The current flux in relations between the International Monetary Fund (IMF) and Ukraine and Belarus has done little to enhance the image of either country as creditworthy partners - even though both need cash more than ever. In peculiar tandem, both post-Soviet states have spotlighted their reluctance to implement badly needed reforms in exchange for credits.
The IMF has effectively frozen its lending under the $17.5bn support programme agreed with Kyiv one year ago because of Ukraine's snowballing political crisis. Across the border, the Belarusian government also failed to secure a new support package from the multinational lender as the leadership in Minsk under President Alexander Lukashenko bluntly rejects unpopular economic measures.
The IMF needs to have "more clarity" about the status of the Ukrainian government and the country's ruling coalition in order to continue lending under the extended funding facility (EFF), communications director Gerry Rice reiterated at a press briefing on March 3.
"We need to have more clarity about the status of the government and the coalition for us to be able to engage on policies to strengthen and transform the economy and to pave the way for the completion of the second review [of the EFF agreed in March 2015]," Rice said.
Ukraine has been delaying sending an updated memorandum on its economic and financial policy to the IMF under the support programme, which it has to do to enable the lender to release billions of dollars in credits that have been withheld during Kyiv's political circus.
In February, two pro-Western parties, Samopomich (Self Reliance) and Batkivshchyna (Fatherland), left the ruling coalition, accusing Ukraine's leaders of conspiring with oligarchs to keep the unpopular Prime Minister Arseniy Yatsenyuk in power during a vote of no confidence. They followed the exit of Oleh Liashko's Radical Party last September, although the formal withdrawal of the faction's 21 MPs was confused because of uncompleted paperwork.
On February 29, President Petro Poroshenko assured there will be no destabilising snap parliamentary elections and urged the coalition and parliament to jointly reboot the government to end the current political crisis. However, he avoided specifying whether any factions other than his Poroshenko Bloc and Yatsenyuk's People's Front should be responsible for reforming the government.
Stuck in the U-bend
Apart from two initial IMF transfers totalling $6.68bn of the overall $17.5bn credit, Ukraine did not receive $3.3bn in two other tranches due from last September. The tranches were frozen due to government wrangling with the IMF and parliament over tax reform and the country's 2016 budget.
Credits from other international donors, including a $1bn US guarantee and $670mn in macro-financial assistance from the EU, are also dependent on the IMF turning the funding tap back on again. But prospects for a quick release of the money have rapidly receded with the political infighting and the fracturing of the coalition.
Rice added that Poroshenko recently reassured the IMF of his commitment to the reforms, including improving governance and fighting corruption. "In the last weeks that's been the focal point of the discussions about measures to ensure progress towards tangible results in these areas. They are part of the programme and they are in the memorandum of economic and financial policies," the spokesman said.
In early February, IMF head Christine Lagarde said that without a substantial new effort to invigorate governance reforms and fight corruption, it was "hard to see" how the support programme could continue and be successful. "Ukraine risks a return to the pattern of failed economic policies that's plagued its recent history. It's vital that Ukraine's leadership acts now to put the country back on a promising path of reform," Lagarde said in a statement.
Poroshenko tried to temper the damage in a phone call in which he assured Lagarde that Ukraine will continue its reforms despite the crisis in relations between the government and the parliamentary coalition.
"The president highlighted the necessity of refreshing the Cabinet of Ministers without early parliamentary elections that will only deepen the political crisis and deteriorate the conditions for reforms," Poroshenko's media office said in a statement.
See you in April
Meanwhile, Belarusian Finance Minister Vladimir Amarin said on February 29 that Minsk has suspended its own negotiations with the IMF.
He gave few details but said the government is instead close to securing a new $2bn aid package it has been seeking from the Russia-led Eurasian Fund for Stabilisation and Development (EFSD). According to Amarin, the EFSD loan may be secured within a week or two, while Minsk is "in the final stage" of negotiations with the fund.
The, confusing the situation, First Deputy Economy Minister Alexander Zaborovsky said on March 3 that the government will continue its talks with the fund. "I believe that the dialogue with our colleagues from the IMF will continue during spring meetings of the World Bank group and the IMF in Washington in April," Zaborovsky said.
Earlier, Lukashenko urged the government to avoid lowering itself to get IMF credits. "We should work with them. They suggest reasonable solutions. But we should not grovel in the dust before them," the president said.
The EFSD's funding is intended to save Belarus from a financial meltdown as it weathers its second deep financial crisis in five years. According to official statistics, the former Soviet republic does not have enough financial resources to repay all its external obligations over the next 12 months.