IMF to consider extending new loan to Ukraine

A delegation from the International Monetary Fund (IMF) will visit Ukraine between Dec. 7 and 17 to consider extending the Ukrainian government a new loan, IMF officials said on Nov. 30. The IMF is interested in introducing a new loan, the Kommersant newspaper reported on Dec. 3, while Ukrainian state officials said they’d be willing to renew the 2010 agreement that allocated USD 15.8 bln, of which USD 3.4 bln was distributed. “The old program can be extended for eight months to August 2013,” said Petro Poroshenko, the Minister of Economic Development. He added that the government is open to drafting a new loan considering “the realities are different between the start of 2010, when the old program was developed, and the global crisis that we’ll be entering in 2013.”

Zenon Zawada: Whether the loan is old or new, Ukrainian officials face difficulty in reaching an agreement with the IMF. The same sticking point that interrupted the first stand-by program after two tranches – higher prices for household natural gas consumers – remains unresolved. Although the Ukrainian parliamentary elections have concluded, introducing such price hikes won’t be any easier for the government considering the significant debt already owed to utility companies and poor economic conditions. The other key IMF demand, loosening the hryvnia-dollar peg, can lead to a faster-than-preferred devaluation and remove one of the government’s key levers on the Ukrainian economy. On the other hand, we expect Poroshenko to propose some creative compromises to these impasses.