The executive board of the International Monetary Fund (IMF) on September 14 approved the release of a $1bn credit tranche to Ukraine, ending an almost year-long halt of funding under the lender's $17.5bn bailout package for the country.
IMF Managing Director Christine Lagarde said after the board voted in Washington that Ukraine is showing signs of recovery and improved confidence, attributed to its implemented reforms, sound macroeconomic policies and work to revamp Ukraine's banking system.
“Further progress in fiscal reforms is key to ensure medium-term sustainability,” Lagarde said in a statement, but calling for pension reforms and tax policies to avoid higher deficits, and to restructure state-owned enterprises.
Confirmation of the disbursement came on the same day the cabinet in Kyiv reported GDP growth of 1.3% in the second quarter of this year, compared with 0.1% in the first quarter. In January-July, the amount of capital investments in Ukraine also grew almost 10% year-on-year, Economic Development and Trade Minister Stepan Kubiv said.
Ukrainian President Petro Poroshenko said in a statement that the release of the IMF tranche would help keep the country’s hryvnia currency stable and boost the economy. “The positive decision by the IMF is evidence that the world recognises that reforms are happening in Ukraine, that real and positive changes are happening in Ukraine, and that the country is moving in the right direction,” Poroshenko said.
The resumption of the IMF programme will also unlock other financial support for Ukraine, Poroshenko added, notably $1bn in US-guaranteed; Eurobonds and at least €600mn of macro-financial assistance from the European Union.
The lender had withheld credit tranches since last autumn as Ukraine's political turmoil deepened and authorities in Kyiv increasingly failed to deliver reforms agreed under the IMF's $17.5 Extended Funding Facility agreed in March 2015. So far Ukraine received about $7.6bn.
The new allocation will take place in the next few days, despite earlier Russian threats that as an IMF shareholder it would obstruct the disbursement of the money until the issue of its unredeemed $3bn Eurobond is resolved with Kyiv.
The government is now ready for talks with Russia on restructuring the $3bn debt, due last December, Ukrainian Finance Minister Oleksandr Danylyuk was quoted as saying by Interfax-Ukraine on September 13.
“In line with Ukraine's obligations in its current programme with the IMF, namely on demonstrating ‘good faith efforts’ in negotiations with Russia on the debt issue, Ukraine is ready to enter into further talks on the possible settlement of the debt dispute,” Danylyuk said.
Russian also confirmed possible talks with Ukraine on the debt issue, and Siluanov is expected to meet his counterpart in October with the mediation of Germany.
Kyiv last year introduced a moratorium on the repayment of the $3bn Eurobond, claiming the money was illegally disbursed under Russian efforts to prop up the former Ukrainian regime which collapsed in February 2014.