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September 25, 2012 Kyiv National Academic Operetta Theater

UKRAINE CAN DO WITHOUT FINANCIAL HELP FROM THE IMF PUBLIC DEBATE BRIEF

Speakers FOR the motion Speakers AGAINST the motion

Sergey Teryokhin MP of Ukraine, First Deputy Head of the

Finance, Banking, Tax and Customs Policy Committee of Verkhovna Rada of Ukraine

Borys Tymonkin Ukrsotsbank Board Chairman

Valeria Gontareva Chairman of the Board of Directors of AMC "Investment Capital Ukraine"

Jose Lopez Garrido Member of the Spanish Congress of Deputies,

First Secretary of the Parliamentary Committee for Economy and Competitiveness

The debate “Ukraine can do without financial help from the IMF” opened the autumn season of public debates in Kyiv. Borys Krasnyanskiy, Managing Director of Group DF, moderated the event.

Ukraine’s relations with the IMF began in 1994 and had numerous upsets and downfalls. After approving a loan to Ukraine in 2010, the IMF subsequently suspended funds when the Ukrainian government failed to implement key requirements under the agreement. Yet today, to ensure the country’s economic stability, the government drastically needs foreign loans. What are the risks of borrowing money and can Ukraine do without the IMF’s financial aid?

During the debate, the supporters of the motion maintained that instead of wasting its resources on the search for creditors, Ukraine has to concentrate its efforts on reforming the economy. Otherwise it will have to fulfill the IMF’s strenuous requirements which will slow down the local GDP.

Their opponents, who advocated the cooperation with the IMF, said that the new tranche will provide the funds, which are needed to cover the current payments and to restore the macroeconomic stability. They also emphasized that this cooperation will send a positive signal to the investors.

Arguments in favor of the cooperation with the IMF have changed the audience’s opinion. The panel against the motion won the debate with 50% of votes.

Public debates provide an opportunity to discuss the most topical issues of Ukraine’s economy. The project’s goals are to help the public develop an informed view on the country’s economic situation and to facilitate a culture of constructive communication about its most important problems.

Sergey Teryokhin: “IMF’s loans are beneficial for the financial sector. However, its requirements obviously have nothing to do with raising the life standards of our citizens. The creditor’s standard terms include the increase of budget revenues by raising taxes, widescale privatization, refusal from industrial subsidies, and curtailing of welfare programs. The IMF is not interested in the effect these requirements may have on people’s lives”.

Borys Tymonkin: “The population and the foreign creditors must be given a foothold, and no foothold is better that the IMF. You can put off taking loans, but when you comply with the program’s requirements, this means that you live in a country with a good potential”.

Valeria Gontareva: “The IMF is a rapid deployment force. It is created to help countries with financial difficulties, including problems with the balance of payments, especially when these problems threaten the stability of the international fiscal system. The IMF’s loans are the only money, which pay for the reforms you make”.

Key Statements

Sergey Aleksashenko, Deputy Chair of Russia’s Central Bank: “The IMF’s money gives a chance to postpone serving your debts. Sometimes this helps. However, the IMF’s loans are bad for the future generations of Ukrainian politicians and common people who will have to pay this money back”.

Igor Prasolov, Chairman of the NBU Council: “There is no acute need of the IMF’s money. We have a sufficient gold reserve. However, the cooperation with the IMF sends a positive signal to investors and private creditors, helps to lower interest rates on loans, and increases the influx of capitals. Moreover, while the global financial market is unstable, long-term, low-interest credits provided by the IMF are a good aid for the future”.

Voting Results:

Q&A Session with the Audience Q: “Which of the IMF’s requirements we cannot meet? What conditions are harmful for Ukraine?” A: Sergey Teryokhin: “The main thing is a commitment to a small budget deficit”. Q: “One of the IMF’s key recommendations is a flexible rate of hryvnia. Has Ukraine considered complying with this term?” A: Borys Tymonkin: “Should the National Bank go from the free market entirely? Perhaps, not. However, the pressure on the NBU’s reserves to keep a hryvnia rate fixed is unreasonable”. A: Sergey Teryokin: “The rate of hryvnia should be determined by a free competition among the banks, and not by an arrangement between the National Bank and other financial institutions”. C: Victor Suslov: “In the current situation we should take the IMF’s loans, otherwise we won’t be able to balance our payments. Then we have the option to take either the IMF’s loans with a 3.5% interest or free-market loans with a 9.25% interest. So if we have to make this choice, let it be the best one. Moreover, the IMF merely demands that the agreement signed by the Prime Minister, Chairman of the NBU and the Minister of Finance of Ukraine is performed. That’s it”. Q: “During eighteen years of cooperation with the IMF, Ukraine has never met its duties under any program. Yet for a long time, for some reason, the IMF continued to give us loans. May this reason be political? What is your opinion?” A: Valeria Gontareva: “We write a letter to the IMF and tell them what we are going to do ourselves. Afterwards, based on this letter, the agreement is reached”.

Jose Garrido: “Some people think that borrowing money is the soluton to all their problems. I believe when you start making the necessary reforms in order to resolve your problems, it is when money comes. This way is easier and cheaper”.

Further information and the video version of the debates are available on:

www.debaty.org and www.feg.org.ua

FEG, 8 Illinska Str., 8th Entrance, 5th Floor Kyiv, 04070, Ukraine

tel: +380 44 501 41 00 feg@feg.org.ua

Ukraine can do without financial help from the IMF