IMF Obtains Commitment from Ukraine to End Corruption

The International Monetary Fund has been in talks with the Ukraine regarding a $17.5 billion bailout. That bailout was in jeopardy due to rampant corruption among those in Ukraine’s capital of Kiev. This week, after sharp warnings from the IMF, the Ukraine has vowed to pursue reforms aimed at cleaning up its corruption problems. 

The International Monetary Fund has been in talks with the Ukraine regarding a $17.5 billion bailout. That bailout was in jeopardy due to rampant corruption among those in Ukraine’s capital of Kiev. This week, after sharp warnings from the IMF, the Ukraine has vowed to pursue reforms aimed at cleaning up its corruption problems. 

Last week saw the shocking resignation of Ukraine’s Minister of Economy, Aivaras Abromavicius. The resignation served to merely highlight the stark division of opinions among members of the ruling coalition. This heterogeneous approach to government has resulted in poor governing, corruption, and a lack of progress on reforms mandated by the IMF as part of its bailout program. 

In a statement made by IMF Chief, Christine Lagarde said, “Without a substantial new effort to invigorate governance reforms and fight corruption, it is hard to see how the IMF-supported program can continue and be successful.” Lagarde went on to note her concern with the Ukraine’s slow progress and reports of rampant corruption.

Lagarde’s statement worked, and spurred action from the top leaders of the Ukrainian government. Ukrainian President Petro Poroshenko spoke to Lagarde via telephone to address the concerns she raised. Following the conversation, it was announced that he had agreed to create a “roadmap” for how his nation will keep reforms moving forward. The announcement went on to say, “The president noted the necessity of rebooting the government without snap elections, which would only deepen the political crisis and worsen conditions for carrying out reform.”

Lagarde later issued another statement, this time praising Poroshenko’s commitment, saying that he “reassured me of his unwavering commitment to reforms, including improving governance and fighting corruption … We agreed on the principle of a roadmap of actions and priority measures to ensure prompt progress.”

Financial backers in the west have grown weary of Ukraine’s unreliable performance. While the nation has shown potential in the past, investments were lost and growth stymied by government discord and graft. This time, the nation’s own central bank has taken a stand against corruption. It has noted publicly that the nation must work with the IMF and foreign investors if it wishes to successfully right the sinking ship that is its economy. Currently, the nation has received bailout funds totaling $40 billion, and will need more soon.

According to a report by Reuters, the Ukraine has been courting the IMF for additional bailout funds since last October. This would be the third round of bailouts from the IMF, but the Ukraine’s failure to follow through with reforms mandated during the first two encounters have delayed further disbursements. 

In light of the delay, the sitting government’s approval ratings have plummeted, and there are concerns over a no-confidence vote occurring in the Ukrainian parliament later this month. As a result, the Ukrainian bond market has sagged to their lowest point in 11 months.