IMF expects decision on Ukraine loan tranche in September

The IMF expects to announce shortly the date of the board meeting to consider granting Ukraine the third loan tranche as part of the second review of its External Funds Facility program, IMF Communications Director Gerry Rice told a press briefing on Sept. 1 in Washington. The meeting, scheduled for the second half of September, will be announced “once some technical issues on the timing of some future actions are resolved,” he said. Rice declined to answer a question on the amount of the new IMF tranche, only stating that Ukraine has made good progress since his last briefing on July 14. That day, Rice said “the discussions are very close to being finalized” and “some technical issues remain.”

Answering a question on whether Ukraine is behaving in good faith with Russia on resolving its debt issue (Ukraine is overdue in repaying a USD 3 bln Eurobond owed to a Russian fund), Rice commented that the board will assess Ukraine’s conduct, stressing that the IMF is not part of the negotiations of this debt repayment.

Alexander Paraschiy: What has changed in his rhetoric from mid-July is that Rice is more certain about the timing of the board meeting, having limited his view to stating “it’s possible” the last time. This time, he referred to “timing of future actions,” with no reference to “prior actions,” implying that certain requirements have been fulfilled by Ukrainian side. All this suggests that Ukraine is indeed much more closer to getting the next IMF tranche, in the amount of USD 0.7 bln (or, less likely, USD 1.0 bln). Such a message should be supportive for the Ukrainian currency, which has lost 3.6% against the U.S. dollar in the last two days, as well as for Ukraine’s Eurobonds (UKRAIN).

Now that these expectations have been formed, the absence of Ukraine in the IMF’s schedule till end-September (which is usually announced ten days in advance) would be a huge disappointment.