Top investors and business associations have called on the Ukrainian government and parliament to make a deal with the International Monetary Fund in order to unlock a long-delayed $1.9 billion tranche of aid money for the country.
If Ukraine does not receive further financial support from the IMF, the country will suffer, as Ukraine’s economy is still fragile, business leaders said at a press conference in central Kyiv on July 12.
“(At stake is) the loss of two years of future (gross domestic product) growth, hard-won financial stability, billions of dollars of investment, thousands of jobs, the containment of brain drain, and hope for a better future,” reads a statement released by the business leaders.
Ukraine still has to qualify for half of the $17.5 billion in conditionally approved credits granted to it under a program that expires in March.
But Ukraine is still far from completing its reform homework, as it still needs to create an anti-corruption court that is approved by the Venice Commission, raise its domestic natural gas prices to match the price of imported gas, and keep the government’s budget deficit within the promised 2.5 percent of the gross domestic product. Today it is around 4 percent.
Those who voiced their concern with the government’s progress were: Tomas Fiala, CEO at Dragon Capital investment firm; Lenna Koszarny, founding partner and CEO at Horizon Capital; Viacheslav Klymov, co-founder at Nova Poshta and president of the Ukrainian Entrepreneurs Union; Roman Shpek, head of the Independent Association of Banks of Ukraine and senior advisor of Russian-owned Alfa-Bank; Anna Derevyanko who heads the European Business Association; and Tetyana Prokopchuk, vice president at the American Chamber of Commerce of Ukraine.
“We need decisiveness, we need to make a decision,” Koszarny said. “The government, and IMF, and our (international) partners today know that everything is in front of them. All they have to do is to make a decision. We don’t want it to be (after parliament) vacations and everyone relaxes and after they close the session in Verkhovna Rada.”
Ukraine’s parliament will have a month-and-a-half vacation starting on June 14.
“We need to make a decision now throughout next week and this is extremely important,” she said.
Derevyanko, who represents more than 900 businesses, also says that cooperation with IMF is crucial for the business community.
“We understand that it gives us money that will stimulate macroeconomic stability, and with this we as businesses need reforms that serve as an anchor in the IMF’s program,” she said. This includes the privatization reform, the control of the state budget deficit, and various changes in the tax system, she said.
Derevyanko also warned of what will happen if Ukraine does not receive the next IMF tranche: there will be less competition in the business sector, fewer jobs, lower salaries and a strong hryvnia devaluation, she said.
Fiala says that Ukraine had already lost a lot of time and opportunity to ramp up its business environment with the IMF financing.
“We didn’t use the long-term cheap financing as we could have,” Fiala said. “It would have given businesses a lot more comfort to invest and could have created a lot more jobs, and fewer people would be leaving the country, and we wouldn’t have to be competing for human capital.”
Koszarny pointed to the aggressive IMF fiscal austerity program applied in Romania 10 years ago as a successful example that Ukraine could learn from.
“Let’s look at Romania, they also had an IMF program in 2008. Their (GDP) is growing the fastest in the EU. Last year it was 7 percent, and while they had to go through very tough reforms, we can see the results.”
The full written joint statement by the press conference participants is as follows:
“1. We urge the Ukrainian government, the IMF and Ukraine’s international partners to use all efforts to put a workable deal together before July 20 to unlock the $1.9 billion tranche in 2018.
2. We urge the Ukrainian government and the IMF to find a workable solution on gas tariffs and budget issues by July 20 and for the Ukrainian Parliament to support it.
3. We urge the Ukrainian Parliament to approve draft law No. 7441 with amendments on appeals of the current NABU cases on July 12.
4. We urge the IMF and Ukraine’s international partners to continue to consider the entire economic and reform picture as well as broader societal implications, and to make decisions based on today’s realities.
5. We believe that what is at stake is the loss of two years of GDP growth, Ukraine’s hard-won financial stability, billions of dollars of investment, thousands of jobs, brain drain, and the hope for a better future.”