IMF concludes Ukraine visit, vows further dialogue

An IMF mission concluded a two-week visit to Ukraine on April 10 – its second this year – without reaching a loan agreement, but reporting progress and a commitment to further talks. “The key building blocks of a new program would be measures to reduce Ukraine’s fiscal and external current account deficits, and energy and banking reforms,” said mission chief Christopher Jarvis, as reported by the IMF web site. “The mission made good progress in discussing these issues, and our dialogue will continue in the coming weeks.” The prior day, the Ukrainian government raised USD 1.25 bln from a 10-year Eurobond placement.

Alexander Paraschiy: The outcome of the negotiations is in line with our expectations. The IMF is demonstrating it won’t provide a loan without strong commitments from the Ukrainian government. At the same time, Ukrainian authorities don’t see any reason to engage in painful policies when they have an alternative to the IMF loans for the time being. Eurobonds are more expensive than the IMF money but when considering the political price for the IMF money, then tapping the market for money becomes much more preferable for the administration of President Viktor Yanukovych.

Against this background, we do not expect any real progress in the IMF negotiations until Ukraine faces problems with Eurobond placements and is forced to turn to the IMF.