The International Monetary Fund has approved a new $3.9 billion loan agreement for Ukraine – a small victory for President Petro Poroshenko ahead of the presidential election next year.
The fund’s decision, announced on December 18, includes a first installment of $1.4 billion that is expected by December 25. The fund’s board said decisions about the next remaining two installments would come in May and November.
Also on December 18, the World Bank announced a $750 billion loan guarantee to help Ukraine raise an estimated $1 billion in debt on international markets.
IMF aid had effectively been frozen since April 2017 due to the country’s sputtering efforts to implement major economic reforms and tackle corruption. That included overhauling the governance structure and payment systems for the state-owned gas company, Naftohaz.
“Such decisions that come from leading world financial institutions ensure stability of our progress and strengthen resilience of Ukraine against severe internal and external challenges,” President Poroshenko said in a statement.
The IMF loan agreement “will provide an anchor for the authorities’ economic policies during 2019 and focus on maintaining macreconomic and financial stability,” the fund said in a statement.
It said the program would focus on priorities including reducing public debt and inflation, reviving bank lending, and “advancing a focused set of structural reforms, particularly to improve tax administration, privatization, and governance.”
The prospect of securing more IMF loans has allowed the Ukrainian government, which must service a rising debt burden next year, to seek new debt on world markets.
It also opens the door for the European Union and other foreign donors to provide more aid.
The World Bank suggested the loan guarantee it announced is aimed in part to support economic reforms and efforts to tackle problems that throw up barriers to economic progress, such as corruption.
“Overall, the reform program… addresses structural bottlenecks and sends a signal to investors about Ukraine’s ability to sustain reforms and address macroeconomic vulnerabilities ahead of the 2019 elections,” said Satu Kahkonen, World Bank country director for Ukraine.
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