IMF may postpone new tranche if Ukraine’s Cabinet changes, MinFin says
9 February 2016
The IMF may postpone the disbursement of a new loan tranche to Ukraine in anticipation of a change in government, Finance Minister Natalie Jaresko said on the ICTV channel on Feb. 8, according to Interfax-Ukraine. “The IMF will wait to see what executive power will be established and whether it will commit to the obligations under which USD 6.7 bln have been already provided”, she said. She highlighted that cooperation with the IMF, which is among the few providers of loans to Ukraine, is essential for the country’s financial stability.
On previous occasions, the Ukrainian President and representatives of the government expressed their expectations that Ukraine would receive the next USD 1.7 bln tranche from the IMF in February. In addition to this tranche, Ukraine expects to receive from the IMF another tranche worth USD 1.7 bln and four smaller tranches for a total of USD 2.5 bln in 2016.
Alexander Paraschiy: The risk of the postponement of a new IMF tranche might be a good argument against a complete change of the Cabinet. Therefore, such arguments, provided by Jaresko, work in favor of a scenario where Prime Minister Arseniy Yatsenuyk retains his position, and only a minor reshuffle of the Cabinet is made. In particular, Yatsenuyk may use this to make parliament vote in favor of his government program in the coming week(s), which will give him one-year immunity in the PM position.
Interestingly, it is Natalie Jaresko who, according to Minister Aivaras Abromavicius’s suggestions last week, should occupy the position of Prime Minister in a new pro-reform government. Clearly, the IMF and the Western governments would like to see her as Ukraine’s PM, but she seems to acknowledge that the removal of Yatsenyuk from the PM position poses even more risks to the IMF program. In particular, such a scenario could lead to the split of the parliamentary coalition, where Yatsenuyk’s faction plays a leading role, and initiate early parliamentary elections. In such a case, the IMF’s support might be frozen for at least half a year.
