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IMF Says Ukraine Met Criteria For USD1.4 Bln Loan Tranche

July 18, 2014

MOSCOW (Alliance News) - The International Monetary Fund on Friday said that Ukraine can secure the second tranche of its USD17 billion bailout loan as it has met most of the performance criteria.

"The mission has reached understandings with the Ukrainian authorities on the policies necessary for the completion of the first review under the stand-by agreement," IMF Mission Chief for Ukraine Nikolay Gueorguiev said in a statement.

"In this regard, the authorities have committed to take a number of policy actions prior to the completion of the review. As is usual practice, the understandings reached with the authorities are subject to approval by IMF management while the completion of the review is subject to approval by the Executive Board."

The completion of the review would pave the way for the disbursement of nearly USD1.4 billion loan amount. The IMF Mission visited Kyivbetween June 24 and July 17.

"All structural benchmarks for the first review have been met as well, although some of them with a delay," Gueorguiev said.

"This is a notable achievement as the intensification of the conflict in the East means that the program has been implemented in an environment that is considerably more difficult than anticipated when it was launched."

Ukraine's government is fighting pro-Russian separatist movements in the eastern part of the country, following Russia's annexation of the autonomous region of Crimea earlier in the year. In the latest development in the region, a Malaysia Airlines passenger jet, with 298 people on board, was shot down by rebels yesterday near the Russia-Ukraine border, reports said citing the Ukrainian government.

The IMF Mission lowered this year's GDP forecast for Ukraine's economy on the back of the intensification of the political conflict. The lender cut the projection to 6.5% contraction from 5% decline seen earlier.

Further, the IMF said lower revenue collections in the East, higher security spending, and lower-than-expected debt collection by Naftogaz will cause fiscal and quasi-fiscal deficits and financing needs to rise above the programmed path.

The lender also pointed out that Ukraine's net international reserves are under pressure due to higher-than-expected capital outflows and monetization of fiscal deficits.

"The program hinges crucially on the assumption that the conflict will begin to subside in the coming months...a significant prolongation of the crisis would seriously strain their ability to do so without a substantial increase in external support on adequate terms," the IMF Mission Chief said.

"Fund staff will remain in close consultation with the authorities and their international partners as the situation unfolds."

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Source: Alliance News

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