IMF approves disbursement of $1bn tranche to Ukraine

IMF approves disbursement of $1bn tranche to Ukraine
Ukrainian President Petro Poroshenko and IMF Managing Director Christine Lagarde.
By bne IntelliNews April 3, 2017

The International Monetary Fund (IMF) on April 3 approved the release of a $1bn tranche to Ukraine under its troubled $17.5bn aid package, citing the gradual recovery of the economy but calling for deeper reforms and more results against corruption.

This will bring the total disbursements under the IMF financing arrangement to $8.38bn since its inception in March 2015.

“The Ukrainian economy is showing welcome signs of recovery,” David Lipton, the IMF’s first deputy managing director, said in a statement. “Growth is returning, inflation has been brought down, and international reserves have doubled. This progress owes much to the authorities’ decisive policy actions, including sound macroeconomic policies.”

However, “Corruption needs to be tackled decisively. Despite the creation of new anticorruption institutions, concrete results have yet to be achieved,” Lipton said. He  also emphasised the need to accelerate structural reforms and boost investments, and to start in earnest with privatisation and developing a market for agricultural land.

“This is another sign of recognition of Ukrainian reforms!” Ukraine’s President Petro Poroshenko wrote on his official Facebook page on April 3 after the Fund’s board met to discuss the credit programme.

The new $1bn IMF tranche will strengthen the country’s financial stability, the central bank added.

Kyiv is expecting a total of four tranches from the IMF this year in exchange for the government tackling corruption and implementing reforms.

After months of delays, the IMF in March again postponed for two weeks the release of the $1bn tranche while it and Kyiv both assessed the economic cost of the official trade blockade of Ukraine’s rebel-held eastern regions imposed last month.

The National Bank of Ukraine (NBU) said that Fund experts had concluded that the blockade would only have a moderate impact on economic growth and did not threaten Ukraine’s inflation target.

On March 20, however, the NBU revised its 2017 GDP growth forecast down from 2.8% to 1.9% due to the government blockade that followed a de facto blockade of the war-torn Donbas region by war veterans since January.

Poroshenko on March 30 said he expected the second €600mn tranche of European Union macro-financial assistance to Ukraine to be transferred to Kyiv “from the third to the seventh of April”.

Ukraine received the first €600mn loan from the EU in July 2015. The disbursement of the next wire – out of a total of €1.8bn – has now been delayed for more than a year. Kyiv’s ban on timber exports remains the sole impediment to the receipt of the   second tranche.

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