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The IMF approved a new bail-out for Ukraine on Thursday, worth $17.5 billion over four years. The first $5 billion are supposed to be delivered today. The Economist has pored over it and found it wanting in several key areas.

The first is what the IMF expects will happen to Ukraine's budget deficit. It expects the "primary" budget deficit (which excludes interest repayments) to disappear entirely by next year, "setting debt on a firm downward path". Is that a lot to ask?

Last year the primary deficit of the government and Naftogaz, the state gas company, was -6.9%. That is pretty big (Portugal had roughly the same budget deficit in 2009). But as the first chart shows, the IMF is asking for some tough reforms. It shows what happens to the budget deficit when a crisis hits (the first year is the one before the crisis). Five years following the crisis, the budget deficits of the four highlighted countries fell as the effects of the crisis wore off. When a country falls below zero on the chart, it is running a primary budget surplus. Greece and Portugal saw especially big falls. The IMF expects Ukraine to achieve a Greek level of adjustment, that took four years, in just one. And its predictions for economic growth are wildly optimistic.

What form will this austerity take? Cutting the massive deficit of Naftogaz, the state gas company, should save a lot of money. Naftogaz has a big financial black hole (5.7% of GDP last year) because it sells gas to Ukrainians far below the cost of importing it. Rampant corruption made this even worse. The IMF, however, expects Naftogaz's deficit to shrink to nothing by 2017. Raising gas prices is one way of doing this. In a fortnight's time, retail gas prices for households will rise by 284%. New estimates suggest that to reach market levels, some consumers will soon see price rises of over 200% in dollar terms.

Where else will the adjustment come from? The IMF does not want taxes to increase much and wants spending cuts to carry the burden instead (see second chart). For instance, spending on unemployment and disability insurance will, by 2017, have fallen by about 30% from its 2013 level. That is not great news, especially since the IMF also expects unemployment to hit 11.5% this year (up from 7.3% in 2013). In other words, there will be less money to distribute among more disabled and unemployed people.

Nonetheless, the financial plan argues that "compensatory measures to protect the most vulnerable are being stepped up". The plan forecasts that:

Total spending on social-assistance programs will reach 4.1% of GDP in 2015, an increase of 30 percent compared to 2014… In addition, unemployment benefit spending will rise by 15%.

This sounds great. But on closer inspection that does not seem quite right. The statement does not say whether these increases are inflation-adjusted or not. That is really important, since Ukrainian inflation rate has now reached over 30% a year.

So what will actually happen? Figures elsewhere in the document show that it is indeed a 30% rise in nominal terms. Spending on social programmes will hit 4.1% this year, but that is only a rise of 0.3 percentage points from last. (And the government's own budget currently expects it to fall by 0.1 percentage points.) The IMF's projections show that the proportion of GDP spent on overall social benefits will fall from 21.1% in 2014 to 18.4% next year.

There are some bright spots. Government capital spending, for instance, should rise. But overall it all looks rather painful. That is the inevitable result of the West trying to rely on the IMF to prop the economy up. The fund's board could not have approved the bail-out had they thought that the fund would lose money. That is why they are insisting on such austerity. And IMF funding is limited to budgetary support: it cannot offer the long-term investment that Ukraine desperately needs. Organisations such as the European Union and America should be doing that, but so far they have taken a back seat. But without a much bigger, long-term investment program, Ukraine's economy will continue to flounder.

Blogs, The Economist