IMF says important issues remain open, plans to return in March

An IMF delegation concluded on Feb. 12 its two-week visit to Kyiv, which was the first phase of loan negotiations with Ukrainian state officials. Ukraine Mission Director Christopher Jarvis said his team will return in March to continue the talks. In a press release, Jarvis cited “significant progress” in policies that will reduce the budget and current account deficits, strengthen reserves and create jobs and growth. “Important policy issues still remain open and further technical work needs to be completed,” he said. Without changing current economic policies, GDP growth will be 0-1 percent in 2013 against the backdrop of a larger current account deficit, Jarvis said, adding, “That makes the country vulnerable in case of a negative turn in events.” From the Ukrainian side, Economy Minister Ihor Prasolov said he expects a memorandum on cooperation will emerge for signing at the end of March.

Alexander Paraschiy: Positive messages about progress in negotiations are exactly what we expected from this mission given the IMF’s “not here to harm” position. Yet they don’t mean that real progress was made. As we mentioned in our IMF note on Jan. 28, Ukraine is playing with promises to raise gas tariffs and relax control over the hryvnia in order to stall for time and keep Eurobond holders believing that an IMF deal is possible at some stage. Meanwhile, Prasolov’s statement about expecting a memorandum in March falls in line with what we’ve been reporting. Still, we can hardly expect Ukrainian authorities to engage in painful policies soon as long as they can access external financial markets, as they have been doing.