Ukraine hopes for $3bn from IMF by early January, around $15bn over 2015

By bne IntelliNews December 17, 2014

bne IntelliNews -

 

Ukraine's newly appointed finance minister Natalia Jaresko said that she hopes Ukraine can get $3bn from the International Monetary Fund by early January, and that in total Ukraine needs around $15bn in funding additional to its existing IMF standby arrangement.

In comments to the Wall Street Journal, Jaresko said Ukraine could get the urgently needed IMF funds in early January, if Ukraine's parliament in coming days passes a "tough" budget for 2015 and legislates for serious reforms.

Jaresko said that the draft budget for 2015 would be based on a forecast of 0% growth, defying widespread forecasts of a continued contraction in the economy.

The IMF mission left Kyiv at the end of November, saying it would only return in early January. According to media reports, the delay in the IMF's disbursal of the next tranche of a $17bn standby agreement is caused by Ukraine's failure to eliminate the deficit of state energy company Naftogaz, caused by energy subsidies to the population, as well as its retention of a system of extensive tax benefits for the agriculture sector.

Jaresko in the interview became the latest leading Ukrainian politician to call on international donors for additional funding to break what she called the "cycle of distrust". She indicated that the sum of additional funds needed is in the range of $15bn over 2015.

On December 16, both President Petro Poroshenko and Prime Minister Arseny Yatsenyuk told European leaders and experts that Ukraine needs extra financial support.

Jaresko told journalists that Ukraine would manage to pay Russia's Gazprom $1.65bn before the end of the year, as agreed under an EU-Russia-Ukraine agreement signed in Brussels on October 30, with the funds already put aside by Ukraine's National Bank in a special account.  Ukraine's energy company Naftogaz paid Gazprom $1.45bn in arrears on November 4, and made an advance payment for gas of $378m in early December.

Jaresko also said that there were no talks ongoing with Russia to restructure a $3bn Eurobond due in December 2015.  According to reports, Russia could demand early repayment of the bond in March 2015, due to Kyiv's likely breach of conditions restricting its sovereign debt to GDP ratio to a maximum of 60%. Analysts estimate the ratio as having already reached 70%. Russian President Vladimir Putin has said that Russia would not use the option, in order to preserve financial stability in Ukraine.

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