IMF board approves USD 1.7 bln loan to Ukraine

Макроэкономика 03.08.2015 The IMF executive board completed the first review of Extended Fund Facility (EFF) program and approved USD 1.7 bln disbursement to Ukraine on July 31. The IMF officials are positive about Ukraine’s performance but encourage authorities to further implement reforms. “The Ukrainian economy remains fragile, but encouraging signs are emerging” said David Lipton, First Deputy Managing Director of the IMF. “Since the approval of a financial arrangement under the IMF’s Extended Fund Facility, the authorities have made a strong start in implementing their economic program,” he added. “At the same time, restoring debt sustainability will require the completion of a debt operation consistent with program objectives.” The IMF urges the authorities and the holders of Ukraine’s sovereign debt to continue efforts to reach an agreement ahead of the next program review. “In the event that talks with private creditors stall, and Ukraine determines that it cannot service this debt, the Fund could continue to lend to Ukraine consistent with its Lending-into-Arrears Policy,” David Lipton confirmed. Alexander Paraschiy: Positive decision of the IMF on second wire under EFF was widely expected. Ukrainian authorities have completed all requirements of the Fund except for debt restructuring. Due to delayed disbursement of second wire (initially was scheduled for mid-June) we expect the third review of the program to start no earlier than in October. In this context, we do not rule out that Ukrainian government will ask the Fund to merge the third and fourth instalments in one tranche the way it was requested last year. Meeting budget deficit target (4.2% of GDP) and further steps on strengthening Naftogaz position will be the key structural benchmarks for 2H15. Strengthening Anti-Corruption Bureau, starting privatization, and next steps with pension reform are extra points added to the updated memorandum. As regards to debt operation, it would be important for Ukraine to finish it by September 23, when its USD 500 mln Eurobond matures.