Ukraine could soon receive a $700 million tranche from the International Monetary Fund (IMF) after a staff-level agreement was reached to restart lending under a $5 billion program.
Ukrainian authorities and IMF reached an agreement to review the program on Oct. 18 after the IMF staff team ended a month-long remote reviewing mission of the country’s reforms.
The agreement signed between Ukraine and the IMF paves the way to the fund’s approval for a long-awaited $700 million tranche. The government may also ask to extend the program, set to expire in December, to June 2022, said Ivanna Vladkova Hollar, the head of the IMF staff team in Ukraine.
The new policy of the IMF in Ukraine “will help to address the economic and health crisis caused by COVID-19.” It will also support the financial stability in the country and remove obstacles for private investment, Vladkova Hollar said.
Although the December deadline is close, Ukraine has only received $2.1 billion within the IMF’s $5 billion program signed in May 2020.
Ukrainian authorities expected to receive the second $700 million tranche in August, but the IMF said that the country’s efforts to reform weren’t strong enough.
Some key requirements such as the lifting of a moratorium on farmland sales and measures to protect the nationalization of PrivatBank from its former owner, the billionaire oligarch Ihor Kolomoisky, took longer than expected.
Ukraine has made progress in some areas, including the long-awaited opening of the land market, but the fund still expects more from President Volodymyr Zelensky’s government, especially in implementing the rule of law.
Further lending is contingent on Ukraine executing a number of policies that include financial stability, central bank independence and structural reforms to tackle corruption.
It feels like the IMF cut the Ukrainian side a lot of slack here (given mixed delivery on the anti-corruption agenda, judicial reform and state-owned enterprise governance), but the to-do list will be very long in the staff-level agreement to achieve board approval,” wrote Timothy Ash, the longtime London-based Ukraine analyst.
“So I bet it will be tough to see money released this year still. I wonder if Ukraine was cut some slack because of Nord Stream 2 by Western shareholders here. It should be enough to allow Ukraine’s market access cheaply if it so desires. I am not sure where to place those rumors about (National Bank of Ukraine Governor Kyrylo) Shevchenko getting the chop with the program’s focus on central bank independence.”
