IMF stresses need for reform, delays next mission visit until October

The next mission from the International Monetary Fund to Ukraine is scheduled to visit in late October to continue discussions on the second review of the USD 16 bln standby loan program, vs. next week as announced earlier this month, according to a statement released yesterday by David Lipton, special advisor to the managing director of the IMF. The announcement followed a meeting between Lipton and Ukrainian Finance Minister Fedir Yaroshenko and Fuel & Energy Minister Yuriy Boyko in Washington on Tuesday. Lipton said he stressed the importance of strong policies and reforms to overcome delays and complete the second review. The IMF green lit the last USD 1.5 bln tranche in December 2010, which brought total disbursements under the program to USD 3.4 bln. A scheduled USD 1.5 bln tranche was to have been disbursed in March, with the entire amount being directed to the central bank. Brad Wells: The announcement has negative implications for Ukraine, with the resumption of the IMF loan program viewed widely as a key backstop for the government. The delay implies Ukraine will not see any further loan tranches until at least the end of 2011 or early 2012. We are doubtful of the political will for difficult reform this fall, as this summer the government has been taking a tentative approach with its polling numbers dipping (Yanukovych’s approval ratings plummeted to 11.3% in April vs. 40.9% a year earlier), protest fever already brewing after the imprisonment of opposition leader Yulia Tymoshenko, and October 2012 parliamentary elections moving closer and closer.