IMF mission to return to Ukraine early next year

The IMF technical mission to Ukraine should conclude its work by the end of this week and a new mission to discuss policy on the standby program should return to Kyiv early next year, said on Dec. 14 David Lipton, the IMF’s first deputy managing director, a day after meetings with the president, prime minister and their economic teams. “I was impressed by their vision for an economic transformation of Ukraine, and by their commitment to a decisive, frontloaded implementation of their reform agenda,” he said. The IMF technical mission, led by its head Jerome Vashe, arrived in Kyiv on Dec. 9 and will work until Dec. 18.

Alexander Paraschiy: The current talks seem to have hit some difficulty because the IMF wants more radical reforms, in our view. The IMF and other donors are reluctant to fund extreme fiscal inefficiency and widespread corruption. Meanwhile, the Cabinet is trying to find some balance between austerity measures and protecting sensitive social payments. We expect further talks on the design of the 2015 spending plan, particularly an acceptable deficit.

We are optimistic some agreement will be reached, given that Ukraine’s gross reserves will fall close to USD 7 bln (nearly one month of imports) already in a few weeks and the country badly needs external funding to maintain its solvency in 2015. Once an agreement is reached for the next tranche, we believe the Cabinet’s economic team, particularly its naturalized foreigners, will be ready to execute the painful steps with budget cuts and boosting the efficiency of public spending.