IMF puts off deal with Ukraine, WSJ speculates

The International Monetary Fund has put off signing of
a new program with Ukraine as it worries that the government is doing little to
recoup money from the owners of failed banks, including Privatbank, the Wall
Street Journal reported on Oct. 31, citing “people familiar with the
negotiations.” The IMF is “holding up the next set of loans until it
is convinced Mr. Zelensky’s government will aggressively try to recoup an
estimated $15 billion stolen from more than 100 banks,” the WSJ wrote.
“Among Kyiv’s challenges in winning IMF approval is Ihor Kolomoisky,” a
former shareholder of Privatbank, identified by wsj.com as President Zelensky’s
close supporter. The impeachment inquiry in the U.S. “has drawn additional
scrutiny to Mr. Zelensky’s government, putting greater pressure on Kyiv to
address the IMF’s concerns,” wsj.com added.

Recall, the IMF mission visited Ukraine in mid-September
to discuss a new loan program with Kyiv, with no tangible results achieved. Uncertainty
around the nationalized Privatbank was among the issues discussed during the
visit. On Oct. 18, IMF official Poul Thomsen assured the public the IMF
mission will return to Ukraine “in a couple of weeks.” In the more than two
weeks since then however, there is no information about an upcoming visit.

Alexander Paraschiy: Besides
failed banks, the IMF is also discussing with Ukraine issues of central bank
independence, fighting corruption, liberalization of natural gas prices and the
2020 state budget. In our view, the IMF will return to discuss all these
issues, as well as a new program, as soon as there will be more clarity about
the state budget’s approval, which we expect by mid-November. The issue of
Privatbank is definitely important, but we expect that this time it won’t be
critical for signing a new IMF program, as soon as Kyiv continues to assure the
public it is doing all its best to resolve the issue to the government’s
benefit.

All in all, we expect the new IMF program will be
agreed upon by the end of 2019 and Ukraine will be able to get the initial
tranche in late 2019 or early 2020. The next tranches under the program might
require some more tangible results in fighting corruption and dealing with
owners of failed banks, including Privatbank.