IMF mission recommends resumption of EFF (09/16/01)

IMF mission recommends resumption of EFF

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Julian Berengaut, mission representative to Kyiv for the International Monetary Fund (IMF), said on September 7 that he would recommend to the financial organization's board of directors that it resume funding Ukraine through the long-suspended Extended Fund Facility.

Mr. Berengaut said his decision is based on the improved economic situation in the country and discussions with the Ukrainian government.

"The mission has established that Ukraine complies with the conditions for resuming financing in keeping with the agreements reached previously," said Mr. Berengaut after a final meeting with Prime Minister Anatolii Kinakh.

The IMF mission head explained that the country needs only to fulfill a requirement that it make public information on the current status of the natural gas sector, a move that is expected shortly.

The IMF executive board is now scheduled to meet on September 20 to finalize the recommendation, in accordance with which Ukraine would receive $375 million to increase the National Bank of Ukraine's foreign currency reserves and to service Ukraine's debt to the IMF accrued in the last six years.

If the board upholds the recommendation, which is expected, it will give the World Bank the needed impetus to approve a separate $250 million loan that it has prepared for Ukraine - credits that were calculated into the 2001 budget. The World Bank, which will meet the same day as the IMF executive board, generally follows the IMF's lead. By receiving approval for the two loans, Ukraine will also raise its potential for private commercial loans from international lenders.

Renewal of the EFF will fulfill a pre-requirement by the Paris Club of creditors as well and allow it to consider restructuring the $580 million debt owed by Ukraine for another 12 years.

Mr. Berengaut said he is satisfied with the draft government budget published last week, which calls for 57.1 billion hrv in outlays and a deficit equal to 1.7 percent of the GDP. He said the numbers are a positive beginning to negotiations for the next tranche of the EFF, also expected to be worth $375 million, which is due for approval at the beginning of November, and in large part will be determined by the type of 2002 budget Kyiv approves and the manner in which it is done.

In 2002 three more tranches each worth $190 million are expected before the EFF runs out in September. After that Ukraine can qualify to receive additional non-monetary aid from the IMF in the form of expert technical consultations.

Ukraine has received $1.14 billion in credits from the international lending organization since its line of credit was opened in September 1998. The money has come sporadically however, because Kyiv has failed to meet IMF requirements on several occasions. The latest tranche has been held up for most of this year as the country attempted to meet the budgetary and administrative reform requirements demanded by the IMF.

| Home Page |