Ukraine's National Bank chairman in D.C. for talks with IMF, World Bank (08/17/03)

Ukraine's National Bank chairman in D.C. for talks with IMF, World Bank

by Yaro Bihun
Special to The Ukrainian Weekly

WASHINGTON - The head of the National Bank of Ukraine (NBU), Serhii Tyhypko, spent the better part of the last week in July in Washington lining up the next series of International Monetary Fund and World Bank credit packages for Ukraine and conferring with U.S. officials.

At the conclusion of his four-day visit, Mr. Tyhypko said he was satisfied with the results of what he characterized as "very constructive" talks. As he reported during a press conference at the Ukrainian Embassy on May 31, the IMF will announce its decision on a $750 million stand-by credit package for Ukraine in mid-October, after the Ukrainian government resolves a few problem areas, including the passage of a budget for 2004.

He said that while Ukraine really does not need the IMF stand-by credits now, having them approved serves as a good indicator for investors. And, he added, if Ukraine's financial situation should worsen, Ukraine then could avail itself of that assistance.

Mr. Tyhypko said that, while a few years ago, when its reserves were down to $300 million, Ukraine's discussions with the IMF were a matter of fiscal "life or death," the situation today is very different - its reserves are up to $1.5 billion, the trade balance is $1.8 billion in the black, and other economic indicators point to a strong economy.

Ukraine also expects to receive approval of a $250 million loan package from the World Bank to help cover any possible budget deficits, Mr. Tyhypko said. World Bank Vice-President for Europe and Central Asia Johannes F. Linn, with whom he met while in Washington, assured him that the bank would make its decision on that package after the IMF announces its decision in October.

Asked about the current grain crisis in Ukraine, Mr. Tyhypko said that it was caused by bad weather, of course, but in a more fundamental way, by the lack of agricultural reform.

"There is no food crisis in Ukraine," he stressed. The problem was in rising prices, which can be remedied with increased production and with assistance to those companies that can achieve it, he explained. "And the guarantee that this situation will not be repeated in a year or two is continued agricultural reform," Mr. Tyhypko said.

"And by this I mean, first of all, the private ownership of land," he added. The Ukrainian farmer can produce wheat for about half of what it costs on the international market, he said, but the government must help the farmer get access to necessary credit in order to work effectively. Mr. Tyhypko, who heads the pro-government Trudova Ukraina party, also stressed the need for political reform in Ukraine, the absence of which "threatens the future development of the country" - regardless of who is elected the next president of Ukraine.

Characterizing President Kuchma's political reform package as a non-starter, he suggested that the Verkhovna Rada tackle the problem using the opposition's reform proposal as a base.

"Why?" he asked. "Because, like it or not, we have to get 300 votes in Parliament. And judging by the reaction to the president's reform proposals, I think we can discount it."

He added, however, that the opposition package should be amended to satisfy both the majority and the opposition with respect to parliamentary elections and the presidency.

While in Washington, Mr. Tyhypko also had meetings with Deputy Assistant Secretary at Treasury Nancy Lee, Deputy Assistant Secretary for European and Eurasian Affairs Steven Pifer and Daniel Fried, senior director for European and Eurasian Affairs at the National Security Council.

While these discussions covered normal economic and political issues, he said, Daniel Fried brought up the case of two American non-governmental organizations - the National Democratic Institute and the International Republican Institute - who have found it impossible to register their democratization projects in Ukraine.

Trudova Ukraina had cooperated with NDI in the past and found them to be straightforward and constructive, Mr. Tyhypko said. "I think that we should not be afraid of such efforts," Mr. Tyhypko said, adding that he will look into the matter further and will raise it in his meetings with the president and prime minister.

Asked about Ukraine's reaction to cutbacks in U.S. economic assistance to Ukraine, Mr. Tyhypko stressed that Ukraine should be able to help itself. "Our situation is improving, so we shouldn't be surprised when our assistance funds are cut," he said.

"In order to improve the life of Ukrainians, we need two things: a market economy, with all of the structural and other reforms that are necessary to bring it about, and democracy, which includes political reforms, democratic presidential elections in 2004, a normal functioning press," among other requirements, he said.

Asked about the possibility of Ukraine joining Russia and Belarus in an economic union with the ruble as its common currency, Mr. Tyhypko stressed that Ukraine's future is in Europe.

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