Is the IMF opposed to wage and pension increases in Ukraine?
Pazarbasioglu: Protecting the poor, the unemployed, and the most vulnerable is a priority for us. In Ukraine, protecting wages and pensions has been particularly important. A sizable part of our funding has been directed toward ensuring timely payment of wages and pensions by the government. But we need to face reality—the availability of financing places clear limits on spending increases. In 2010, the government committed to raise wages and pensions in line with expected inflation. This would imply a 10 percent increase. The IMF supports this increase: it balances the need to protect purchasing power against the need to live within financing constraints. A larger increase cannot be financed without resorting to inflation or significant downsizing of the public sector workforce. Ukraine’s inflation is already among the highest in the world. Higher inflation hurts everyone. But it is particularly painful for those on low incomes. To really protect the poor, we need to preserve the gain
