The position of the International Monetary Fund (IMF) on negotiations with Ukraine on the resumption of funding remains the same: the Fund is awaiting the formation of a new government and wants to see priorities of its policy.
IMF Spokesperson Gerry Rice said at a press briefing in Washington, D.C., on Thursday that the IMF team was ready to return to Kyiv to continue discussions after the parliamentary elections as soon as the new government is able to decide on its policy priorities.
Ukraine will be able to sign a new program with the International Monetary Fund (IMF) in the amount of $6-8 billion by the end of 2019 and make necessary payments on foreign debt in 2020 and 2021, Raiffeisen analysts predict. In the document, they noted a high probability of obtaining the majority by the pro-presidential party Servant of the People, which was leading in polls with an indicator of 41.5-52.30%, which will ensure the implementation of reforms promised by President of Ukraine Volodymyr Zelensky, due to which Ukraine will be able to receive IMF support.
According to the analysts, even if it fails to independently form the government, the Servant of the People party can form a coalition with Svyatoslav Vakarchuk’s Holos party, which is supported by 5-7% of the respondents.
“Given the commitment of President Zelensky to reforms, the new government will be able to sign a new three-year program with the fund in the amount of $6-8 billion by the end of 2019,” the report says.
Raiffeisen analysts point out that 40% of payments on Ukraine’s gross external debt are in 2020–2021 ($16.8 billion in 2020 and $18.5 billion in 2021), therefore the government needs a new cooperation program with the IMF as soon as possible. “Even given the full rollover of inter-company loans and the refinancing of 50% of corporate credits, Ukraine will have to pay $12.5 billion in 2020 and $15 billion in 2021,” the document says.
The updated macro-forecast of the National Bank of Ukraine (NBU) assumes receiving $2 billion from the International Monetary Fund (IMF) under the Extended Fund Facility, deputy governor of the NBU Dmytro Sologub has said at a press conference in Kyiv.
“We expect that in the fourth quarter the new program is likely to start with the IMF, and Ukraine will receive $2 billion. And we also expect $2 billion in each of the next years as part of the new structural financing program,” he said.
Sologub stressed that such an assessment is an expert commentary. According to him, if the funds arrive a little earlier or a little later, it will not have a significant impact on other macroeconomic parameters, except for international reserves.
The banker also estimated, based on the example of other countries and the size of Ukraine’s quota in the IMF, that the size of the new program could be in the range of $5-10 billion for a period of 36 to 48 months.
“We have no insight, this is our expert assessment,” he said.
Sologub also said that the National Bank laid down in its forecast another entry of Ukraine to foreign markets with eurobonds in the amount of about $1 billion as its expert assessment.
Ukraine could receive a tranche under the Stand-By Arrangement with the International Monetary Fund (IMF) in June, First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova has reported. “Most likely, in June Ukraine may receive a tranche, because if they the IMF mission come in May, they simply won’t be able technically to provide the tranche in May,” she said in an interview with the LB.ua online portal. According to Rozhkova, the first unexpected and unpleasant surprise for the IMF was the cancellation of the article on illegal enrichment in Ukraine, the second one was the situation with the court rulings on PrivatBank.
“Of course, we’ve informed them about the events and that first we need to get the decisions of courts and only after that we will be able to comment on some legal position, the arguments of the courts … As you know, the IMF makes its decisions at a meeting of the executive board. The mission comes to the board, reports on the trip, on the results of the borrower’s work. What will they say this time: look, they reverse the reform?” she said.
The National Bank of Ukraine (NBU) counts on continuation of cooperation of Ukraine with the International Monetary Fund (IMF) after the expiration of the currency Stand-By Arrangement (SBA), according to an inflation report for January 2019 posted on the website of the central bank.
The document, in particular, has the key assumptions for the macroeconomic forecast of the NBU for 2019-2021, including payments to the public sector from donors in 2019-2021 ($6.5 billion from the IMF, $1.6 billion each from the EU and the World Bank), along with the placement of government external loan bonds for $8.5 billion, will allow refinancing most of the payments on external obligations.
As reported, the IMF Executive Board, following a meeting on December 19, 2018, approved a new program of cooperation with Ukraine under the stand-by arrangement. The amount of the 14-month program is equivalent to SDR 2.8 billion, or about $3.9 billion. Some SDR 1 billion (about $1.4 billion) was provided immediately, while the remaining funds will be provided based on the results of the program reviews in May and September 2019. The NBU thus plans to raise some $4 billion from the IMF in 2020-2021.
In addition, at the end of January 2019, the NBU said that it had laid out macroeconomic forecasts for the country to place eurobonds worth $2 billion in 2019. Thus, the National Bank expects an increase in sovereign eurobonds in subsequent years to more than $3 billion.
As reported, Ukraine in October 2018 placed two tranches of eurobonds: $750 million five-year bonds and $1.25 billion 10-year bonds.
The yield on the five-year bonds was 9% per annum, and for the 10-year bonds it is 9.75%.
BNP Paribas, Citi, Goldman Sachs and J.P. Morgan acted as organizers of the issue.
The International Monetary Fund (IMF) Resident Representative in Ukraine Goesta Ljungman has reported on the upcoming visit to Kyiv of experts of the fund to discuss the 2019 draft budget, the adoption of which is a condition for providing Ukraine with funding for the new stand by program. According to Ljungman, the experts will stay in Ukraine on November 4-9.