The International Monetary Fund refused on Monday to give Ukraine a $50 million installment under its $542 million stand-by loan, demanding proof that the government is serious about straightening out the country's fiscal mess. An IMF delegation that arrived in Kyiv last week left without an agreement on the delivery of the loan tranche, although further talks on reviving the one-year loan agreed last August are expected.
'Discussions … are expected to resume in April,' said an IMF official who asked not to be identified. Ukraine's reform program, launched by President Leonid Kuchma late in 1994, has been slow to take hold, and the cash-strapped country has lately resorted to borrowing on international markets after foreign investors stopped buying its domestic debt.
'The mission is concerned by the fact that the financial position of the government is still fragile,' said the IMF official. 'It is concerned that the mechanisms for public expenditures had not yet improved.'
He said Ukraine needed to strengthen significantly its budget and structural reform program.
In another blow to Ukraine's shaky finances, the World Bank announced Monday it would postpone two loans totaling $200 million. Deputy Prime Minister Serhy Tyhypko had predicted Saturday that the loans would be put on hold as the result of IMF's displeasure.
But a World Bank spokesman said Monday the money was withheld because the Bank has its own concerns about the pace of macroeconomic reform.
A Western economist said the IMF was being tougher on Ukraine after it had been too lenient in Asian countries that were plunged into a financial crisis last year. 'The IMF has been quite patient,' the economist said. 'At other times Ukraine did not fulfill conditions but it got the money.'
Ukraine, which had hoped to receive a long-term, multi-billion Extended Fund Facility credit from the IMF starting this year, has received five of 11 tranche payments totaling about $250 million under the stand-by. Two tranches were delayed last year after Ukraine overshot deficit targets, but the IMF eventually paid them. Ukraine must spend some Hr 8 billion ($3.9 billion) on treasury-bill redemptions this year. The government has announced a privatization push to fill empty coffers, but that has also been slow to get off the ground. The IMF source said that while inflation was low and output appeared to be rising, the treasury bill market was still not functioning.
Foreign buyers, alarmed by tremors on the international financial markets, stopped buying treasury bills last year and have been slow to return, leaving Ukraine with little money to support the hryvna.
Analysts believe the IMF has since been counseling Ukraine's central bank to manage a gradual devaluation of the currency.
(Post staff writer Katya Gorchinskaya contributed to this story.)
