IMF reaches staff-level agreement on Ukraine’s USD 1.6 bln second tranche

Yesterday the International Monetary Fund issued a press release stating it reached a staff-level agreement with Ukraine on the first review under its SBA facility. By year-end, the IMF Executive Board is expected to consider disbursing the second USD 1.6 bln facility tranche (incl. USD 1 bln directly to the government). According to the IMF release, Ukraine had met all the quantitative criteria as of end-September and has yet to complete “prior actions”. The latter, most likely, include final resolution about troubled Bank Nadra, preparation of the 2011 budget draft,  some sort of resolution regarding VAT reimbursement indebtedness, as well as passage of a new tax code, allowing for IMF comments. Mykyta Mykhaylychenko: Our base case scenario implies a positive IMF decision by year-end. The second tranche could come by end-December, which is somewhat later than the previously expected end of November. Although the government has enough cash to cover most of its needs, temporary “cash mismatches” can occur as it has to redeem approximately USD 420 mln of JPY-denominated Eurobonds on December 19th.