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Viewing cable 08KYIV2538, UKRAINE PRESIDENT AND PM APPEAL TO IMF

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Reference ID Created Released Classification Origin
08KYIV2538 2008-12-31 10:48 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv
VZCZCXRO7825
PP RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #2538 3661048
ZNR UUUUU ZZH
P 311048Z DEC 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 6987
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
UNCLAS KYIV 002538 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/UMB, EEB/OMA 
TREASURY PASS TO TTORGERSON 
 
E.O. 12958: N/A 
TAGS: EFIN EREL ECON ETRD PGOV PREL XH UP
SUBJECT:  UKRAINE PRESIDENT AND PM APPEAL TO IMF 
 
REF: KYIV 2532 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR INTERNET DISTRIBUTION 
 
1.  (SBU) Summary.  In an unusual display of cooperation, Ukrainian 
President Viktor Yushchenko and Prime Minister Yulia Tymoshenko sent 
a joint letter (full text below) to IMF Managing Director Dominique 
Strauss-Kahn on December 30, confirming their intention to adhere to 
IMF conditionalities.  Specifically, they pledged to take "decisive 
steps" to correct allotments for public pensions and wages that had 
been included in the recently approved 2009 budget.  This joint 
letter is striking for two main reasons: 1) it indicates the 
President and Prime Minister's awareness of the budget's many flaws 
(reftel), and 2) it suggests that the pair may be willing to work in 
tandem to head off IMF censure during its first formal oversight 
visit in January 2009.  End summary. 
 
2.  (SBU) The public release of a joint letter from President 
Yushchenko and PM Tymoshenko to the IMF's Strauss-Kahn is an 
indicator that the erstwhile Orange Coalition partners may have 
found common cause in their alarm over the 2009 budget.  With the 
IMF linking a second disbursement of its $16.4 billion Stand-By 
Arrangement (SBA) to Ukraine's implementation of a balance budget 
requirement, Yushchenko and Tymoshenko recognize that further 
allotments may be in jeopardy due to the flawed 2009 budget that was 
signed into law on December 29 (reftel).  The IMF told us on 
December 30 that it had sent a strong message about Ukraine's 
"negative" and "unrealistic" 2009 budget to the GOU, and that the 
January visit of the IMF mission head would focus special attention 
on the budget's projected 2.97 percent deficit. 
 
3.  (SBU) Ukrainian law requires national budgets to be passed 
before the close of the previous calendar year.  It has become 
tradition to pass what Yushchenko deemed "a bad budget" before the 
New Year, only then to further debate and amend the budget in the 
first quarter.  The mention of pension and public wage reform 
suggests the President and PM are listening to the IMF and are 
sensitive to its concerns, since the IMF has been critical of the 
status of planned pension and wage outlays.  At the same time, they 
may also be indicating that the budget process is fluid and not yet 
finalized, and that Rada amendments in 2009 will bring the budget 
into compliance with IMF conditionalities. 
 
4.  (SBU) Comment.  The President and PM have spent recent months 
blaming each other for Ukraine's political and economic problems. 
Much maligned for their lack of joint leadership in response to the 
brewing crisis, their letter is a noteworthy step in the right 
direction, reflecting a need for the IMF to continue providing 
guidance and "coordinated measures" on next steps.  End comment. 
 
5.  (U) The full text of President Yushchenko and PM Tymoshenko's 
letter to IMF Managing Director Strauss-Kahn is as follows: 
 
6.  (U) "Please accept our compliments as well as greetings and best 
wishes on the occasion of the 2009 New Year.  We would like to 
inform you that situation in Ukraine remains difficult, but the 
President of Ukraine and the National Bank are making all possible 
efforts to stabilize it.  At the same time, on December 26, 2008, 
the Verhovna Rada passed the 2009 State Budget, a law that did not 
fully reflect some of the economic program indicators supported by 
the IMF.  Please be assured of our commitment to take decisive steps 
to ensure implementation of the program, including correction of 
budget figures, specifically those pertaining to pension reform and 
public income policy.  We count on fruitful joint work with the IMF 
mission during its visit to Ukraine in January 2009 to develop 
coordinated measures to stabilize the situation." 
 
TAYLOR