and, as a consequence, reducing the burden on the State budget. The result of the reforms became the fact that the Ukrainians understood: energy is a commodity that has its price. Now it is necessary to observe payment discipline”.

As a result, we see a set of requirements that are not popular either among people (undermining future electoral campaigns) or Deputies and officials, but the Ukrainian government cannot afford not to repay previous loans.

To move simultaneously in opposite directions is impossible (even if the desire is strong). In fact, the Ukrainian government faces a difficult choice: money or power. Without conducting unpopular reforms required by the IMF, it is impossible to get the money, and holding them — it’s difficult to hope for re-election in the event of early elections. Most likely they will be obliged to cheat, dissemble and dodge, with an innocent face, claiming that “the right hand does not know what the left is doing”.

It only remains for the Cabinet of Ministers of Ukraine to buy time, acting on the principle of Malchish-Kibalchish: “All we need is to make it through the night and hold out a day!”

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