IMF sets out conditions for next loan; September current account balance improves; FDI picks up, debt outflows moderate; Ukraine harvests 43.3 million tons of grain.
IMF sets out conditions for next loan
The International Monetary Fund’s mission to Ukraine completed its two-week visit to Kyiv earlier this month, without recommending immediate disbursement of the next loan tranche out of the fund’s $16.5 billion lending program. The IMF said a positive decision is conditioned on Ukrainian authorities abolishing recent legislation that hiked the minimum wage and other subsistence salaries. The fund did not name its other conditions. Given the poor state of Ukraine’s public finances, namely the sharp contraction in budget revenue amid a deep economic decline, the government is very likely to act fast to meet the IMF’s latest requirements. At the same time, many analysts do not expect the IMF to hold off on Ukraine for long, given the country’s worse-than-expected economic malaise and the risk of it triggering a spillover effect regionally. Having lent almost $11 billion to Ukraine over the past year, the IMF has so far proved very lenient to the country despite its failure to meet a number of conditions attached to the fund’s ongoing lending program.
September current account balance improves
The National Bank of Ukraine confirmed Ukraine’s current account ran a $97 million surplus in September, improving from a small deficit in August thanks to a better foreign trade balance and bringing the January-September deficit to $1 billion (versus a gap of $9.1 billion over the same period in 2008). The merchandise trade deficit more than halved in September, to $300 million, as exports rose by 16 percent to $3.8 billion compared to August while imports inched a mere 4 percent higher to $4.1 billion due to lower gas imports. However, exports of Ukrainian goods are set to decline marginally in the coming months on weaker foreign demand for steel, pushing the current account balance back into the red. For the full year, Ukraine is expected to post a current account gap of $1.4 billion, a vast improvement over a deficit of $12.9 billion recorded in 2008.
FDI picks up, debt outflows moderate
Foreign direct investment in Ukraine picked up in September to $800 million from $100 million in August, the highest monthly inflow since the beginning of the year, bringing January-September FDI to $3.3 billion (down from $8.9 billion over the same period a year ago). Last month’s increase in FDI was likely attributable to a $500 million share capital increase at Russian-owned Prominvestbank. On another positive note, outflows of debt capital from Ukraine narrowed sharply in September to $500 million on a net basis (from $1.6 billion in August) as domestic companies and banks succeeded in attracting new foreign debt while repaying their earlier liabilities. For example, commercial banks repaid $800 million of long-term liabilities but managed to raise $500 million of short-term debt last month. The deficit on Ukraine’s financial account thus narrowed to $1.4 billion in September from $2.5 billion in August.
Ukraine harvests 43.3 million tons of grain
Ukrainian farms harvested 43.3 million tons (Mt) of grain by bunker weight (before cleaning and drying) from 14.6 million hectares (Mha), or 94 percent of the total planted area, as of October 23, reporting an average yield of 3.0 tons/hectare (down 15 percent year-on-year). Farms harvested 21.7 Mt of wheat, 12.7 Mt of barley and 5.6 Mt of corn. The total grain harvest this year is expected to reach 45-46 Mt by bunker weight, implying a net-weight output of 40-41 Mt (down 15-17 percent year-on-year). Additionally, local farms have already planted 7.5 Mha with winter wheat and barley (96 percent of the targeted area) and 1.3 Mha with winter rapeseed (103 percent). In total, farms plan to sow 9.1 Mha with winter crops this year, or 12 percent more than in 2008.
