Anticorruption independence is prerequisite for Ukraine program, IMF says

Maintaining the independence and integrity of newly
created anti-corruption bodies in Ukraine is “a prerequisite under the current
IMF-supported program,” spokesman Gerry Rice told a Sept. 10 press briefing,
answering a question about a recent constitutional court ruling on the NABU.
Rice also said that discussions on the current IMF program with Ukraine are
ongoing, though there is no date for an IMF mission on the program’s review.

The National Anticorruption Bureau (NABU), the
Specialized Anticorruption Prosecution (SAP) and the High Anticorruption Court
were created in 2015-2018 under the supervision of IFIs as a self-sufficient
legal infrastructure to root out corruption. The IFIs are believed to have
ensured that the bodies got leaders who are independent from Ukraine’s power
brokers. However, last month, SAP head Nazar Kholodnystky resigned,
while the legitimacy of NABU director Artem Sytnyk has been put into question
following the constitutional court’s ruling
that invalidated president’s order to appoint him. These events raised the
risks of maintaining the independence of NABU and SAP.

Ukraine has entered into a new 18-month SBA program
with the IMF with a total financing amount of USD 5 bln in June 2020. The
initial tranche under the program amounted to USD 2.1
bln. The next tranche of USD 0.7 bln was initially scheduled for Sept. 1.

Alexander Paraschiy: Despite
Ukraine having implemented all the structural benchmarks under the SBA program
to date, there is a high risk that the review of the IMF program (and the next
tranche) will be significantly postponed, primarily because of the IMF’s fears
that the Zelensky administration will roll back anti-corruption reforms.

But even if the risks in anti-corruption areas are
removed in the nearest future (which is unlikely), the next IMF tranche won’t
be disbursed earlier than December. This is because Ukraine will start drafting
the 2021 state budget in the next week. No program review will occur until the
process is completed, with budget deficit parameters consistent with the IMF’s
view.

All in all, we see an extremely low chance for Ukraine
to get the next IMF tranche this year.