Ukraine gave the West more money than it received

A summary of Ukraine’s financial outcome for the outgoing year suggests that despite the victory of the Maidan and the promises of Western politicians who supported it, in 2014, Ukraine received from Western countries less than it gave away. According to Prime Minister Arseniy Yatsenyuk’s statement from December 16, this year, Ukraine raised “nearly US$9bn and paid to creditors US$14bn.” Ukraine’s Finance Ministry, in turn, explains that almost US$11bn were paid to western creditors and more than US$3bn to Gazprom.

“In actual fact, within 2014, the West allocated even less money to Ukraine than the country needed to repay the debts to it,” a Kyev-based newspaper Vesti.ua writes. This is the key factor of the hryvnia sagging, and the prospects for improvement are extremely obscure, according to the paper.

Although, on December18, the European Investment Bank cheered Ukraine by announcing a €1bn loan to the country, that amount, as Vesti writes, looks extremely modest amid European Commission President Jean-Claude Juncker’s statement suggesting that Ukraine needs US$15bn financial aid and that European Union has only limited capacity to help. “EU's member states would have to chip in, as the EU's executive Commission did not have enough money in its budget,” he said.

Meanwhile, the West gave quite different promises, the author writes. On February 24, three days after the victory of the Maidan, Elmar Brok, a zealous supporter of Ukraine’s revolution, (then chairman of the European Parliament Committee for Foreign Affairs) arrived in Ukraine. He said €20 billion would be on the table to back the reforms and the support could be granted immediately to prevent Ukraine's default.

For the time being, the IMF and EU say Ukraine needs to conduct reforms. Meanwhile, Yatsenyuk said in Brussels: "When we need financial assistance, let me put it in a nutshell: yesterday." In response, European Commissioner Johannes Hahn said EU would continue to provide "an unprecedented level of financial support" to Ukraine but this hinged on reforms. In this light, it is noteworthy that the overthrown president Viktor Yanukovych suggested postponing the rapprochement with the EU unless the necessary economic aid - which was then estimated to exceed US$100bn - was guaranteed.

The situation with the IMF is similar. The nearest tranche is expected no sooner than in February. To that end, in the IMF they are waiting for the parameters of the approved budget to assess its efficiency. It is not for nothing that the IMF is keen to see the budget. As far as is known, the Cabinet is preparing an unprecedented cut to social security expenditures to reduce the budget deficit. It is not clear whether the Parliament will agree to approve it. The Parliament may approve only part of the public sector austerity measures, and it will prove insufficient for the IMF.