The International Monetary Fund on Thursday pledged $18 billion in loans to prop up Ukraine’s sinking economy, as the nation’s prime minister forecast more pain ahead without reforms that will affect nearly everyone in the country.
In a lengthy and passionate address to parliament, Arseniy Yatsenyuk warned that Ukraine was “on the brink of the economic and financial bankruptcy” and laid out details for fixes needed to put the country back on track, including raising taxes, a freeze on minimum wage and radically higher energy prices.
The reforms will hit households hard, which is likely to severely dent the interim government’s tenuous hold on power.
It is true that some pain is necessary, but this is pain to please a new master, to be driven further into debt. And it is really not a loan for Ukraine at all, but for the ones who took a risk (or it was supposed to be a risk) by loaning Ukraine money. Ukraine will be further in debt to keep the money rolling in to their earlier creditors.
This paragraph was especially evil:
Other donors, including the European Union and Japan, have already pledged further assistance to Ukraine, conditional on the conclusion of an IMF bailout and reform package. The total amount of assistance available for Ukraine will be about $27 billion over the next two years.
Calling the EU and Japan “other donors” implies that the IMF is a “donor.” But that is a falsehood. The IMF is not donating anything! They are simply loaning Ukraine more money. So does this mean that, in addition to the loan from the IMF, that Ukraine will get real financial gifts from the EU and Japan? Or are those two countries the same kind of “donors” as the IMF? Are they merely offering to help Ukraine go further into debt?
Notice that we have here a foreign combine of nations now demanding laws and policies to suit their needs. How is that “democracy”?
Separately, the 28-nation EU has prepared a wider aid package including loans and grants for Ukraine expected to total more than $10 billion over the coming years.
So some are “grants” or “donations” but other parts of the $10 billion are loans. Notice how perverse this is. The EU uses grants, money taken from taxpayers, to help entice Ukraine to accept the loan offers, which will make money for the bondholders. Those loaning Ukraine money are basically offering incentives at the expense of far poorer people in the EU.
Ukraine’s Finance Ministry has said it needs $35 billion over the next two years to avoid default.
So what happens in Year Three once Ukraine has barely managed to avoid default and now owes $35 billion more than it did before?
If Ukraine wants to default and rebuild its economy on the basis of sound money and a sound economy, I think such austerity would be worth it. But they should never accept austerity to simply go further down into the debt hole and be ruled by foreign powers.