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framework and the judiciary.
Ukraine has pledged to agree to 12 conditions to receive the next IMF tranche. These structural beacons include: to approve the budget for 2022 with a deficit target of 3.5% of GDP; to abolish concessions in the criteria for state representatives in the management of state-owned banks; to release the results of an audit of funds spent on COVID; to improve the professional level in the field of banking supervision; to adopt a roadmap for bringing PrivatBank and Oschadbank for privatization; to publish reports on proceedings against former bank owners withdrawn from the market in early 2014; to adopt a strategy to recover the assets of bankrupt banks; to inspect the current members of the High Council of Justice; and to appoint the Supervisory Board of Energoatom.
The Executive Board of the IMF completed on November 22 its first review under the Stand-By Arrangement initiated in June 2020, the fund reported the same day.
This will allow Ukraine to receive an SDR 500mn ($699mn) loan tranche under the program. The IMF board also approved Ukraine’s request to extend the on-going program, which originally terminated in December 2021, to end-June 2022.
The IMF listed key commitments that the Ukrainian authorities took under the program: consistent fiscal policy that will preserve mid-term debt sustainability and lower risks “from quasi-fiscal operations, including in the energy sector”; safeguarding central bank independence and inflation targeting; “ensuring banks’ financial health, including through good governance”; “tackling corruption and pushing forward with the implementation of judicial reform”; and “reducing the role of the state and vested interests in the economy”.
Recall, Ukraine had been scheduled to receive in total SDR 3.6bn ($5.1bn) under the current SBA program, split into five tranches and four program reviews, with the fourth having been initially scheduled for October 2021. With the approved tranche, Ukraine will use SDR 2.0bn of the program’s funds.
The event is positive for Ukraine’s image and the outlook of its fiscal and currency stability. The approval of the review without the actual voting for Ukraine’s budget for the next year, which is usually being demanded by the IMF, seems to be a gesture of trust toward the Ukrainian authorities. Hopefully, Ukraine’s parliament won’t let the IMF down and will approve the budget with the agreed upon fiscal deficit of no more than 3.5% of GDP.
Ukraine’s Cabinet approved on November 8 a resolution to take out two loans from Cargill Financial Services International for a total amount of €250mn, it reported the next day. The loan will be taken in two tranches: for three years (at 5.15% rate) and for five years (at 5.85%). Interests will be paid quarterly. Borrowing from Cargill has become a tradition for the Zelenskiy government. Twoloans, €250mn each, were taken out in October 2019 and September 2020. Recall, last year, Ukraine decided in July to attract 3Y and 5Y loans from Cargill at 5.15% and 6.25% rates. This year’s borrowing looks rather expensive for the government, compared to its Eurobond curve. For instance, the 5Y sovereign curve for EUR-denominated international bonds is
33 UKRAINE Country Report December 2021 www.intellinews.com