Zelensky confirms discrepancies between Ukraine, IMF

President Volodymyr Zelensky stated Feb. 22 that
Ukraine and the IMF have some different vision on legislation to reform the High
Council of Justice, as reported by Interfax-Ukraine.

“We agree with some things, and with some we do not.
As a guarantor of the state, I defend the independence of Ukraine,” Zelensky told
an infrastructure forum. He explained that legislative initiatives on the High
Council of Justice, discussed with the IMF, must not contradict Ukraine’s
constitution. He also expects an IMF tranche by the end of 2021, stating that
Ukraine is counting on this money.

Zelensky also complained about lobbyists working
separately with the IMF and telling wrong things, as reported by pravda.com.ua
news site. Therefore, there are no people inside Ukraine helping the government
to reach an agreement with the IMF, the president concluded.

Recall, Ukraine should have passed the first review
and received the second tranche under the IMF Stand-By Arrangement in September
2020, according to the initial schedule of the program for USD 5.2 bln, approved in June 2020.

Alexander Paraschiy: By
complaining about lobbyists, Zelensky once again showed his attitude to the IMF
as a cash machine or parents
giving pocket money to their teenager. The Ukrainian authorities seem to
believe that independent experts, as well as a stubborn position of the IMF
staff, are the reasons for delaying the tranches. Such a belief of Zelensky,
which the cabinet of previous PM Oleksiy Honcharuk tried to debunk, seems to be
fully supported by the incumbent ministers, as well as economic advisors like Tymofiy Mylovanov.

In our view, disagreements about reforming Ukraine’s anticorruption
infrastructure and judiciary system are rooted neither in defending the
country’s independence from western influence, nor in firm statemen’s positions
of the government. The IMF and the local experts branded as lobbyists are well
aware that Ukraine’s top policy makers have their own view of the reforms in
which they want to gain more control over judges and anticorruption bodies.
Therefore, the IMF’s position on such things is unlikely to change and
Ukraine’s ability to manipulate the IMF with these issues is narrow. And so is
the chance for Ukraine to get any IMF tranche soon, provided that the
government will not eliminate the disagreement with the fund on key reforms, or
does not offer new agenda for future cooperation.

Such statements by Zelensky do not add ground to our
base-case scenario, which is that Ukraine will be able to agree with the IMF on
a next tranche in 2Q21.