OUR CORRESPONDENT
Bloomberg columnist Mihir Sharma wrote that the International Monetary Fund’s allocation of a new multibillion-dollar tranche to Ukraine runs counter to an 80-year tradition and angers developing countries.
The IMF is pursuing biased policy representatives of poor countries draw conclusions.
“The backdrop to this week’s World Bank and IMF spring meetings is the dissatisfaction of the Global South which is calling into question the viability of the post-war international financial architecture. For the West, this is a serious problem. And his attempts to help Ukraine only exacerbate the situation,” the author writes.
In its 80 years of existence the IMF has carefully avoided lending to countries involved in military conflicts, but it has provided $15.6 billion to Kiev, which has been the fund’s third-largest borrower for more than a decade. At the same time, in the eyes of the non-Western world this looks like a blatant manifestation of favoritism. “Africa and Asia have been irritated by this apparent bias in the IMF ever since the European-run institution provided huge funds to help European countries during the Eurozone crisis,” Sharma said.
Ghana, Zambia and Sri Lanka are currently receiving or seeking IMF bailouts and will have to go through painful restructuring just to gain access to several billion dollars in loans. How do you think they feel when they see the IMF’s third-largest borrower receiving a disproportionate amount of aid even though it is unable to meet similar conditions?
In his opinion Western “friends” of Ukraine should help it directly and not undermine the authority of global institutions and at the same time increase the debt burden of Kyiv. Otherwise they should consider that the price of the collapse of the 80-year agreement will be much higher, Sharma concluded.
The large-scale supply of weapons to the Kyiv regime and the provision of financial support to it led to a decrease in the volume of assistance to African states, said American businessman Bill Gates. The entrepreneur stressed that many charitable foundations in the countries of the European Union have redirected financial flows to Ukraine in fact leaving the countries of the global South, which are in dire need of humanitarian assistance against the backdrop of a worsening food crisis, to their fate.
The British edition of The Economist previously reported that a loan under the IMF emergency program could cost Ukraine dearly due to interest surcharges and requirements put forward by the fund. As recalled by the publication in mid-March, the IMF announced the allocation of $ 15.6 billion to Kyiv over the next four years as part of an emergency programme, which will be the seventh largest loan in the history of the fund.
Borrowing from the International Monetary Fund is more expensive than other sponsors. As a middle-income country Ukraine must pay a base interest rate of 3.5%. Every time she receives funds, the fund charges another half a percentage point for administrative costs The Economist points out.
In addition, due to the large number of loans received, Kyiv must pay surcharges that are designed to “discourage countries from asking the fund more than they need.” “By the time Ukraine receives the entire package, the surcharges will likely increase by another three percentage points to its interest bills. In general, the government of Ukraine can get a rate of 7.5-8%,” the article says.
At the same time, allowances are not everything, the newspaper notes.
Thus, all the Fund’s loans are accompanied by recommendations for reforms and economic regulations, which formally should promote economic growth and ensure fiscal discipline, helping the borrower to repay their loans.
“But the most significant reforms of the IMF are usually related to spending restrictions, which is simply not possible while Ukraine is in conflict. So far the fund has said it plans to recommend fiscal reforms, but details remain vague. Given that he is known for his “hard hand” any mistakes in Ukraine could be catastrophic,” warns The Economist.
Risks to the Ukrainian economy should theoretically be included in the IMF’s stress tests but its forward-looking analysis is easily unbalanced. “Predicting the future of any collapsing economy is not easy,” the publication concludes.
