Ukraine is in the active negotiation stage with the IMF concerning its current stand-by arrangement (SBA) loan programme, Finance Minister Serhiy Marchenko told a television news network on January 28. He said the IMF’s mission to conduct the first review under the programme has been extended for another 7-10 days. He expressed his hopes the Ukrainian side would be able to finalise a memorandum with the fund and would “understand clearly what commitments we can make.” He added that the question on the timing of a new IMF tranche is secondary, while “the main thing is that Ukraine is gradually fulfilling all its commitments.” 

Marchenko also confirmed that the IMF was concerned about the government’s decision to introduce a price cap on natural gas for February-March. While the IMF understands the importance of interim price caps to protect consumers, the fund is asking for a clear model so that such a situation doesn't repeat itself in the future, Marchenko said.

Recall, the IMF mission to conduct the first review under the IMF’s SBA loan programme started in late December. Ukraine should have passed the second review and received the third tranche in December 2020, according to the initial schedule of the SBA programme for $5.2bn, approved in June 2020.

“We agree with Marchenko’s comments that it’s more important to stay within the IMF programme than to talk about the timing of the next tranche. At the same time, its's disturbing that Ukraine has yet to agree to its commitments under the programme, meaning there are some issues that are disturbing the fund. And we're confident gas pricing is definitely not the worst among them. This is in line with our view that the probability of Ukraine securing the next tranche in 1Q21 is less than 50%. Moreover, it looks wiser now to talk about the likelihood of the next tranche arriving in 2Q21, which we view as likely,” an analyst at the Kyiv-based Concorde Capital brokerage said in a research note.