Ukraine PM, president reiterate commitment to IMF deal

Ukraine’s two highest leaders, President Zelensky and
PM Shmyhal, both issued statements on Mar. 10 on their websites reiterated
their commitment to securing a new IMF loan program.  “A top priority is
the launch of the Extended Funds Facility program,” the cabinet’s website
wrote. Shmyhal, accompanied by the justice and finance ministers, engaged in a
Mar. 10 conference call with IMF representative Ron van Rooden to discuss the
next necessary steps.

From his end, Zelensky said IMF cooperation is
important “not only in terms of receiving the next tranche, but also in terms
of maintaining the confidence of international investors,” the president’s
website reported, citing his conversation with Bloomberg journalists. Zelensky
said he will work to approve legislation launching a farmland market and
prohibiting failed banks denationalization, understanding they are commitments
that he has taken to implement ahead of the deal. He clarified that the banking
legislation (the so-called anti-Kolomoisky bill) is still being drafted.
“Not only the Office of the President, not only (the Minister of Justice
Denys) Maliuska, but also a large number of specialists and lawyers are working
on that. I think we need a little more time to agree upon this bill,” Zelensky
said.

Alexander Paraschiy: It’s
encouraging to see that top Ukrainian politicians voiced their determination to
reach a deal with the IMF as soon as possible. And the roots of their declared
determination are clear: the turmoil on the global markets, which coincided
with last weeks’ reshuffling of the Ukrainian cabinet, hurt demand for
Ukraine’s public debt last week, and even forced MinFin to cancel local bond
placement on Mar. 10.

Moreover, the global turmoil spillover created
additional pressure on the Ukrainian currency, forcing the central bank to
intervene with the sale of USD 270 mln on the forex market on Mar. 10 and more
USD 100 mln this morning. In such an environment of uncertainty, IMF support is
critical for Ukraine.

A fly in the ointment in this situation is the
demonstrative silence from the IMF side. Neither Goesta Ljungman, nor van
Rooden commented on their recent talks with Ukraine’s top officials to
encourage the public. Recall, in some situations of emerging risks for Ukraine,
the IMF had a “cheer up” policy of encouragement. That includes August 2018 (when
neighboring Russia and Turkey underwent currency shocks) and December 2019 (ahead of
the important Normandy Format summit).

We interpret this as the IMF having yet to see an
acceptable version of the ant-Kolomoisky bill. Some clarity about the IMF’s
position could emerge tomorrow when its traditional biweekly press briefing is
likely to take place.

So far, the probability of a Ukraine-IMF deal looks no
better than 50%.