The board will cite positive changes in Ukraine’s macroeconomic policy, fiscal stability, banking sector and other areas as justification for restarting lending that it shut off last year at $6.7 billion. It will likely urge Ukraine to accelerate its anti-corruption fight as a condition for more assistance, even though the fight is largely illusory. And the others — the European Union, the United States, the World Bank — will then have permission to fall in line, see the glass as half-full and unlock their frozen loan programs amounting to $40 billion (including the IMF”s $17.5 billion) in a four-year period through 2018.
Approval is likely based on the IMF’s weak demands on Ukraine’s leaders, judging from what is publicly known (and not all is known) about IMF conditions. It does look like the fix is in. The West’s 25-year strategy to Ukraine can be boiled down this: We’ll give you enough aid to sputter along, realizing your Soviet-like leaders are not salvageable, but that hopefully, in a few generations, the grandchildren will ignite the transformation to a prosperous democracy.
The IMF continues to lend even though President Petro Poroshenko and parliament have done nothing to reform the General Prosecutor’s Office or the courts. A law passed on June 1 and hailed as judicial reform has too many question marks to outweigh Poroshenko’s two years of obstruction.
Jerome Vacher, the IMF country representative, told the Kyiv Post in the Doing Business in Ukraine guide published on June 3 that judges and prosecutors are beyond the IMF’s mandate, expertise and ability to monitor. Fair enough, but the decision to lend or not to lend is within the IMF’s mandate and assessing the judicial system is something everyone can do. And everyone who has done so knows the rot exists to protect a corrupt oligarchy.
Ukraine’s unchecked corruption is the biggest threat to the nation’s macroeconomic stability and path to sustainable economy growth, the vaunted aims of the IMF, yet the lender takes a pass at requiring structural changes to the two most important institutions for fighting corruption.
Instead, the IMF works around the edges, focusing on the National Anti-Corruption Bureau of Ukraine and the National Agency for the Prevention of Corruption, two new agencies that are subservient and understaffed by design.
This is the same IMF that carried out eight lending programs even though it knew that Ukraine’s banking sector was corrupt and non-transparent, with not even the National Bank of Ukraine, the supposed state regulator, knowing who owns the banks. Now those bills are coming due, to the tune of $3 billion in public money shelled out to depositors who lost their money in these fake banks. And yet not a single person has been prosecuted for financial fraud nor likely will be.
If the program resumes, the IMF should just admit that it is in the business of being the lender of last resort and that this borrower’s dismal record in fighting corruption is acceptable as long as it repays the loans.
