Ukraine, IMF to begin talks on long-term credit agreement (02/01/98)

Ukraine, IMF to begin talks on long-term credit agreement

by Yaro Bihun
Special to The Ukrainian Weekly

WASHINGTON - Ukraine expects to sign a multi-billion-dollar, long-term credit agreement with the International Monetary Fund to support Ukraine's economic reform program.

Vice Prime Minister Serhii Tyhypko, who headed a high-level Ukrainian economic delegation that conferred with the IMF here on January 22, said the two sides agreed to begin preparatory talks on the subject in early February.

"We would like to see the program prepared in two months and signed in April," he said at the conclusion of his two-day visit on January 23.

His delegation, which included Finance Minister Ihor Mitiukov and National Agency for Reconstruction and Development Chairman Roman Shpek, also met with officials of the World Bank and the Clinton administration.

The long-term IMF credits would be in the form a three-year Extended Fund Facility (EFF) of close to $3 billion. If approved, it would be distributed to Ukraine on a month-to-month basis, provided the government adheres to the IMF's reform guidelines. Currently the IMF's credit assistance of $542 million is in the form of a "stand-by" agreement, which is also disbursed on a monthly basis.

In talks with the IMF, the Ukrainian delegation also made a case for releasing the next tranche of stand-by credits for Ukraine. Indeed, a few days later, on January 28, the IMF board of directors voted to disburse the tranche, amounting to $49 million.

Since signing the stand-by agreement with the IMF in August 1997, Ukraine has not been receiving the monthly tranches regularly. As Finance Minister Mitiukov explained, in December 1997 Ukraine received the tranches for the previous two months, and it missed the December disbursement.

With the January 28 release, an IMF spokesperson said, Ukraine is up to date on stand-by disbursements.

Mr. Tyhypko said his optimism about receiving the next stand-by credits and reaching agreement on the EFF long-term credits is based on a number of recent actions taken by the Ukrainian government with respect to its fiscal policy and structural reforms, among them:

presidential decrees on budget deficit reductions and privatization;
timely passage by the Verkhovna Rada and signing by the president of the nation's budget (for the first time since independence it was ready on time, and with the lowest-ever projected deficit); and
establishment of the 1998 currency exchange corridor for the hryvnia at between 1.85 and 2.25 hrv to the U.S. dollar.

At the World Bank Mr. Tyhypko and his delegation focused on three World Bank-financed projects in Ukraine. He said it was agreed that much progress was made in two projects that deal with the development of agriculture and support of entrepreneurship. The third project discussed is in the energy sector.

The Ukrainian delegation also had talks with senior officials at the National Security Council, and the departments of the Treasury, Commerce and State.

"In general, we can say that we are satisfied with the results of this visit," Mr. Tyhypko said, adding that within a few days a large American delegation will arrive in Kyiv for the next round of discussions of the trade and investment committee of the U.S.-Ukraine Binational Commission, known as the Kuchma-Gore Commission.

Asked whether corruption and foreign investment problems, which seemed to dominate previous bilateral economic talks between Ukraine and the United States, were again among the subjects discussed with U.S. officials, Mr. Tyhypko replied that the issue was not discussed this time.

"Over the last half year we have done much to resolve these issues," he said, noting that the government stopped purchasing grain, made the natural gas distribution market more competitive and transparent, and reformed its privatization program.

"As a result of these steps, in my opinion, the level of corruption has declined in Ukraine," Mr. Tyhypko said.

"But we are far from calling our work complete," he added. "About a month ago, together with the World Bank, we held a major seminar on corruption. And we shall continue our efforts."

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