I'm interested to see if the IMF-EU can restrain themselves from fully imposing the usual dogma, on the grounds that the competition with Russia is more important, or will it be business as usual.
For example, the question of fuel subsidies is often mentioned. From a standard economic point of view, it's a slam dunk that this is not a desirable policy. People would be better off if you just gave them cash instead of the subsidy, and they would consume less energy, which would be good for the environment and for your balance of payments and your sovereignty if you're an energy importer. But there's clearly a wrong way to remove fuel subsidies, which is that everyone wakes up one day and fuel subsidies are gone with no compensation from the government, making poor people a lot worse off with a big shock. Iran carefully implemented a plan to remove fuel subsidies gradually, starting at the margin: there was a limit imposed to what you could buy at the subsidized price, after that you had to pay the market price. This meant that the worst incentives for over-consumption were removed, while still protecting poor people from the price rise up to a certain amount of consumption. This was coupled with a phase-in of cash transfers to the poor. There was no big public backlash. Could we see something like that in Ukraine? On Tue, Feb 25, 2014 at 6:33 AM, Louis Proyect <[email protected]> wrote: > Gerry Rice, a spokesman for the International Monetary Fund, which would > have to provide the billions of dollars in urgently needed credit, > issued a statement on Monday saying only, "We are talking to all > interested parties." > > The Obama administration said it was prepared to provide financial > assistance beyond that from the I.M.F., but it did not say how much. > > "This support can complement an I.M.F. program by helping to make > reforms easier and by putting Ukraine in a position to invest more in > health and education to help develop Ukraine's human capital and > strengthen its social safety net," the White House spokesman, Jay > Carney, told reporters in Washington. > > The I.M.F. has made clear it is unwilling to help Ukraine without a > commitment from the country to undertake painful austerity measures and > other restructuring. Mr. Yanukovych's resistance to those demands was a > principal reason he backed away from a trade deal with Europe and sought > help from Russia instead. > > Given the animosity of the new Ukrainian government toward Russia, Ivan > Tchakarov, an analyst with Citibank, said that Ukraine could turn only > to the West for help, and would inevitably face demands for tough > reforms and a near-certain recession as a result. > > "Assuming that Russia will pass, it will be up to the I.M.F. and E.U. to > pick up the tab," Mr. Tchakarov said. "The I.M.F. will impose hard > constraints on the economy, and these will most probably mean a > recession in 2014." > > Still, Mr. Tchakarov noted that there would be long-term benefits to > Ukraine's undertaking desperately needed measures, like ending subsidies > of gas prices and cutting the thickets of business regulations that > weigh down the economy. These actions could potentially allow it to > emerge far stronger, like its neighbors Poland and the Baltic countries, > he said. > > --NY Times, "Amid Political Upheaval, Ukraine Faces Dire Need for > Economic Help", Feb. 25 2014 > > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > -- Robert Naiman Policy Director Just Foreign Policy www.justforeignpolicy.org [email protected] (202) 448-2898, extension 1.
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