[Ohio UZO News] Ukraine: FT; WoE; EDM; Reuters; RFE/RL

[Deychak, Orest]

Financial Times

www.ft.com

IMF frees up $2bn for Ukraine

By Roman Olearchyk in Kiev 

Published: December 31 2009 

The International Monetary Fund gave the green light to Ukraine to lower
its minimum international reserve requirement, freeing up $2bn from
central bank coffers to pay Russian natural gas bills and keep the
cash-crunched country financially-afloat ahead of a hotly contested
presidential election.

The announcement late on Wednesday helped further to defuse fears in
Europe that gas supplies could be cut off again as they were during last
January's Moscow-Kiev spat, should recession-ravaged Ukraine fail to
cover multi-billion-dollar import bills in coming months.

"The IMF Executive Board agreed to the government's request to modify
the performance criterion on Net International Reserves, as specified in
the current Stand-By Arrangement, to lower the end-December NIR floor by
about $2bn," said Max Alier, the IMF's resident representative to Kiev.
"This important step will enable the Ukrainian authorities to use
existing resources to make external payments due - including gas
payments - within the framework of Ukraine's programme with the Fund."

The IMF has helped keep Kiev afloat since the global financial crisis,
providing $11bn in support as Ukraine's gross domestic shrank by 15 per
cent. But the fund froze assistance in November due to lacklustre
reforms and political infighting in Kiev. Mr Alier said that fresh aid
hangs on the ability of Ukraine's leadership to demonstrate consensus
and adopt a fiscally prudent 2010 budget.

Ukraine's request in December for a fresh $2bn emergency loan was turned
down, and the IMF has sought to keep its distance from the country's
messy pre-election politics. Kiev's political leaders are bitterly
divided, with president Viktor Yushchenko, prime minister Yulia
Tymoshenko and ex-premier Viktor Yanukovich all campaigning in a January
17 presidential election campaign. 

Ms Tymoshenko's opponents have accused the IMF of being too soft on her
government. Ms Tymoshenko accuses opponents of trying to cash-starve her
government and undercut her presidential bid by sabotaging cooperation
with the IMF. The political temperature is not expected to cool down
until after a second round run-off is held in February.

Wednesday's decision marks continued flexibility by the IMF in dealing
with Kiev. It should help keep Ms Tymoshenko's government afloat with
just enough cash from central bank reserves that were built up with IMF
funds after the global financial crisis struck. 

Window on Eurasia: Life Expectancy Figures Failing to Recover in Russia,
Ukraine and Belarus

 

Paul Goble

 

            Vienna, January 4 - Most post-communist countries
experienced major declines in life expectancy figures during the 1990s,
but only the three Slavic countries - Russia, Ukraine and Belarus - have
not seen a significant recovery in those figures over the last decade, a
pattern that reflects continuing "super-high" mortality rates among
working-age males in all three.

 

            That is one of the conclusions offered by Elena Paliy in the
current issue of Moscow's "Demoscope Weekly" in an article devoted to
the situation in Ukraine, where she says, birthrates are now at European
levels but where "mortality rates correspond to the worst examples of
the post-Soviet space" (demoscope.ru/weekly/2009/0403/tema05.php).

 

            Arguing that while "it might be logical to suppose" that
improving economic conditions would have changed that, in fact, in these
three countries, life expectancy figures have remained stagnant and thus
have fallen ever further behind the numbers not only in Europe but even
in many other parts of the post-Soviet world. 

 

            In her article, Paliy focuses on the situation in Ukraine in
particular.  There, she writes, during the 1990s, there was an increase
in mortality among almost all age groups, although she notes that
Ukraine "was able to achieve definite successes in preserving the lives
of newborns," something that prevented the overall figures from being
even worse.

 

            During that decade, "the most unfavorable shifts" involved
working-age people and especially working-age males. While there were
differences within this latter group, she continues, it is appropriate
to speak about "super-high mortality" among that category as a whole.

 

In 2008, she reports, "more than a third died before reaching age 65;
that is, as measured by the standards of the World Health Organization,
they died prematurely," with 73 percent of those deaths taking place in
the working-age cohorts.  And despite some improvement in survival rates
among the young, life expectancy for men thus fell by four years after
1990.

 

            Health experts have made it clear what Ukraine needs to do -
provide better health care to all age groups, reduce alcohol
consumption, improve diet and so on - but Paliy notes with regret,
"despite the obviousness of the recipe," Ukraine, as a result of the
systemic social crisis has not been able to adopt it.

 

            In particular, she says, increased income differentiation
and social inequality have led to serious health problems among the
poorer and less-well-placed groups, and especially among male members of
the latter. But "judging from everything," she concludes, "it is
difficult to expect an essential improvement in mortality figures"
anytime soon.

