IMF reports active dialogue with Ukraine, but no timing on deal

The IMF is in “very active dialogue” with Ukraine in reaching
agreement on the new EFF loan program that was pre-announced in December, the
fund’s spokesman Gerry Rice told a press briefing on Feb. 13.  The new
program is “subject to approval by our Board and the implementation of a set of
prior actions,” Rice reminded the press, providing no details on these actions.
Neither did he provide any expectations on the timing of the IMF board decision
on the deal. He stressed the key objectives of the new IMF program will be:
strengthening the rule of law and tackling corruption, enhancing competition,
and reducing the role of the state and oligarchs.

Recall, as soon as new Ukraine’s Cabinet was appointed
in September 2019, active dialogue with the IMF on a new EFF program was
launched, with IMF mission visits to Kyiv in September and November, both of which providing no
tangible results. A bit unexpectedly, on Dec. 7, the IMF managing director informed the Ukrainian president
about the preliminary approval of the EFF loan, which she estimated at USD 5.5
bln. The approval was at the level of IMF staff, and its ultimate approval at
the Board level is conditional on the implementation of prior actions by
Ukraine. No list of prior actions has been announced publicly, though from the
IMF’s messages, it was clear that the most critical of them is Ukraine’s
actions aimed at preventing any possible return of the nationalized Privatbank
to its former shareholders.

Alexander Paraschiy: As we wrote this week, parliament’s ability to approve any legislation
related to Privatbank in the nearest two months may be blocked, as the
Verkhovna Rada has been mired in reviewing thousands of amendments to the
farmland market bill, which may continue until late April. If so, the earliest
possible deal with the IMF can happen in May. More realistically, the deal
could happen in 3Q20 when Ukraine’s payment schedule on sovereign debts is most
intensive. While a “no deal at all” case shouldn’t be ruled out, so
far we believe the probability of this scenario is low.