IMF mission starts work in Ukraine on Dec. 21

The online mission
of the IMF to review Ukraine’s implementation of the stand-by loan program will
be officially held on Dec. 21-23, President Zelensky tweeted on Dec. 18.
“Ukraine stays a reliable partner to the IMF as our collaboration will benefit
Ukrainian people,” he wrote. Regarding the timing of the next IMF tranche under
the program, PM Denys Shmyhal said on Dec. 18 that it will arrive in
February-March, “providing there are no surprises again.”

Recall, the stand-by
programme, started
in June 2020, provides for about USD 5 bln in financing of Ukraine’s state
budget in five tranches through October 2021. As of December 2020, Ukraine was
scheduled to pass two reviews of the program and receive three tranches for
about USD 3.6 bln. Instead, Ukraine only received an initial tranche of about
USD 2.1 bln in June and has passed no program reviews.

Alexander
Paraschiy: Shmyhal’s
mention of “no surprises again” is his admission that Ukraine’s policy during
the last half year has not been compatible with the IMF’s program. This is
fully in line with a comment by IMF managing director Kristalina Georgieva –
made upon the approval of the initial tranche in June – that uncertainty about the direction
of economic policies in Ukraine “remains substantial.”

On the one hand, it
is positive that the Ukrainian government is on the same page with IMF
officials about the risks to the next loan tranche. On the other hand, these
risks are significant. In that light, we see the probability of the next IMF
tranche in 1Q21 as no more than 50%, even if the ongoing IMF staff mission is
successful.