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21 Dec, 2018 07:34

Burden of repaying IMF loans will fall on future generations of Ukrainians, warns Putin

Burden of repaying IMF loans will fall on future generations of Ukrainians, warns Putin

The IMF’s approval of a new $3.9 billion loan for Ukraine has already been hailed as a victory in Kiev. It’s just enough to cover some pension payments but will take a long time to pay off, said Russian President Vladimir Putin.

The executive board of International Monetary Fund (IMF) greenlighted a new 14-month loan package, the so-called Stand-By Arrangement (SBA), for an already debt-laden Ukraine on Tuesday.

Ukraine’s Finance Ministry was quick to laud the decision and call it a “victory” as it expects to receive the first installment of $1.4 billion by Christmas. Other tranches will come after completion of semi-annual reviews, the IMF said.

While the fund says the loan deal would preserve recent economic gains and pave the way for higher sustainable growth, it might backfire on the Ukrainian people, said Putin during his annual Q&A session on Thursday.

“We realize what the IMF tranche is – it is just to pay pensions and salaries in the social sphere, and then future generations will have to pay,” said Putin, answering RT’s question on citizenship for Ukrainians.

The president added that Moscow does not want to play into the hands of those who want to split the peoples of the two historically-linked nations, a goal that the current government in Kiev made its policy.

The IMF financial package, which replaces the previous four-year financial aid for Ukraine, had been ready in mid-October but the IMF board was waiting for the Ukrainian government to issue the 2019 budget with a deficit of $3.2 billion or 2.3 per cent of GDP.

Ukrainian authorities were also to complete a series of economic reforms before the aid was approved by the IMF. These included unpopular measures such as raising gas and heating rates and are considered to be a huge blow to Ukrainian leader Petro Poroshenko’s support in the upcoming elections.

The country’s national debt stands at more than $75 billion as of October this year, this includes external debt of $47.65 billion.

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Despite figures showing that Ukraine managed to lower foreign debt by nearly $1.5 billion, next year may be tough for the country as it has to pay nearly $27 billion to foreign creditors, according to a forecast issued by authorities in December.

Earlier, Ukrainian Prime Minister Volodymyr Groysman put the figures even higher, saying that the external debt is more than $65 billion, given that the government borrowed more than $26 billion between 2007 and 2010, and an additional $20 billion in the four following years. He also admitted that the burden of the external debt is one of the biggest problems for the national economy.

“The biggest problem from an economic point of view is the pressure of foreign debts on the state, most of which were accumulated before 2014,” the prime minister said, adding that all this rests on the shoulders of the Ukrainian economy and its people.

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