Anti-Colombian law approved. But this is not the end

In less than 12 months, Ukraine finally got closer to the new IMF program. Less than six months later, Ukraine met the last condition and adopted the long anti-Colombian law.

But, as you know, the revolution has a beginning, the revolution has no end. The same is true with the story about anti-Colombian law and PrivatBank. This is not the end.

What is the result of the vote? Ukraine complied with the IMF conditions, and there are now 2-3 weeks before the final decision of the IMF board. But this is a pure formality. In addition to two procedures to be completed in Ukraine. First, not approve the parliamentary decree, which says about the abolition of the vote in favor of the anti-Colombian law, and then get the president’s signature. While the IMF will carry out bureaucratic procedures, Ukraine will only comply with its formalities. As a result, a Memorandum will be signed in the near future, and Ukraine will receive the first tranche of the Stand By program. In addition, signing an agreement with the IMF will open access to EU financing. (there we can obtain 3 tranches of 600 million euros each) and the World Bank.

Key: Ukraine receives support in a critical year

In theory, this tranche should be the first in a series of tranches that Ukraine will receive in the next 18 months. We will begin to repay this loan in 3 years. And yes, there is nothing wrong with the IMF loan. Loans attract all countries in the world. (The general practice, of absolutely all developed countries, is to pay off old loans by attracting new ones) and it is especially active this year when budget deficits have increased considerably in relation to the crisis. It’s just that countries basically do it quietly and almost daily, using resources from the stock market. And for Ukraine, investor money is not available because the country is not trusted. And so, every time you have to go back to the IMF for money.

Why was the anti-Colombian law adopted despite the clear unwillingness of the authorities to do so? Just because there is no alternative. No matter how you love Kolomoisky, the default is too painful for the economy and for the rating. You can remember the tanks on the streets of Argentina, and the latest videos from Lebanon, where protesters destroy the central streets of Beirut, are also indicative. But this does not mean that the authorities understand and accept the need for this law. Rather, on the contrary, it is safe to say that if there had not been a coronacrisis, this law would never have been adopted. And many interviews with members of the majority are more reminiscent of apologies for having to vote for the law. In addition, they put the thesis that the law does not comply with the Constitution. And the bacchanalia of the speeches in the parliament during the consideration of this law is indicative.

But the crisis came. And Ukraine needs the IMF. At the same time, the positive side of the story is that the current global crisis can hit Ukraine much less than in 2008. Ukraine is approaching the crisis in a much better way, and we see that the result of banking sector reforms and the achieved macro-financial stability allows the hryvnia to remain stable, and the economy does not have imbalances inherent in the situation of the past. And if the country remains within the framework of cooperation with the IMF until the end of the year, then the impact on the economy will be much less than in 2008. If you do not do stupid things.

Key: Ukraine receives support in a critical year, 2020. When it needs to finance a record budget deficit, and access to foreign markets is limited. As a result, we will avoid the default scenario and the unlimited issue scenario.

Is there a risk that the section we receive is the last in this program and we see a destabilization of the situation?

Yes there are. What does that mean? This means that the story is just beginning. And the Kolomoisky people will go to the Constitutional Court. Who always made decisions based on political will. And nothing more. And the big question is whether the political will of the Ukrainian authorities to protect the money of Kolomoisky’s Ukrainian taxpayers raises questions. The oligarch’s objective remains unchanged: to regain control of PrivatBank to withdraw demand in London. Still, Ukrainian oligarchs trust British justice, but they don’t want him to decide his fate. And the adopted law prevents it.

Therefore, when the crisis is over, Ukraine may be able to regain the vote using the Constitutional Court. This will be a clear signal to all of our western partners. But today there are a number of reforms on the agenda that are only impeded by Ukraine’s critical dependence on the IMF. We are talking about the Private Bank, the independence of the National Bank and the independence of NABU. If this happens, Ukraine itself will discontinue cooperation with the IMF, which is guided, including by external investors. And this again can put the issue of financial stability back on the agenda. And again we will hear the word default on the agenda. But that will be a completely different story.

Text published with permission

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