IMF mission concludes visit, says possible decision in July

An IMF mission visiting Kyiv as a part of second review under the Extended Fund Facility (EFF) arrangement, completed on May 18, according to its press release. The mission reached staff level agreements with Ukrainian authorities on policies needed to complete the second review, which began on May 10. “Ukraine has made considerable progress in restoring macroeconomic stability over the past year under difficult circumstances” stated Ron van Rooden, the mission chief for Ukraine.

“Steadfast implementation of structural and institutional reforms is now critical to turn the recent recovery into strong and sustainable growth, with unwavering determination in the fight against corruption emerging as a litmus test for the government’s ability to retain broad domestic and international support for its policies.”

Authorities should “boost their efforts to entrench fiscal and financial stability, decisively enhance transparency and the rule of law, and reform the large and inefficient state-owned enterprise sector,” van Rooden said. If decisive steps in these areas are implemented, a decision on the anticipated third IMF wire of USD 1.7 bln could be announced in July, he said.

Alexander Paraschiy: As we expected, the IMF requested some prior actions in exchange for the next loan tranche. We know about 19 bills that needed to be approved by parliament but haven’t yet been, with the full list not released yet. From the release, we can also conclude that launching privatization of some state enterprises might be among such prior actions. But the IMF also likely had extra requirements that target corruption.

As usual, implementation of prior actions is taking somewhat more time than initially planned. Recall, Ukrainian Vice Prime Minister Stepan Kubiv voiced his expectation last month that the third IMF tranche will arrive by the end of June. We continue to expect that August is the most realistic month for the new IMF funds to arrive. Statements by the new Prime Minister Volodymyr Groysman indicate that state authorities are determined to meet the requirements to get this wire.