But analysts say Fund is inching closer to resuming credits
aine left Kyiv on Sept. 22 after a two-week stay, issuing both praise and criticism for the pace of reforms, but stopped short saying if – and when – credits will be resumed.
“As to the possibility of receiving funds before the year’s end, as I said, I do not want to speculate,” Julian Berengaut, head of the mission, told reporters on Sept. 21.
Ukraine has had no fresh credits since September 1999 when a $2.6 billion IMF tranch was frozen amid allegations that the National Bank of Ukraine misrepresented its reserves in order to obtain new credits.
Ukraine had hoped to receive about $900 million from the IMF this year.
IMF officials said the country’s recent economic growth, citing that Ukraine’s economy is growing for the first time since independence. They pointed to structural reforms, a reduction in non-cash payments, a new wave of privatization, reduction of fiscal debts, tax breaks and a decrease in state subsidies for utilities and other services as the driving forces behind reforms.
Still, the mission was wary about the government’s draft 2001 budget, which is heavily dependent upon $1.2 billion in privatization revenues – most of which are expected to come from the privatization of telecom monopoly Ukrtelekom and seven energy distribution companies, or oblenergos.
“We are worried that it is an unrealistic projection,” Berengaut said.
The country’s privatization revenues for the year are now around $1 billion. The figure was originally expected to be $2.5 billion for the year, but officials later downgraded the figure to $1.5 billion.
Berengaut also said that the government should not rush through a proposed new tax code because it needs improvements and that the government should cooperate with parliament and create a “broad basis for reforms.”
Analysts say that while Ukraine has not seen credits this year from either the IMF or other international lending institutions, such as the World Bank, it has managed to pay back about $1 billion in foreign debt on time.
The lack of fresh loans, however, has kept many foreign investors out of the country and has limited the government’s ability to continue reforms, says Khwaja Sultan, a senior adviser at the Harvard Institute for International Development’s Ukraine Macroeconomic Reform Program.
According to First Deputy Prime Minister Yury Yekhanurov, the mission’s task was not to approve or disapprove of new credits, but only to prepare a report that it will submit to the IMF Executive Board by mid-October. The report, he added, will then form the basis for the Executive Board’s decision, which is expected in mid-November.
Yekhanurov, however, wants the fresh loans soon.
“It is important for us that the meeting of the Executive Board is held. When will it be held? Let it be!” Yekhanurov said.
Despite any clear signals from the mission, many analysts believe that fresh loans are not far away.
“There was a difference in this mission from the previous mission earlier this year,” says Ruslan Piontkivsky, a senior economist at the Kyiv-based International Center for Policy Studies. “Ukraine returned almost $100 million to the IMF ahead of time, and the NBU scandal has finally begun to quiet down.
“We are definitely closer to credits,” he said.
Michael Sito, director of sales and trading at Dragon Capital, agrees.
“The mission did support a lot of things very openly, and I think they understand Ukraine has done a lot and deserves the credits some time soon,” he said. “I think you can expect the credits by the end of the year.”
Sito believes that Prime Minister Viktor Yushchenko has done a lot to appease the IMF in the last year and that if the credits are withheld any longer, the IMF will only lose its influence in the country.
“I don’t think there is any way the IMF is not going to support this government because it is the best government Ukraine has ever had,” Sito said.
