IMF will approve Ukraine loan, with revised budget, Yatsenyuk says

The Ukrainian government will receive its anticipated next loan tranche from the IMF, Prime Minister Arseniy Yatsenyuk stated at his Dec. 30 press conference. At the same time, the 2015 central budget, approved on Dec. 29, will need to be amended in order to gain the funds, he said. The IMF will require spending cuts, particularly with social payments, Yatsenyuk said. “The goal of such a financial program is the stabilization of public finances and the stabilization of the balance of payments,” he said. “I’m confident that the program will be approved since the previous two wires we received … were provided for strict compliance with the criteria of the IMF memorandum.”

Alexander Paraschiy: The prime minister’s statement is a positive signal in the context of whether the government will receive the next IMF tranche, which is critical for its survival. In essence, the Cabinet will “outsource” the task of revising its budget to the IMF. This readiness to delegate budgeting means that the chances for a new IMF wire, and subsequently Ukraine’s solvency, have improved.

At the same time, the decision  reflects poorly on the Yatsenyuk government, showing that it’s incapable of making difficult decisions and trying to avoid political responsibility for potential spending cuts. We expect Yatsenyuk will shift the blame for painful austerity measures onto the IMF. Beyond all the politics, what’s most important is that the budget is revised to more realistic numbers and we expect them to surface within a month of the IMF mission’s arrival on Jan. 8.