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Jun 20, 2022
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Ukraine and the hypocrisy of global moneylenders

Ukraine has huge debt obligations to external creditors

The IMF strategy for “fragile and conflict-affected states” was released in March 2022 and will remain in effect until 2025.

The summary of the document states: “Instability and conflict are exacerbated by climate change, food insecurity and gender inequality… The consequences of instability and conflict are critical and directly related to the IMF’s mandate… The strategy proposes concrete adaptation measures IMF Participation, Tools and Policy Advice on Specific Fragility and Conflict”.

The document determines that 42 countries belong to the list of NCGs, which is about 20% of IMF members. developed by a group of experts led by Frank Bosquet; Prior to joining the IMF, he was Senior Director of the Fragility, Conflict and Violence Group at the World Bank. He is also a regular member Davos Economic Forum.

The document states that countries from the NCG group need to modernize the tax system and customs fees, restructure public administration, anti-corruption laws, manage debt assets, oversee the functions of regulatory authorities, and combat money laundering.

There is nothing new here – all the same methods that the World Bank Group (WB) used in the 90s. to restructure the economies of developing countries.

By the way, the work of the World Bank Conflict Group has already been criticized by independent think tanks. A key problem facing the Bank’s analysis – and even the UN’s analysis of conflict and instability – is the lack of conclusions about the effects of neoliberal economic policies on conflict and instability. It is these consequences, including rising inequality and poverty, and declining human development indicators, that are causing unrest in many countries.

There are no answers in the WB analysis to the questions of how macroeconomic shocks, inequality and unemployment (all these are factors of instability) will be eliminated. How is the Bank transforming its financial incentive directives to support the development of the NCG countries?

And the most interesting question concerns Ukraine: how the World Bank and the IMF are going to carry out their policy towards this country, where hundreds of thousands of refugees, tens of thousands of dead, destroyed infrastructure.

If this is not a country affected by conflict, then what is?

However, it is interesting that neither the WB nor the IMF qualify Ukraine as an “unstable and conflict-affected state.” In early March 2022, the Bank approved an additional $489 million loan to Ukraine and created a multi-donor trust fund. A week later, the Bank allocated another $200 million to Ukraine and promised to help put together a $3 billion support package for Ukraine in the coming months.

Ukraine is classified by the World Bank as a middle income country. As such, it can only borrow from the Bank’s lending arm in this area, the International Bank for Reconstruction and Development (IBRD), and not from concessional lending, the International Development Association (IDA). If Ukraine were included in the NCG list, it could have access to financing with favorable maturities, or would be transferred to the IDA group, receiving concessional lending and the right to debt relief.

However, classifying Ukraine as an IDA (low-income country) country will deter foreign investors. And, in order to maintain “investor confidence”, the government of Ukraine goes out of its way to maintain its current status in relations with the WB/IMF.

According to Eliot Dolin-Evans of Monash University (Australia), “the main problem with reclassifying Ukraine as a country in conflict is that it would be very problematic for international financial institutions and creditors, since Ukraine is one of the largest borrowers of IMF money and World Bank, and the country has huge debt obligations to countries and external creditors around the world. A proper classification of Ukraine could mean that lenders, the IMF and the World Bank would waive interest and fees on loans made to the country, with the demand for debt forgiveness becoming much more weighty if Ukraine were an NCG country. The IMF and international lenders … take into account the World Bank classification, and they too would need to consider Ukraine for debt relief or concessional lending if the Bank classified Ukraine as an NCG country.”

That is, the World Bank turns a blind eye to what is happening with Ukraine, it is interested in usurious schemes, including the return of debts with interest. The same additional World Bank loan came with the condition that the government of Ukraine “renew its commitment to resume…reforms after the end of the war.” Ukraine will continue to be credited at market rates, which will burden it with an even more unsustainable foreign debt.

Photo: anna-news.info

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