IMF wants more progress from Ukraine to complete first review under SBA

The IMF welcomes Ukraine’s approval of laws that will
strengthen the judicial system in Ukraine, “but more progress is needed in
several other areas to support completion of the first review” under the
Stand-By program, the fund’s spokesman Gerry Rice told a July 15 press
briefing. He did not specify any area where progress is needed, but he listed
key focuses of the discussion with Ukraine: 1) strengthening governance of the
National Bank, 2) improvements to the legislative and regulatory framework for
bank supervision and resolution, 3) discussions on the fiscal deficit, 4)
restoring and strengthening the anti-corruption framework, 5) judiciary system
and 6) energy policy. Rice also said that the IMF had “very constructive meetings with Finance
Minister Serhiy Marchenko.”

Alexander Paraschiy: In all the
areas listed by Rice, Ukraine has reached some apparent progress, perhaps with
the exception of the first item (at least, Ukraine’s result in this area is
hard to evaluate). However, in many areas, there are details that might prevent
the IMF from completing the staff level agreement on the program review.

For instance, in the anticorruption area, Ukraine’s
parliament approved a law to restore criminal punishment
for officials failing to declare their assets, whereas the selection of the
head of anti-corruption prosecutors’ office has been stalled (there has been no
head since August). In “energy
policy”, Ukraine’s Cabinet changed the charter of Naftogaz to grant more power
to supervisory board in 2020, whereas the same Cabinet appointed a new CEO of Naftogaz
via bypassing the supervisory board.

We still expect that the Ukrainian government will
find common ground with the IMF staff in the coming one-two weeks enabling
Ukraine to remain in the IMF program.