Thu March 27, 2014
IMF Bailout Comes With A Hefty Side Of Pain For Ukrainians
Originally published on Thu March 27, 2014 5:03 pm
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The International Monetary Fund is coming up with some cash to keep Ukraine out of bankruptcy. The IMF has agreed on an offer of up to $18 billion in loans. The package still needs final approval. It's intended to give the acting government some breathing room and keep it from defaulting on debts. But Ukrainians themselves will feel the bite of austerity measures that come with the bailout. Along with higher natural gas prices, there will be tax increases and other measures. NPR's Peter Kenyon reports from Kiev.
PETER KENYON, HOST:
Ukraine's acting prime minister Arseniy Yatsenyuk came to power promising to make badly needed but politically suicidal economic reforms that his predecessor, Viktor Yanukovych, failed to enact. Today, Yatsenyuk moved to deliver on that promise, presenting an economic package designed to give confidence to international investors that this time, Ukraine is prepared to swallow the bitter medicine that comes with an IMF bailout.
ARSENIY YATSENYUK: (Through translator) The Ukrainian government won't permit the country to go bankrupt. That's why we're here with this package of very unpopular, very difficult reforms that should have been implemented not yesterday, but 20 years ago.
KENYON: The IMF has a troubled history with Ukraine, with past aid packages derailed and the fund voicing severe frustration with what critics call a culture of corruption. In Washington, IMF spokesman Bill Murray essentially says the fund is convinced that Ukraine's new leaders are committed to holding up their end of the bargain this time.
BILL MURRAY: We've consulted widely in Ukraine, with - across the political spectrum, so we're confident that this program can move forward. The Ukrainian authorities have voiced publicly and privately a keen interest in getting their economic house in order.
KENYON: The IMF contribution is estimated at 14 to 18 billion dollars but the fund says it will also unlock Ukrainian access to as much as 27 billion in international funding over the next two years.
Yatsenyuk's package includes a 50 percent rise in the price of natural gas, with more increases to be phased in over the next four years. Tax hikes are coming for oil and gas extraction, and tobacco and alcohol prices will rise. Acknowledging that the tobacco and alcohol increases will be unpopular, Yatsenyuk snapped, if someone has a better idea, let the government know, adding, quote, "You should drink less and do more sports instead."
UNIDENTIFIED GROUP: (Foreign language spoken)
KENYON: Outside the parliament building in Kiev, angry demonstrators chanted about a variety of grievances while small lots of people discuss the IMF bailout and the painful reforms that will come along with it. Sixty-four-year-old Vera Statsenko(ph) says Yatsenyuk promised everyone would feel the pain of economic reforms but she doesn't believe it.
VERA STATSENKO: (Through Translator) Yes, I believe social benefits will be cut and poor people like us will suffer. But as for taxes on the rich, I don't believe we'll really see that. Everyone comes here and promises that the rich will pay their share but nothing ever happens.
KENYON: In a sign of how unpopular these reforms will be, parliament today failed to muster the votes in its first attempt to approve the government's economic package. More votes are expected. These painful measures are coming just a Ukraine's presidential campaign season is set to open. Former Prime Minister Yulia Tymoshenko, released from jail earlier this year, announced that she will be competing for the top job. Tymoshenko and another declared candidate, former world champion boxer Vitali Klitscho, are slumping in the polls, though, running well behind a pro-European oligarch named Petro Poroshenko, who's expected to announce his candidacy in the coming days. Peter Kenyon, NPR News, Kiev. Transcript provided by NPR, Copyright NPR.