Individual
Democratic
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Research
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1994-1996
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Ukraine And European Security - International Mechanisms
As Non-Military Options For National Security Of Ukraine.

Bohdan Lupiy
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GoChapter 4. "Evolutionary" Approach" - Ukraine And European International Establishments.

Section 6. Ukraine and International Financial Institutions

At the beginning stages of Ukraine's independence, the country's relations with international monetary institutions were practically non-exsistent. This was mainly bacause "anti-Russian sentiments prompted Ukrainian leaders to oppose the radical reform strategy chosen by Russia. Nor did [Ukrainian leaders] want to learn from Poland's radical economic reform. In addition, national romanticism gave rise to ideas of national isolation, return to a rural economy, and a uniquely Ukrainian economic model."(324)

At the same time, the above-mentioned Western approach of focusing on Moscow, has regarded "disproportional ammount of attention...[and] the lion share of economic attention to Russia, tending to ingnore countries like Ukraine" up to early 1993.

All these conditions inspired in 1992-1993 initial economic reformation in Kiev. However, with no sophisticated agenda of reforms, Ukraine sunk into a deepest economic crisis. Unresolved questions with the future of the former-Soviet arsenal on its territory, a weak political process and absence of appropriate legislative basis have continued to hamper possibilities to attain any considerable degree of foreign financial assistance.

Since mids-1994, with new Administration caming into power International financial insitutions undoubtely took a cheif role in the foreign policy of Kiev. The first signs of credible international support came in July 1994, after Ukraine was promised of US $ 4 bln. from the G-7, following the Group meeting in Naples.

On their side, International Monetary Fund (IMF) and the World Bank (WB) have also started to pay magnificent interest to the process of Ukrainian economic reformation. Following the official visit of then IMF Managing Director Michael Camdesus to Kiev in July 1994, the Fund's delegation started to negotiate a Systematic Transformation Facility loan (STF) to Ukraine.

In fact, when the international monetary institutions, and particularly IMF, work to help countries in desparate economic straits, like Ukraine, they foremost count on government and try to enable it to establish long-term structural measures, which make possible sustainable development of the country and 'restorement of growth'.

With this idea in mind and after signing a deal with the IMF on 26 September, 1994.(325) President Kuchma announced his vision of the neccesary economic reform in Ukraine to the Ukrainian parliament on October 11, "the major points of which had been previously agreed with the IMF to obtain the first instalement ...[of STF]".(326)

The new economic program envisaged structural reforms in financial sector, radical changes in privatization policies, establishment of a stock market, liberalization of taxation and banking reform. In addition, the president stressed the importance of radical land reform and support of all forms of ownership.(327)

In its essence, the economic program covers five main areas in the country's economic and political sectors: stability of the monetary system, new privatization policy, priority to industries, which involve complicated scientific research, social policy and reform in the salary system, Ukraine's entry to the international trade system.

Following the announcement of the new economic reform, and adoption it by the parliament,(328) Ukrainian president visited the G-7 organized conference "Partnership for Economic Transformation in Ukraine" in 27 October, 1994 in Winnipeg. New Ukrainian strategy, presented by Leonid Kuchma received overwhelming support, and Ukraine was promised by foreign donnors of totally US $ 1,2 bln. of Western economic aid.(329)

In November, 1994 the IMF delegates repeatedly visited Kiev to negotiate a regular "stand-by" program, which to provide Ukraine with the inducement of US $ 1 bln. after the successful completion of the firts phase of reform.(330) In total, untill the mids-1995 the IMF commited to Ukraine around US $ 750 mln. in its STF agreement and US $ 1,6 bln. in its stand-by agreement' loan.(331)

Following the IMF support to Ukraine, the World bank also provided the country with rehabilitation fund of US $ 500 mln. in December 1994 and pledged to offer additional support of few hundreed milion dollars until the end 1995.(332)

Besides considerable help in supporting new economic reform, the IMF also provided a great deal in the area of Ukraine's debt negotiations over energy supplies with Russia and Turkmenistan. Together with World Bank which afford Ukraine with US $ 400 mln. annualy to aid country's payments for outside energy supplies,(333) the IMF has concluded the stand-by loan agreement with Russia in March 1995, including a clause on acceptance by Russia of resheduling of Ukraine's 1995 payements for energy delievery.(334) Within internal fora the agreement has also opened the way for further outside financing for Ukrainian economy. In general, the latest figures show that the World Bank and IMF have commited a total 3,4 billion in loans , $ 1,5 bln of which is slated for 1996.(335)


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