MinFin is optimistic about IMF deal coming soon

The Ukrainian government is in constructive
discussions with the IMF on the issues that remain in the way of receiving the
next tranche under the USD 17.5 bln EFF program, Acting Finance Minister Oksana
Markarova commented to Bloomberg TV on July 23. “On the budget, on gas prices,
we are having very constructive discussions, which I hope to constructively end
soon,” she said. She commented that Ukraine’s state budget results for the
second quarter are closer to MinFin’s plan, while some “mitigating measures”
(to ensure the budget deficit will be in line with the IMF-agreed target) are
being discussed with the fund. She also expressed her hope that the next
tranche will be agreed upon soon.

Markarova also confirmed the ministry’s plan to tap
the Eurobond market this year, commenting that “the market will tell” the exact
timing of a placement.

Recall, Ukraine has implemented two of the four items
on the To Do list declared by IMF Managing Director Christine Lagarde in IMF’s June 19 press release,
while still failing to agree on a revision of natural gas rates for households
(which is being discussed with Ukraine’s PM) and on Ukraine’s state budget (discussed
with MinFin).

Alexander Paraschiy: While there
is no doubt that MinFin will be able to agree with the IMF staff on measures to
ensure a limited deficit of Ukraine’s state budget for 2018, the discussions on
the gas issue seem to be much tougher. According to Interfax-Ukraine, the
government has offered to the IMF at least eight different approaches to change
residential gas pricing (aiming at a limited increase of prices in the near
term), but to date none of the approaches has satisfied the IMF. So far, we
share Markarova’s optimism that the IMF’s next tranche (and the last one under
EFF program) will be agreed upon soon, while our optimism is now weaker than a
couple of weeks ago.