IMF mission to arrive in Ukraine in two weeks, media report

The Ukrainian government is anticipating an IMF
mission will arrive on Sept. 12 or 13 to implement its fourth review under its
Extended Funds Facility program, Interfax-Ukraine reported on Aug. 31, citing
its sources. This review was initially scheduled for May 2017 and should have
resulted in the IMF’s allocation of the fifth loan tranche under the program
worth USD 1.9 bln.

The key tasks that Ukraine should have implemented by
May 2017 were: selection of an advisor to negotiate the restructuring of
Privatbank’s loan portfolio (done); approve pension legislation (approved in first readingin July, may be approved in full in early September); approval of legislation
launching a farmalnd market (not done, and the IMF confirmed it is ready to postpone
it for this review, at least); and the establishment of
a civil service to investigate financial crimes (not done).

Alexander Paraschiy: We expect
Ukraine’s parliament will be able to approve the second reading of pension
legislation, which is the IMF’s key requirement for the fifth tranche. The
tranche’s likelihood improved significantly after the IMF postponed its demand
for farmland reform. With only two tasks for May’s review fully or partially
implemented by Ukraine (out of four that were listed in the last memorandum),
we believe this tranche will be reduced to about USD 1.0 bln, smaller than the
scheduled USD 1.9 bln (as what happened with the previous tranche).

However, the fifth tranche is not a done deal. Among
the hurdles is the government’s unwillingness to implement its own resolution
(whose adoption enabled Ukraine to pass the third review of the program) to
adjust natural gas prices for households (higher, in this case), making them in
line with import parity as of October. Hopefully, Ukraine will find common
ground with the IMF during the mission’s visit.