IMF mission to visit Ukraine Sept. 6 to discuss financial assistance

An IMF mission will visit Ukraine on Sept. 6-19 “to
discuss recent economic developments and policies,” said an Aug. 13 IMF press release,
citing Goesta Ljungman, the fund’s resident representative in Ukraine. “The
mission will also discuss next steps, including financial assistance from the
IMF in support of policies to maintain macroeconomic stability and keep the
economy on a path toward sustainable and inclusive growth,” Ljungman said.

Ukraine’s Acting Finance Minister Oksana Markarova
commented that the mission’s visit is “evidence of good dialogue” between
Ukraine and the fund. The ministry “will work together with the IMF to reach a
positive outcome of the mission, which upon completion will not only result in
NBU reserves increasing, but also unlock funding on a preferential terms with
the use of the World Bank’s policy-based guarantee in the amount of USD 800 mln
and also 1 billion Euro in EU macro-financial assistance,” Markarova stated.
The governor of Ukraine’s central bank, the NBU, commented that the visit “is a
step towards reducing uncertainty about future developments in the Ukrainian
economy and improved expectations of market participants.” The nearing
prospects of IMF financing will have a positive impact on Ukraine’s currency
exchange market, the NBU commented in its press release.

Alexander Paraschiy: The visit’s
scheduling is indeed a good signal for expectations about Ukraine’s short-term
debt sustainability and the stability of the Ukrainian currency. The visit
itself does not mean Ukraine has resolved all the outstanding issues for the
next IMF tranche (it seems that the issue of natural gas prices remains unresolved),
but it definitely increases the likelihood of reaching a deal.

The timing of such an announcement (during the
traditional recess of the IMF board) is a bit unusual and might be related to
the IMF’s wish to help the stability of the Ukrainian currency against the
background of weakening neighboring countries’ currencies (the Turkish lira has
lost 28% vs. the U.S. dollar since the beginning of August, while the Russian
ruble has lost 7%).

Any positive news from the IMF will add some stability
to the Ukrainian hryvnia, but it will not prevent its seasonal weakening, which
usually starts in August. So far, the Ukrainian currency has lost only 2% since
the beginning of August, remaining among the most stable in the region despite
the Russian military aggression and IMF uncertainty.