IMF mission in Ukraine concludes with no results

An IMF mission that recently concluded a two-week visit to Kyiv reported on Nov. 18 that Ukraine won’t receive a fourth loan tranche of its USD 17.5 bln Extended Funds Facility in the next month. The mission conducted the program’s third review.

Further talks “will continue in the period ahead,” said Mission Head Ron van Rooden in a statement released that day. Ukraine needs more time to ensure mid-term fiscal sustainability, to safeguard financial stability, to repair the financial system and to address corruption.

“Tangible results in prosecuting and convicting corrupt high-level officials and recovering proceeds from corruption have yet to be achieved,” he said. Ukraine also needs to reform state-owned enterprises and to implement a consistent policy on raising wages, van Rooden said.

Alexander Paraschiy: This is an expected result of the IMF’s mission and a solid diagnosis for Ukraine’s officials. With such conclusions, Ukraine hardly can count on any external lending by the end of 2016, and the IMF’s next four tranches at a total of USD 5.3 bln – scheduled for 2017 – are now under question.

We expect the IMF will return to discuss progress on the third review no earlier than in late January, but we are doubtful that Ukraine will make enough progress by then to receive the planned USD 1.3 bln tranche. This negative development boosts the risk of Ukraine’s mid-term default.