Ukraine central bank expects IMF mission arrival in early November

The National Bank of Ukraine (NBU) expects the arrival of the IMF mission to discuss further cooperation under Extended Fund Facility (EEF) program in early November, said on Oct. 29 NBU Head Valeria Gontareva, according to Interfax-Ukraine news agency.

“We anticipate them next week. However, we did not receive official letter yet.  The issue of the mission arrival depends on the Finance Ministry, which should be finalizing its spending plan,” Gontareva said.

The IMF mission completed on Oct. 2 an 11-day visit as part of its second review of the third tranche of its four-year, USD 17.5 bln loan. However, the IMF said it would extend its review, rather than reach a decision on a tranche, since it didn’t have a clear vision on the Cabinet’s policy plans for 2016. 

Alexander Paraschiy:  We anticipate the authorities will have difficult talks with the IMF. The IMF’s main concern is related to the 2016 spending plan, which is expected to be near balanced (with a deficit of no more than 3.7% of GDP). This target looks quite challenging given that more than UAH 60 bln in 2015 budget revenue will no longer be available  (gained from NBU profit, additional import duties and 3G license sale proceeds). What’s more, the authorities are talking about introducing a new tax reform plan, which is estimated to cut budget collections by an extra UAH 60 bln, in the best case scenario. For the moment, the Cabinet does not have a solution to this dilemma while the IMF will not move forward without a clear and realistic spending plan on the table. Against this backdrop, it’s very likely that both the 2016 budget and the new IMF tranche will be approved only at the very end of the year.