Beyond Economic Shock Therapy And Economic Shock And Awe: The Case For Ukraine And For Global Economic Humanism
“Ukraine badly needs more international financial support to handle a tremendous external shock. …
A year ago, Ukraine’s economy was in sound health after eight years of an average annual economic growth of 7.6 percent. Ukraine has maintained a minimal budget deficit, and its public debt was as small as 12 percent of GDP in 2007.
No other country has been hit as hard as Ukraine, and it needs all the support it can get to mitigate the social shock. The Ukrainian government reacted swiftly, asking the International Monetary Fund for support last October. Within four weeks, Ukraine and the IMF had agreed on a large, strong two-year standby agreement with $16.4 billion of IMF credits.
The IMF had three key demands: A balanced budget, a floating exchange rate, and bank restructuring. Ukraine has delivered. It has done more on bank restructuring than most Western countries. After some hesitation, the National Bank of Ukraine let the exchange rate float. It has depreciated by about 50 percent and stabilized, endowing Ukraine with new cost competitiveness. The Ukrainian government has maintained the budget close to balance in spite of collapsing state revenues.
The international financial institutions recognize Ukraine’s dilemma and the government’s heroic achievements. The World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank have contributed some $3 billion in new funds. ...
Amazingly, Ukraine has so far seen minimal social unrest, but unemployment is bound to skyrocket, especially in the East with its steelworks and mines. Naturally, the Ukrainian government is anxious to reinforce its social safety net and insists on a budget deficit of a moderate 3 percent of GDP.” …
Anders Aslund “The Case For Ukraine” Peterson Institute for International Economics February 26, 2009
Dr Anders Aslund has called on the United States to award 1,000 fellowships annually to young Ukrainians to study in the United States.
Photo credits: Landscape and mine rescue workers in Donetsk, Ukraine, Future European Union. Copyright controlled.
Pittsburgh is the American sister city of Donetsk, Ukraine.
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California's unemployment rate rose to 10.1% in January 2009, its highest level in a quarter century, as recession tightened its grip on the most populous U.S. state [6.1% in January 2008].