IMF management endorses second Ukraine tranche

IMF management has endorsed the second tranche of its Extended Fund Facility (EFF) loan program with the Ukrainian government, the Bloomberg news agency reported on July 24, citing an anonymous source.  On July 2, Ukraine reached a staff-level agreement with an IMF mission for the second tranche, which amounts to nearly USD 1.7 bln. The meeting of IMF’s executive board to consider approval of the second tranche is scheduled for July 31.

Ukraine has fulfilled all IMF requirements except the debt operation, said on July 23 Gerry Rice, the IMF communications director. He mentioned “good progress” on the debt talks; however, more work is needed for “narrowing the gaps” between creditors and Ukraine’s official position.  So far, no agreement has been reached.

Alexander Paraschiy: The IMF management endorsement means that approval of the second installment is in the IMF pipeline. The wild card for Ukraine receiving the second EFF tranche remains its debt operation. It’s very unlikely the Ukrainian government will be able to reach some agreement with bondholders on debt restructuring this week, but reports of some progress in their talks will be vital for a positive IMF decision, we believe.

A positive signal also arrived from the EU on July 22 when the European Commission dispatched a EUR 600 mln loan to Ukraine.  Since Western institutions closely coordinate their financial support, this decision reflects positive prospects for IMF support.