IMF approves new program, $2.1 billion first installment underway

UKRAINE - In Brief 10 Jun 2020 by Dmytro Boyarchuk

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Finally, the IMF approved an 18-month $5 billion Stand-By Arrangement for Ukraine. The first installment is very generous – $2.1 billion – reflecting the emergency from the COVID-19 pandemic. The next payments presumably will be equally distributed among four installments. We should wait for the Memorandum to see the list of prior actions for the next review. But from press release we can see the Fund demanding "recovering the costs from bank resolutions" i.e., the IMF anticipates Ihor Kolomoyskiy compensating for Privatbank loses. Probably, this will be the most challenging task for President Zelesnkiy to deliver on. Remarkably, Ms. Kristalina Georgieva, Managing Director and Chair of the IMF, mentioned at her address that “uncertainty about the direction of economic policies remains substantial”. This formulation is very strong for Fund communications. Put it differently, the IMF stated openly that Ukrainian authorities are quite hectic in their moves and, to a large extent, remain unpredictable for western partners. The current macro-economic situation is far from being desperate. The trade balance switched into a surplus, the hryvnia strengthens, inflation slows. If no aggravation on a macro-level happens, further progress with new IMF program might be overcomplicated. Kolomoyskiy and his allies are actively demonizing the IMF and the very cooperation. Polls report 46% of Ukrainians are against cooperation with the Fund. The “no default” camp won the last round to large extent on the back of a scary story from the global economy. If the storm eases or Ukraine does not feel the pain of crisis, it will be difficult to sell on a political level why we should keep comp...