MinFin considers IMF cooperation as base-case

Ukraine’s Finance Minister Serhiy Marchenko stated
that the cooperation with the IMF is a basic macro scenario for this year,
according to his interview published by UNIAN news agency on Feb 11. He expects
that cooperation with the IMF will allow the government to count on other
multilateral loans for about USD 1.4 bln, including two tranches for a total of
USD 750 mln from the World Bank and a tranche for EUR 600 mln from the EU.
Meanwhile, Marchenko did not provide any date of a possible IMF deal, only
stating that he expects to receive funds under the current IMF Stand-by program
by the end of 2021, when the program expires.

Among the outstanding issues with the IMF, Marchenko
listed gas pricing for households, “separate questions” about Ukraine’s
anticorruption infrastructure and judiciary reform, as well as unmet structural
benchmarks under the latest memorandum with the IMF, including amendments to
the banking legislation. He also said that Ukraine has started a discussion
with IMF representatives about state budget parameters for 2022, adding that
the IMF is insisting on the budget deficit not exceeding 3.5% of GDP.

Alexander Paraschiy: Ukraine’s
MinFin is scheduled to repay USD 3.8 bln of external debts in 2021, and in the
best case, funds from the IMF, the World Bank and the EU can fully cover this
amount. However, given that for about half a year Ukraine has not been able to
agree with the IMF on the key issue, i.e. the anticorruption infrastructure,
there is a risk that the government will not be successful on this matter in
the nearest six months as well. In such case (which, thus far, is not a
base-case for us) Ukraine might face hardships in financing its state budget
gap for 2021, planned at the level of over USD 8 bln.

We still expect Ukraine to reach the IMF deal in 2Q21.
If that does not happen, the end of August will be a critical deadline for the
deal, after which the probability of it in 2021 will shrink significantly.