Ukraine in active talks with IMF on EFF, coronavirus facility

The Ukrainian government is “even more actively”
negotiating with the IMF on an Extended Funds Facility (EFF) loan program these
days, National Bank of Ukraine (NBU) Governor Yakiv Smoliy told local bankers
on Mar. 18. On top of that, Ukraine is in consultations to possibly qualify for
a Rapid Financing Instrument, which the fund initiated recently to aid emerging
market countries in dealing with the coronavirus, Smoliy said, as reported in
an NBU press release. He assured bankers that the results of negotiations will
be “in the coming weeks.”

Recall, on Mar. 4, the IMF reported it has made
available USD 50 bln in financing for a coronavirus response, of which USD 40
bln could be used for lending to emerging market countries and USD 10 bln for
lending to low-income countries.

Alexander Paraschiy: As we
learned from January’s inflation report, the NBU expects the first tranche for
Ukraine from the upcoming USD 5.5 bln EFF program will be about USD 0.6 bln.
This amount apparently hasn’t inspired Ukrainian power brokers, who continue to
stall in fulfilling IMF requirements. And that’s despite them understanding
they need the first IMF tranche to secure immediately a EUR 0.5 bln loan under the E.U.’s MFA-IV program.
Meanwhile, Ukraine’s government and central bank have to repay USD 4.1 bln in
external loans in April-December 2020, and now it looks like refinancing these
amounts on the private market is impossible.

Therefore, boosting multilateral financing for Ukraine
is essential. We expect that Ukraine’s parliament will adopt two bills in April
that will open the window for IMF’s EFF loan, and the IMF will be more generous
than had been expected by Ukrainians in January. In this way, Ukraine will be
able to accumulate most of its funds externally to refinance the upcoming
repayments.