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6.1.2 Budget dynamics - funding
The European Commission announced the disbursement of a €500mn loan tranche to Ukraine under the fourth program of Macro-Financial Assistance (MFA IV) in a November 30 press release. With this tranche, total loans under MFA to Ukraine since 2014 will reach €3.3bn, which is “the largest amount of such assistance directed at any non-EU country,” the commission highlighted. The total amount of financing under the MFA IV program, as approved in July, is €1.0bn, which consists of two equal tranches. The second tranche can be disbursed no earlier than three months after the first one, and no later than 2.5 years after the program’s start. The next tranche will be conditional upon Ukraine’s progress in public financial management, launching the High Anti-Corruption Court of Ukraine, and the continuation of reforms of the social policy, energy and banking sectors, the commission said. The release of the loan will also presumably be contingent on the International Monetary Fund (IMF) signing off on its new deal. A new $3.9bn Stand By Agreement (SBA) was agreed with the IMF in October , but does not go into effect until it has been approved by the IMF board of directors, who are due to meet next week. However, following statements by the IMF last week the it looks like this is a done deal and the first tranche of at least $1bn could be released before the end of this year. Several other multilateral and government loans are tied to the IMF deal and so more money will be released to the Ukrainian government as soon as the crucial IMF deal is inked. However, all the deals come with important strings attached and the release of the monies is not automatic. The EU commission also said it will consider Ukraine’s progress in 12 tasks, according to the signed memorandum. They include adoption of a mid-term plan to reform tax and customs administration overall, simplification of customs clearance, tax evasion enforcement, ensuring a fully functional verification system of electronic declarations, selection of candidate judges to the High Anti-Corruption Court, adoption of anti-money laundering laws, reaching progress in fighting non-performing loans (NLPs) in state banks and improving their corporate governance, and reaching progress in reforming the electricity market, healthcare and social subsidies.
Next year, Ukraine has to repay $15bn in foreign and domestic debt,
Finance Minister Oksana Markarova told reporters on Friday. This high level of debt repayments comes from the debt refinancing of 2014-2015.
Ukraine also has some $6bn of public debt to pay in 2019.
The new IMF deal unlocks $7bn FX financing for 4Q18-2019 for the government from a variety of sources.
With the IMF programme back on track, Ukraine will be able to meet a challenging repayment of $12bn scheduled for this period.
The funding sources include EUR1bn macro-financial aid from the EU, and $0.8bn guarantees from the World Bank, both of which include the key precondition of Ukraine having a working programme with the IMF.
The government will be also able to return to the financial markets for sovereign issuance, in the amount to$1.5bn in 4Q18 and$3bn in 2019.
Ukrainian President Petro Poroshenko has said that the European
45 UKRAINE Country Report December 2018 www.intellinews.com