 

            The Moscow Institute of Demography and Social Research
projects that life expectancy for Ukrainian males is likely to increase
by only four years by 2020 -- for women, the increase will be two years
- although some projections suggest that Ukraine may not achieve even
those increases over the next decade.

 

            Looking out even further, Paliy says, "even if Ukraine is
able to realize the high variant of the prediction - an increase in
average life expectancy of men and women to 76 and 81 years respectively
by 2050, with a fertility rate of 1.9 children per woman, the population
of Ukraine will decline by three million."

 

            But using what she says is "a more realistic mid-range"
projection, the population of the second Slavic republic will decline to
36 million and the percentage of those above working age will increase
from 30 percent now to 36 percent in 2050, putting additional burdens on
the working age population.

 

            In short, she says, Ukraine "is entering into a special
stage of demographic development," one in which there will be fewer
workers to support more non-working age people.  This trend, which also
exists in Russia and Belarus, she says, "must serve as a warning to
politicians about the impermissibility of further delay in pension
reforms and in the social sphere as a whole. 

                   

Eurasia Daily Monitor

January 4, 2009

Ukrainian Government Fears a New Winter Gas Crisis

Roman Kupchinsky

In December Ukrainian officials descended on Washington with one
overriding mission -to convince the Obama administration that without
the financial help of the IMF, Ukraine might be unable to supply the EU
with Russian gas this winter. This badly disguised attempt at blackmail
on the part of both Petro Poroshenko, the confectionary oligarch and a
member of President Viktor Yushchenko's inner circle, and recently
appointed foreign minister and Hryhoriy Nemyria, Prime Minister Yulia
Tymoshenko's right-hand man, was so transparent and brazen that few in
Washington were inclined to believe them.

In a further sign of disenchantment and frustration with the current
Ukrainian leadership, EU leaders speaking at the 13th EU-Ukraine summit
in Kyiv on December 4, blasted the lack of promised constitutional
reforms in the country, its erratic gas policies and placed part of the
blame for past breakdowns in supplying Russian gas to Europe on Ukraine.
Jose Barroso, the head of the European Commission was blunt in his
criticism of Yushchenko: "Mr. President, I will speak honestly with you.
We are often led to believe that Ukrainian promises about reforms are
only partially fulfilled and that words are not followed by deeds"
(Kommersant, December 7).

Yushchenko hastily rejected these charges and placed the blame for the
lack of reform on the government of Yulia Tymoshenko and the parliament.
He also defended Ukraine's record as a reliable transit country for
Russian gas and assured the summit that there would be no disruptions in
gas supplies this winter (www.unian.net, December 17). Despite
Yushchenko's calming words, Poroshenko sang a different tune during his
later visit to Washington: "Ukraine is confident Europe will not see
another winter of gas supply disruptions, but there will be a "higher
risk" if the IMF does not resume lending to its distressed economy,"
Poroshenko stated (www.unian.net,December 13). His use of the words
"higher risk" in describing the situation was deceptively close to
blackmail. The same can be said of Ukrainian Deputy Prime Minister
Hryhoriy Nemyrya's statement reported in the Financial Times on December
11. "The next three months are crucial," he claimed. One day after
returning from a mission to the IMF's headquarters in Washington Nemyria
asserted: "Wait and see is not an option. The cost of inaction is
greater than the cost of action and may aggravate the situation in the
wider region." Apparently the IMF had a number of good reasons to stop
lending money to Ukraine.

According to an article by analyst Tammy Lynch in the Jamestown
Foundation blog on Eurasia on December 10, in the wake of the freezing
of IMF and World Bank funding, and following repeated statements by
Yushchenko calling for the renegotiation of a Russia-Ukraine gas deal
supported by the EU, there was little to discuss. It seems EU leaders
believe Ukraine has not lived up to its side of the negotiated bargain.
This is true -but the EU has not been in a collaborative mood itself
(www.isria.com, December 10; www.ukrainianjournal.com, November 19).

The EU's refusal to even mention the far distant possibility of EU
membership for Ukraine has consistently irked the country's leadership,
who several years ago needed some hope on which to develop its reforms.
More recently, the EU and Ukraine signed a joint declaration at the
EU-Ukraine International Investment Conference on the Modernization of
Ukraine's Gas Transit System. Among other things, the declaration
commits Ukraine to ensure transparent operation of its gas network, and
set tariffs at a rate that will "reflect actual costs incurred"
(http://ec.europa.eu/external_relations/energy/events/eu_ukraine_2009/jo
int_declaration_en.pdf).

In return, the European Commission, Ukraine, and "creditors" commit to
"cooperate in seeking to establish a technical coordinating (sic)
council unit within Naftohaz of Ukraine." This council would create an
EU-approved "full modernization business plan" for the Ukrainian gas
transportation system, and would help arrange the funding to undertake
the system's modernization. But the main problems with the IMF were
linked to Yulia Tymoshenko reneging on a promise to raise gas prices for
domestic consumers. After having promised to increase prices by 25
percent in September, she had a sudden change of heart.

