Ukrainian PM sees US$12b aid boost 
as pension 
revamp looms

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KIEV — Ukraine’s prime minister sees the country receiving US$12 billion (RM48 billion) of international aid this year and said his cabinet is gearing up to tackle the controversial issue of pension reform.

The figure includes more than US$4 billion in transfers from the International Monetary Fund (IMF), as well as bilateral funds from allies such as the US, Volodymyr Hroisman said Friday in an interview. Talks with the Washington-based fund, which is set to sign off this month on the third tranche of a US$17.5 billion rescue, are turning to pensions, an issue he says will spark a battle with populist elements in parliament.

“The IMF program works for us,” Hroisman, appointed in April, said in the government building in the capital, Kiev. “Of course, we suffer from a disease called populism in our country. They say the IMF is bad and they demonise it, but we’ll inform people what the IMF recommends and why.”

Foreign financing is underpinning Ukraine’s economic recovery, while conditions set by lenders are helping to modernise the ex-Soviet republic’s institutions after decades of corrupt rule. The nation’s ties with the IMF hit rocky ground last year, delaying disbursements as political tensions boiled over and paralysed the government. The IMF and other donors have demanded a more vigorous assault on graft for support to be maintained.

The latest tranche has been reduced to US$1 billion from US$1.7 billion, central bank governor Valeriya Gontareva said last week. The final bills required before the IMF’s board meets will be discussed by parliament this week.

Pension reform, not an issue for the latest tranche, has torpedoed cooperation between previous governments and the lender. The current system, under which some professions such as coal miners and prosecutors are able to retire early, is “very ill,” yielding minimal payments on which people can barely survive, according to Hroisman.

“There are people who retire before they turn 50 — I think it’s a big problem because a person is still young before 50,” he said, without specifying whether existing gradual increases in the overall pension age are sufficient. “We need to change this system.”

A healthy economy is key to providing bigger pensions, Hroisman said. While gross domestic product inched up 0.1% from a year earlier in the first quarter, it shrank 0.7% from the previous three months, the first contraction since an 18-month recession ended in the middle of last year.

Hroisman said he doesn’t see signs of a slowdown, with gross domestic product set to advance 1.5% this year, in line with the latest IMF forecast. Growth can top 2% next year, as long as efforts to fight corruption, cut red tape and privatize state assets are fulfilled, he said.

“That is our task,” Hroisman said. “I think this task can be executed.” — Bloomberg

(US$1 = RM4)