Ukraine may try to refuse cooperation with the International Monetary Fund (IMF) during the electoral cycle 2023-2024, analysts at Bank of America (BofA) believe.
According to the BofA Global Research report, which is owned by Interfax-Ukraine, analysts believe that it may be extended to 2022 “given limited progress.”
“However, we also think that the Ukrainian authorities may try to ‘graduate’ from reliance on IMF financing during the next electoral cycle in the second half of 2023 – the first quarter of 2024,” the analysts said in the report.
According to the report, the authorities may be open to the idea of a new program after the elections as part of broader cooperation with the West, but may prefer not to be bound by IMF conditionality and the usual implementation problems during the electoral campaign.
According to BofA, this may lead to a period without an active IMF program, although some form of cooperation will likely remain in place in any scenario.
The next Verkhovna Rada elections are planned for October 2023, followed by presidential elections in March 2024. This leaves 2022 as the remaining window for continued close cooperation with the IMF, BofA believes.
“We think the extension of the current SBA program [under the stand-by arrangements] for another year or so is the most likely scenario. The extension may allow Ukraine to roll over at least part of its nearly $3 billion in maturities to the IMF in 2021-2022,” BofA said in the report.
Ukraine’s ability to withhold official funding is likely to directly depend on fiscal consolidation in 2022-2023.
At the same time, as noted by BofA, a flexible approach to fiscal policy is likely to mean the need for IMF financing even during the electoral cycle.
Although Ukraine must fulfill a number of conditions in the current program of the Fund, analysts still believe that Ukraine will be able to pass the first test and receive the first tranche in July-September 2021.
