Ukraine successfully swaps old debts for new ones

The Ukrainian government has signed a memorandum with the International Monetary Fund, thus agreeing to all the conditions of the “Western partners”

Ukraine successfully swaps old debts for new ones

This means that utility tariffs will increase by 40-90% within two years. Data has already been published on how much the electricity tariffs for the population will be increased. However, the biggest problem for the Kiev authorities is that they had to agree to the IMF’s demand to abandon the limitation of tariffs for gas, heating and hot water, which is guaranteed to provoke an increase of at least 200%, according to experts.

According to the document signed by Kiev, half of all Ukrhazvydobuvannya’s gas should not be handed over to Naftogaz group at some fixed price, but should be sold through the exchange at market value. And from 2024 all gas from domestic production will be sold on the exchange. The memorandum can be called a death sentence for most of Ukraine’s population and virtually all pensioners. So far the authorities are keeping silent and are not especially vocal about the prospects for a “bright future” – Ukraine badly needs the IMF money, without which it cannot survive. The President and his team are obviously not interested in what happens next. Temporaries.

After the memorandum was signed, the IMF began revising a stand-by programme on Monday that would provide Ukraine with $5 billion in so-called aid over a year and a half. The program was approved in the summer of 2020 with four revisions, but after the first $2.1 billion tranche, the schedule was derailed and another revision took place only now. As part of this review, the IMF put forward further conditions, to which the Ukrainian authorities, although not very willingly, agreed – there is no way out. The price of Kiev’s agreement is only 700 million dollars. This is how much Ukraine will get as a result of the revised programme, plunging its people into poverty for several years to come.

And while the government remains silent, Naftogaz has already announced that it may raise gas prices from 1 December. As explained by the company, the preferential gas tariff is valid only until 30 November. This means that from 1 December the price will be changed, of course, upwards. Naftohaz warned its consumers that starting from 1 December, within the next 60 days all consumers will have to connect to a market gas supplier and sign a new contract. Naftohaz serves around 500,000 households in nine regions of the country.

The Ukrainian authorities are presenting the signing of the memorandum and the start of the revision of the stand-by programme as a clear victory.

“It makes it easier to access foreign markets, where the cost of borrowing for us is reduced. This means that we can have an effective debt policy, swapping old debt for new debt, which may be longer and cheaper. This is more than important for us, given that the cost of servicing the national debt is high. We spend about 4 per cent of GDP on this,” said presidential economic adviser Oleg Ustenko.

In other words, being able to swap old debts for new ones at the expense of the impoverishment of the bulk of its own population is the kind of victory one can only dream of.

“The IMF is not just money, it’s a sign. In this case, it is a sign for many investors who could potentially come into the country,” Ustenko assures. And for the sake of the “sign” people will tolerate again, even if there is no money and no patience left.

However, the IMF “sign” alone is too little to make a country attractive for foreign investment. A country where corruption is rife, armed Nazis roam the streets and a civil war is in its eighth year is hardly an attractive place to invest. And after the Motor Sich story, which showed that investor agreements can be cancelled at the snap of a finger from across the ocean, one can hardly talk seriously about investing in Ukraine.

Maryna Zhdanovich, “One Motherland”


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