Ukraine expects to sign new financing program with EU by summer

Ukraine may be able to qualify for another loan
tranche of macro-financial assistance (MFA) from the EU by this summer, Deputy
PM Ivanna Klympush-Tsyntsadze told the Ukrinform news agency in Brussels after
a Feb. 26 meeting with Valdis Dombrovskis, a European Commission vice
president. Klympush-Tsyntsadze discussed the timeframe of the possible EU MFA
IV program with Ukraine, as well as fulfillment of MFA III program commitments
in which Ukraine “has reached significant progress,” the Cabinet of
Ministers website reported. 

Recall, the MFA III program was formally terminated in
early January 2018. Based on that program, Ukraine was initially scheduled to
receive three loan tranches worth EUR 600 mln each in 2Q15, 3Q15 and 1Q16.
Instead, Ukraine was able to get two tranches (in 2Q15 and 2Q17).

Among the outstanding issues from MFA III, EU
officials listed in December: (a) lifting a moratorium on timber exports, (b) launching
automatic reviews of electronic asset and income declarations, (c) approving a
law creating a debtor registry and (d) creating an electronic register for the
beneficiary owners of companies. Since then, Ukraine has only managed to
approve the debtor registry law.

Alexander Paraschiy: If the new
MFA program is launched, most likely its conditions will be similar to previous
programs and loan tranches of EUR 600 mln will be provided after Ukraine
fulfills certain commitments. The EU will likely insist on Ukraine’s fulfilment
of the remaining commitments under the MFA III program before the launch of the
new one. And certainly no new MFA program is possible in case Ukraine won’t
agree with  the IMF on the next review of its Extended Funds Facility program.
Namely, Ukraine’s parliament has yet to approve a law on the High
Anti-Corruption Court in line with Council of Europe recommendations, as the
government has yet to agree on a natural gas pricing policy for households.

That said, the Ukrainian government has a lot to do in
order to secure loan tranches from the IMF (up to USD 2 bln) and the EU (at
least EUR 600 mln) this year. So far, our base-case scenario is Ukraine will be
able to receive these tranches in mid-2018.