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As of recently, the IMF has decided to lend approximately $18 billion to Ukraine in order for their economy to stay afloat. Of course, however, there are certain criteria to be met. Some of these include cuts in spending, increases in taxes, and more regulations to avoid corruption. While Ukraine is starting to meet some of these criteria, officials in the US are trying to get a $1 billion guaranteed loan approve. The European Commission has also agreed to give Ukraine a loan provided that they can meet the measures put in place by the IMF.
Currently, Ukraine has a very large budget deficit and diminishing foreign reserves. In addition, their currency has sharply fallen since floating the exchange rate, putting the country in very difficult economic times. This crisis has been called the worst since breaking away from the Soviet Union. However, loans from the EU and the US would help greatly. The country is also expected to get about $27 billion in loans within the next two years.
It is possible that this will help Ukraine's economy greatly. However, meeting the requirements will be more difficult around now. Elections are in May, and the some of the population may not be willing to comply. Some opposition as already begun to surface, and it is common knowledge that many people don't like increases in taxes. We will see if Ukraine is able to comply with the given conditions. If they can, the $27 billion will help them greatly.
It is important that regulations are enforced to ensure that the money is well spent and is not stolen from corrupted politicians in Ukraine who may use the money for themselves. This is a frequent concern for a lot of people or organizations who decide to invest money in other countries. However, it will be interesting to see the effects of these financial requirements grow. Right now, Ukraine is in a very difficult economic moment. However, most economists would agree that decreasing taxes or increasing spending would be beneficial in times like these to encourage economic growth. I don't necessarily agree with those certain financial requirements that Ukraine must follow to get loans.
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ReplyDeleteI think any country should get loans in parts. I think it is important to see how that country handles or improves with the funding and then more funds should be given.
ReplyDeleteGiving a large sum of money at once can lead to mishandling. Its tough to give out loans and tougher to repay them back.
Many countries have massive debts, and are repaying the loans in small amounts. They need additional loans to repay back the original loans. Thus leading to a never ending cycle of debt and loans.
Thus along with the loans, countries should also get the help and advice from the experts.