Yushchenko was not blameless in these pre-election machinations and
pushed for an increase in the minimum wage and pension payments, which
the IMF was set against, fearing that its money would be squandered for
Yushchenko's election campaign promises. According to the November issue
of the Warsaw-based publication East Week: "The Ukrainian state-owned
oil and gas monopoly, Naftohaz, has only twice been able to raise the
funds to pay punctually for the monthly gas supplies on its own. In the
remaining months, it benefited from support provided by the government
and the National Bank of Ukraine (NBU)." Yet, the means it has employed
so far to raise funds for gas settlements are becoming more and more
desperate. State-owned banks would have to violate the guidelines
regulating their activities in order to grant Naftohaz further loans.

The state budget is not only experiencing problems financing its own
spending, but has also already used almost all the legal options
available to support Naftohaz; in September, it reimbursed the company's
VAT for all current, past and future (until the end of this year)
settlements, and in August it issued 18.3 billion hryvnias worth of
bonds to raise the company's statutory capital.

The government had hoped to obtain loan support from European financial
institutions ($1.7 billion negotiated in July with the support of the
European Commission, to be spent on modernizing the network and
partially financing gas purchases), but Ukraine failed to meet the basic
requirements for that loan and the deal fell through.

Reuters

Ukraine's Yushchenko plays Russia card against rivals

By Richard Balmforth
Reuters
Monday, January 4, 2010; 7:45 AM 

KIEV (Reuters) - Ukrainian President Viktor Yushchenko, aiming to revive
his own slim chances of re-election, accused his rivals of being part of
a Russia
<http://www.washingtonpost.com/wp-srv/world/countries/russia.html?nav=el
> -backed "coalition" that could doom Ukraine's pro-Europe aspirations. 

Yushchenko's sharp attack on Prime Minister Yulia Tymoshenko and his old
adversary, Viktor Yanukovich, placed Ukraine's ties with its former
Soviet master at the center of campaigning for the January 17 election. 

Relations with Russia, which supplies much of Ukraine's gas and keeps a
naval base on the Black Sea, are critical to stability. 

But they have sharply deteriorated since the pro-Western 2004 "Orange
revolution" brought Yushchenko to power. Moscow wants Ukraine back in
its sphere of influence and to extend Russian business interests there. 

Tymoshenko and Yanukovich, a former prime minister who was the main
loser in the 2004 protests, are frontrunners in the election which is
expected to go to a second round on February 7. 

Yushchenko, loathed by the Kremlin because of his Ukrainian nationalist
policies and pursuit of NATO membership, has only the faintest of
chances, according to opinion polls. 

But he went on the offensive on Sunday, accusing Yanukovich and
Tymoshenko, once his ally and now a fierce rival, of being part of the
same "Moscow plot." 

"Tymoshenko and Yanukovich are the finest representatives of a single
Kremlin coalition," local news agencies quoted him telling voters in the
Lviv region of western Ukraine. 

Addressing the prospect of the two becoming a tandem in power after a
February 7 decisive vote, Yushchenko said: 

"Irrespective of whether he is prime minister or she is president, or
vice versa, the language will be one and the same." 

MOSCOW BACKING 

Moscow's overt backing for the election of Yanukovich in a 2004
presidential poll that was ultimately judged to have been rigged helped
fuel the street protests that caused his undoing. 

A re-run poll handed victory to the U.S.-supported Yushchenko, who was
then backed by Tymoshenko. 

But, in the past five years, as Yushchenko has riled Moscow with
policies aimed at taking Ukraine out of its orbit of influence,
Tymoshenko has pursued a more pragmatic line. 

Tymoshenko has forged good personal relations with Russian Prime
Minister Vladimir Putin and secured soft terms from Moscow for crucial
supplies of natural gas. 

Analysts say Moscow favors Tymoshenko for the top job, though Putin has
publicly denied that Moscow is taking sides. 

Yushchenko on Sunday accused Tymoshenko and Yanukovich of concocting gas
agreements that met their personal ambitions but which could "lead
Ukraine to energy and economic capitulation." 

This, he said, could mean that Russia would back away from an agreement
to withdraw its Black Sea fleet from Crimea in 2017. "If Tymoshenko
becomes president, the Russian fleet will be in Ukraine not until May 28
2017, but for ever," he said. 

This in turn would mean Ukraine stepping back from its policy of
integration into the European mainstream, he said. 

HURTING TYMOSHENKO 

Both Yanukovich and Tymoshenko have set an improvement of relations with
Russia as one of their objectives, while at the same time pledging
themselves to European integration. 

