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IMF reaches deal with Ukraine on new $4 bn, 14-month loan
WASHINGTON, Oct 20, 2018 (BSS/AFP) – The International Monetary Fund
announced Friday it had reached an agreement with Ukraine on economic
policies that would unlock a new loan deal that will provide nearly $4
billion.
The new 14-month stand-by loan deal replaces an existing four-year
financial aid package agreed in March 2015 and due to expire in five months,
the IMF said in a statement.
The agreement must be approved by the IMF board, which will come later in
the year after authorities in Kiev approve a 2019 budget “consistent with IMF
staff recommendations and an increase in household gas and heating tariffs,”
a step the government had agreed on but never implemented.
But the deal also stresses the need for “continuing to protect low-income
households.”
Ukraine Prime Minister Volodymyr Groysman had been seeking the additional
financing from the Washington-based lender to help his crisis-hit nation.
Groysman on Friday announced a gas price increase of 23.5 percent to take
effect November 1.
He said the “incredible efforts” of Ukrainian negotiators managed to reach
a compromise with the IMF and reduce the initial demand to raise prices by 60
percent.
“If we are not able to continue cooperation with our international
partners… this could lead to the country being put into default,” he said.
Ukraine has not received any money from the IMF since April 2017, when the
fund released $1 billion for the cash-strapped country to repay loans. It had
received less than $9 billion of the original $17.5 billion package.
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– Economic anchor –
Talks on economic reform measures that would satisfy IMF requirements and
allow the release of further aid had been hung up for months, as the fund
awaited the government’s approval of a budget, pension reform and an anti-
corruption court.
A gas price hike is a sensitive issue for the cash-strapped country as its
pro-Western leadership faces presidential and parliamentary elections in
2019.
The IMF said the new loan “will provide an anchor for the authorities’
economic policies during 2019.”
Building on progress under the previous financing package, the loan will
“focus in particular on continuing with fiscal consolidation and reducing
inflation, as well as reforms to strengthen tax administration, the financial
sector and the energy sector,” the IMF said.
An IMF lifeline helped the country to recover from crises sparked by a
Russian-backed war in the separatist industrial east that began in April 2014
and has claimed more than 10,000 lives.
The loss of industries in the war zone and flight of foreign investors saw
the former Soviet republic’s economy shrink by 17 percent in 2014-2015.
The IMF now forecasts the economy will grow by 3.5 percent this year and
2.7 percent in 2019.
Following the announcement, debt rating agency Standard and Poor’s
affirmed the country’s credit score at “B-” with a stable outlook.
“We expect the new arrangement will aid Ukraine’s efforts to cover sizable
external debt obligations maturing next year, and also help to anchor
macroeconomic policies through the 2019 presidential and parliamentary
elections,” S&P said in a statement.
The IMF loan is also likely to unlock credit from other international
donors, the ratings agency said.
BSS/AFP/HR/0940