IMF approves initial stand-by agreement with Ukraine.

By bne IntelliNews November 17, 2010
The Mission of the International Monetary Fund has approved the first review of the cooperation program between the Fund and Ukraine. The mission visited Kyiv from Nov 3 to 15 and discussed the first revision of the program in frames of stand by agreement. Following the completion of prior actions by the Ukrainian authorities, the Executive Board of the IMF will consider the review of the stand-by arrangement (SBA) before the end of this year. The completion of the review would release SDR 1bn (about USD 1.6bn), of which USD 1bn would be provided for budget support. According to IMF Mission Chief for Ukraine Thanos Arvanitis, the government remains committed to fiscal consolidation aiming to bring public debt down over the medium term. The IMF forecasts that the deficit of Ukraine's state budget for 2011 will not exceed 3.5% of GDP , IMF Resident Representative in Ukraine Max Alier said. He said that the revenues and expenditures of the national Naftohaz Ukrainy should be balanced in 2011. According to Alier, Naftogaz's deficit stood at 2.5% of GDP in 2009, in 2010 it is expected to reach 1% of GDP, and the task for 2011 is the company's deficit-free balance. In addition, among the tasks of the government the IMF representative named the settlement of problems with VAT reimbursement and further stabilization in the country's fiscal sphere. According to the IMF's Arvanitis, the draft Tax Code is expected to be broadly revenue-neutral in 2011 . He noted that the needed adjustment to achieve the deficit target would be focused on expenditure rationalization, while preserving essential investment projects and social programs for the poorest. In addition, according to the IMF, monetary policy will be reoriented toward price stability and core inflation is expected to continue on a declining trend. The IMF pointed out the stabilization in the Ukrainian banking sector. Ukrainian banks have not yet resumed crediting at the pre-crunch level; however, the process of returning to that level has already been commenced, the IMF noted.

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