Location Ukraine Ukraine

The west is wrong to write off Ukraine’s debts

It’s easy to feel sorry for a country crippled by war and corruption – but dismissing past debts is not the way to help, say Alexander Lebedev andVladislav Inozemtsev

The road to hell is paved with good intentions, they say, and so it may be with the west’s approach to Ukraine.

On 11 March the International Monetary Fund announced a $40bn assistance package to Kiev, consisting of $17.5bn in new loans and $15-20bn write-offs of previous ones. Such a programme may well help any normal country, but the situation in Ukraine is far from normal.

Before the former government was overthrown and then president Viktor Yanukovych fled for Moscow in February 2014, the country was renowned for its corrupt leadership. Yanukovych, convicted of robbery and assaultunder Soviet rule, is alleged to have received a share of each hryvnia (Ukrainian currency) that passed through the economy.

According to western analysts, the overall scale of corruption reached 14% of GDPduring the early 2010s, or roughly $30bn a year.

We believe that a significant proportion of this ended in the pockets of the president and his family, or in the accounts of the oligarchs and other close associates of the ruling clan.

For years these elites salted away their illicit profits in banks accounts around the world, with the west turned a blind eye.

The new government has been left in charge of a country crippled by both war and corruption, with external debts of $72.9bn at the beginning of this year. The finance ministry in Kiev – and the IMF – believe at least $20bn of this should be written off – because, after all, those responsible are no longer in power.

But why would creditors, many of whom are ordinary investors, be willing to do this? Why are they not asking whose debt is being forgiven – is it a new, free nation whose citizens have sacrificed dearly for their pro-European views? Or is it the former elite who are spending their retirement far from Kiev, wealthy and happy?

Rather than absolving those responsible, as the present government appears to be doing, we believe the private sector should take the lead in holding them to account.

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