IMF decides to withhold next loan tranche

The New York Times reported yesterday that the International Monetary Fund has decided to withhold the allocation of the fourth tranche of its USD 16.5 bln loan program to Ukraine, citing an IMF official that spoke under the condition of anonymity. At the same time, the IMF official was quoted as saying the fund was ready to renew cooperation with Ukraine at a time when there is consensus among politicians. Yesterday, Ukraine’s Deputy Prime Minister Hryhoriy Nemirya said that the country handed a letter of intent to the IMF that was agreed upon by the Cabinet of Ministers and the National Bank of Ukraine; the letter was signed by Prime Minister Yulia Tymoshenko, Finance Minister Ihor Umanskiy and NBU head Volodymyr Stelmakh. Mykyta Mykhaylychenko: As we wrote in our recent note, the delay, foremost, will complicate financing of the budget deficit. However, in our view, the situation is not critical. Ukraine has already received ~USD 10.5 bln from the IMF and the domestic economic situation has stabilized recently and we do not expect a repetition of sharp the UAH depreciation like at the end of 2008. The NBU has USD 27.3 bln in international reserves as of end-November while in 4Q09, the double BoP deficit is expected to be not more than USD 4 bln vs. USD 9.5 bln in 4Q08. Further, Ukraine has no sovereign or quasi-sovereign public external debt repayments until end-2010.