IMF clarifies To Do list for next Ukraine loan tranche

IMF Managing Director Christine Lagarde was “very
encouraged” by Ukraine’s adoption of the law on June 7
creating the High Anti-Corruption Court (HACC), the fund said in a June 19
press release. In a call with Ukrainian President Petro Poroshenko on June 18,
Lagarde commended him “for his leadership that enabled the approval of the
law, and welcomed his intention to make the court operational by the end of
this year,” the press release said.

The IMF’s release also included a list of future actions
from Ukraine that the IMF wants in order to approve the next loan tranche.
First, the parliament needs to adopt the law setting the technical conditions
to establish the HACC (not addressed by the law adopted on June 7). Moreover,
parliament needs to amend the June 7 bill “to restore the requirement that the
HACC will adjudicate all cases under its jurisdiction,” the IMF wrote.

HACC is not designated to review appeals in corruption
cases that are already being considered by Ukraine’s regular courts, based on
the adopted law, meaning that defendants in current corruption cases will be
able to avoid the HACC when it’s established.

In addition to requirements related to HACC, Lagarde mentioned
issues “related to gas prices and the budget that are critical to allow the
completion of the pending review under Ukraine’s IMF-supported program.”

Alexander Paraschiy: Lagarde has
demonstrated that the IMF is well aware about all the details of HACC issue, so
the Ukrainian government won’t be able to delay the legislation changes. We
expect both bills will be
approved by June 21. The government has yet to give any clear
signals on implementing the IMF’s other requirements, namely hiking residential
natural gas prices and taking measures to ensure that this year’s budget
deficit won’t go beyond plan. The IMF also hasn’t mentioned progress on these
issues.

We continue to view securing the next IMF loan tranche
as the key precondition for Ukraine’s financial stability for the next two
years. Therefore, we continue to expect that Ukraine’s power brokers will make
the efforts to secure the tranche by end-July.