No matter what the situation, no matter how bad the problem, no matter how catastrophic the state of affairs, a nation can always count on the International Monetary Fund to make things worse.
This week, Ukraine is about to learn that painful lesson.
The IMF is sending $18 billion to the new Ukraine government, but like everything else the IMF does, it’s merely a loan, and it comes with crushing conditions that will damage the already-flattened economy there even more.
Among the faux-sterity demands on the IMF….
An income tax hike from 17% to 25%: yet another reminder that “supply-side” is still foreign to the IMF (The Hindu)…
An increase in consumption taxes: showing that at least the IMF is consistent – they don’t understand Keynesian economics either (Wall Street Journal).
A reduction in gas subsidies (which is good), but not a privatization of the Naftogaz gas firm (which is bad): When you manage to make the governor of Yanukovic’s home province (Donetsk) sound like Mr. Clean, you’re doing it wrong (WSJ again).
Some (perhaps) reduction in the government bureaucracy: although it’s hard to tell just how many. CNN says 24,000. Russia Today says 80,000, but limited to the “law enforcement” sector only – leaving aside than anything out of RT should be taken with a lotswife of salt. Either way, at least the IMF learned not to try the government-pay-cuts that kept Greece’s government just as large in size and scope while pretending to cut its cost.
Still, overall, this is a painfully unnecessary set of “reforms,” which will badly miss revenue targets and likely put Ukraine in a far deeper economic contraction than the current projection of 3%.
Meanwhile, the Russian creditors get full return, despite propping up the Yanukovic regime that put Ukraine on its back in the first place (Telegraph).
So Ukraine will follow Greece and Spain over the economic cliff…
…while Putin and his cronies laugh all the way to the bank.
Cross-posted to the right-wing liberal