Yushchenko's comments appeared directed specifically at Tymoshenko's
election bid. She, like he, has strong support in nationalist western
regions, while Yanukovich's base in its Russian-speaking east and the
south. 

Tymoshenko, in campaigning in Crimea on Sunday, set action to stamp out
corruption among state employees as a priority. 

"I sometimes even envy China where, to deal with corruption, they cut
off hands and execute people. We of course as a European country can not
use such methods even though our palms are sometimes itching to do so,"
she said. 

Yanukovich, speaking on Kiev radio and television, decried the past five
years of "orange politics" which he said had consistently invented
enemies to fight against. 

"We have to unite to combat the (economic) crisis and poverty. Extreme
poverty of millions of Ukrainian citizens -- this is the real enemy of
Ukraine and we should not try to look for other enemies among
ourselves," he said. 

Radio Free Europe/Radio Liberty

January 02, 2010 

Working Toward Banking Transparency In Ukraine 

by Paul Richardson 

An extensive study has revealed how little information Ukraine's largest
banks are willing to share about their finances and their management. 

Ukrainian banks are "troeshniki" (C students) in information disclosure:
They disclose only 48 percent of the information they should be
revealing by international standards, according to the extensive
research done by Standard & Poor's and Ukraine's Financial Initiatives
Agency, with support from USAID's Capital Markets Project. 

Such a level of transparency is insufficient for investors, both foreign
and domestic, who, particularly in times of crisis, tend to look closely
at where they put their money. It is also insufficient for the general
public. After all, Ukrainians are themselves already investors in the
financial sector, and their deposits allow banks to function, invest,
and lend. These ordinary Ukrainians' deposits are the lifeblood of any
bank - as the recent bank crisis in Ukraine shows. 

Timely and accurate information disclosure is critical. It is the
foundation that stable banks and corporations are built upon. Without
proper disclosure about their business, finances, and management, banks
cannot become the pivotal financial institutions the market (and the
people) need. Why? 

First, disclosure standards are like x-ray goggles, giving an almost
unobstructed view of the inner workings of a bank. 

Second, adequate information disclosure acts as an early warning system
when something is wrong with a financial institution. Disclosure
requirements concerning financial statements force companies to publish
data that tell market experts about possible dangers, like overexposure
to foreign debt or nonperforming loans. An ordinary bank deposit holder
would also get advance notice of possible problems. Banks, knowing this,
would possibly adapt their strategy to make it less risky. 

Disclosure rules about management and its structure force companies to
reveal who the people running the company are: what is their education,
their previous work experience, and their business and personal
reputation? In well-regulated markets, the motto is: "Disclosure is the
best disinfectant, and sunshine is the best policeman."

Information disclosure rules also act as a deterrent to affiliated party
transactions and other abuses: the chances are greater that a manager
will resist temptation to use the bank as a cookie jar if he knows its
finances are transparent. And so are the chances that he will abstain
from hiring his first cousin out of family loyalty. 

But for now, information disclosure by Ukrainian banks is insufficient
to satisfy these needs. 

That said, many market participants and government representatives
understand that increasing transparency is crucial. That's why the Joint
Stock Company Law was finally passed last year. Among many other good
features, it sets higher transparency standards for these companies. 

Another positive step is the Electronic System of Comprehensive
Information Disclosure (ESCRIN). It is being implemented by the
Securities and Stock Market State Commission (SSMSC) with support from
USAID's Capital Markets Project, as part of USAID's 15 years of
commitment to develop Ukraine's financial sector. 

As soon as the implementation process is over early next year, it will
become mandatory for all publicly listed and traded companies to
disclose information according to the ESCRIN requirements, bringing
Ukraine one step closer to international standards and to building
investor confidence in the capital market. 

Once ESCRIN is in place, any investor can access the ESCRIN data through
the SSMSC website, type in the name of any publicly listed and traded
company, and find an unprecedented amount of quality information about
the issuer. This information will be in real-time to allow investors to
make timely decisions. It will also be free of charge, to allow wide
public exposure. 

ESCRIN will include descriptive parts, understandable to people who do
not have a higher financial education, to people who have bank accounts,
mortgages, investments in pension funds -- and, therefore, have the
right to know. As these disclosure obligations are being put in place,
they have to be enforced in a timely and -- once again! -- transparent
fashion.

Ukraine is taking essential steps to develop its economy in accordance
with international best practices for all its citizens. Yes, the crisis
continues adversely to affect Ukraine and its citizens, but it can also
show the way to a more vibrant, honest, and transparent economy.

Paul Richardson is the USAID acting director of the Office of Economic
Growth of the U.S. Agency for International Development (USAID) in Kyiv.
The views expressed in this commentary are the author's own and do not
necessarily reflect those of the U.S. government or RFE/RL. 

. 

 

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