21 November 2011
The International Monetary Fund published its review of Ukraine’s 2008 standby loan facility. That loan was frozen in June 2009 ahead of the Ukrainian presidential elections and official cancelled in July 2010 when Ukraine applied for its current USD 15.6 bln loan. The report said the key lesson from the review was the importance of ownership and governance, but there were no clear-cut answers on how to achieve this in Ukraine. Technically, the report is not related to the current Stand-By arrangement but still gives a flavor of how IMF might design its policies towards Ukraine in the future. Brad Wells: The report’s conclusions support our assumption that the IMF is looking for concrete prior action from the Ukrainian government before resuming its current loan program, not just promises. The IMF noted that Ukrainian officials have not followed through on commitments under past support programs dating back to 1994. Another key conclusion the IMF made was that less front-loading might have provided stronger incentive to follow through with reform. We believe this could mean that even when cooperation resumes, IMF might not give out an initial double-sized tranche to Ukraine (USD 1.5 bln vs. USD 3.0 bln) that Ukrainian officials have publicly said they were requesting.