IMF Masochism: Another Ukraine Rescue Package

Ho-hum, here we go again: Ukraine has inked yet another deal with the IMF as one of the IFI's most hard-up of repeat customers. In a press release dated 3/27/2014:

The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF. The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US$14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for.

That the situation there is in the Venezuela/Zimbabwe league is obvious:

Ukraine’s macroeconomic imbalances became unsustainable over the past year. The (until recently) pegged and overvalued exchange rate drove the current account deficit to over 9 percent of GDP, and a lack of competitiveness led to the stagnation of exports and GDP. With significant external payments and limited access to international debt markets, international reserves fell to a critically low level of two months of import in early 2014. The 2013 fiscal deficit was 4½ percent of GDP, and the government accumulated sizeable expenditure arrears. The 2013 deficit of the state-owned gas company Naftogaz reached nearly 2 percent of GDP, driven by the sharp increase in sales at below-cost prices. Without policy action, the combined budget/Naftogaz deficit would widen to over 10 percent of GDP in 2014.

It's the same old, same old the IMF is trying to push through. Given how assiduously the IMF pursues US foreign policy interests [yeah boss, yeah!], it is no surprise that it has been tasked with lending to this perennial deadbeat despite Ukraine not improving in any particular aspect of financial governance. Anyway...

The goal of the authorities’ economic reform program is to restore macroeconomic stability and put the country on the path of sound governance and sustainable economic growth while protecting the vulnerable in the society. The program will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency, and the business climate.

Yeah, right. The IMF has repeatedly halted disbursements in the past due to Ukraine not following through on promised reforms. All in all, this will be its eighth IMF bailout in its post-Soviet history. Tymoshenko, Yanukovych...whomever they select next will find next-to-insurmountable obstacles to fulfilling these reforms demanded by the IMF. What makes this time different from all the times they went to the IMF before? Each time they come back, the only thing that changes is that the country is even more destitute.

Westerners IMHO are really asking for it. Had they just given up the country to Russia, that would have been the end of their woes dealing with Ukraine. But alas, Westerners are true masochists when it comes to upholding all that jazz about freedom 'n' democracy. Me? I have no reason to believe that anything good will come out of it as Ukraine's borrowing history indicates.