Ukraine may never have been so close as it is now to persuading the International Monetary Fund to resume a crucial $2.6 billion loan program, which was frozen seven months ago, government officials and analysts said.
An IMF delegation, which is scheduled to arrive in Kyiv on April 6, is to spend more than a week examining implementation of key structural reforms, whose sluggish progress led the fund to suspend aid to Ukraine last September.
The delegation, led by a newly appointed chief of mission to Ukraine, is also expected to review preliminary results of an audit of central bank operations with earlier IMF loans, which the fund alleges were misused.
In February, the IMF-Ukraine relations were shattered by allegations that the National Bank had lied to the fund about the size of its reserves, using risky operations to exaggerate them.
That eventually led the IMF to disburse the loans it otherwise would have withheld, the fund said last month.
The controversy has put Ukraine into the international spotlight as IMF critics in the West – especially in the United States, the IMF's biggest shareholder – exploited the subject to demand tighter controls over future loans to borrowing countries.
Refusing to acknowledge the allegations, the government asked international auditors PricewaterhouseCoopers in February to check the National Bank transactions in question.
Officials indicated this week that the audit, whose preliminary results would be made public in the following days, uncovered no major violations.
'There'll be no surprises in it for Ukraine,' said Cabinet spokeswoman Natalya Zarudna.
In another indication of a positive outcome for Ukraine, Prime Minister Viktor Yushchenko said the government had sufficient arguments to raise the issue of releasing new loans to the visiting mission even before the final results of the audit were released.
'I believe it will be enough to start a dialogue and resume aid,' Yushchenko said.
Analysts also were optimistic about the near resumption of IMF aid, but said Ukraine's severe debt problems were more likely to play a role in the fund's decision.
'[The IMF] will disburse a tranche that will simply be transferred from one account in Washington to another to refinance [Ukraine's] debt [to the fund],' said Andriy Nikitchenko, credit analyst in Commerzbank.
'I don't see a reason for them to let Ukraine default or have other financial difficulties – neither the [U.S.] State Department, nor the IMF will gain anything from it.'
Although Ukraine recently won foreign investors' agreement to reschedule payments on $2.6 billion of commercial debt falling due in 1999-2000, the country's debt burden remains heavy.
Ukraine has to pay off $936 million to the IMF and $177 million to the World Bank this year alone, and $696 million and $258 million, respectively, in 2001. The National Bank already has paid off $179 million of the IMF debt since Jan. 1 from its meager reserves, presently at about $1.1 billion.
Debts to the IMF and the World Bank cannot be rescheduled, and defaulting on them would deal a severe blow to a country's international image, something Ukraine will do everything to try to avoid, analysts said.
'They're afraid not to pay off the IMF debt, because relations with the IMF define relations with the world community,' said Hlib Vyshlinsky, economist at the independent International Center for Policy Studies in Kyiv.
'Refusing to pay would be making a political statement. I don't think the government is even considering this variant,' Vyshlinsky said.
Other analysts said the West's sympathy for Ukraine's new reformist prime minister, which he earned over years of active communication with foreign lenders at his previous job as the head of the National Bank, would also play into Ukraine's hands.
'They all like Yushchenko, and if they let him go, a less liberal figure will come along,' Nikitchenko said.
Ukraine also needs the resumption of IMF aid to be able to approach the Parish Club of sovereign creditors about restructuring $500 million in debts due this year.
Government officials have recently made these intentions public, but said the talks could not start while the IMF aid was still on hold.
The IMF mission arriving April 6 will be led by the newly appointed chief IMF negotiator with Ukraine, Julian Berengaut, who got the job just three days prior to the visit.
Berengaut, who previously led IMF negotiations with Kazakhstan and the Baltic states, replaced Mohammad Shadman-Valavi, who was rotated to another job several months prematurely after serving in the post for three years.
Ukrainian media have speculated that Shadman-Valavi's early transfer might have been linked to the controversy over Ukraine's alleged misuse of IMF funds.
