Will the IMF Lose Ukraine?

No successful Eastern European government has been asked to impose a dramatic austerity and reform program prior to democratic elections. If the IMF insists that Ukraine's interim administration impose austerity immediately, the country will be forced to break uncertain new ground at a particularly dangerous time.

BOSTON – An incumbent trying to win an election in a stagnating economy must stimulate growth. This is one the most basic principles of modern politics. And yet the West, which wants to help its allies in Ukraine’s interim government win the general election on May 25, seems to have forgotten it.

Instead, plans are underway to impose on Ukraine the biggest austerity package Eastern Europe has ever seen. This is no way to win votes. After the Russian-imposed chaos, the International Monetary Fund is planning to inflict its own chaos on Ukraine. It is time to remind the IMF that political stability, not a controversial raft of emergency reforms, must be the top priority.

The IMF has long sought to impose a range of economic “reforms” on Ukraine. Some are reasonable; others are not – and the IMF’s track record in Ukraine is weak. Some of the reforms the IMF previously tried to get Ukraine to adopt, like pension privatization, were tried in other countries and ditched. The IMF does not always get it right. Today, its main blind spot in Ukraine has concerned consumer subsidies and transfer payments.

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