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attempt to rescue the situation, which has obviously failed.
“The National Bank of Ukraine (NBU) has concluded a series of constructive high-level meetings with the International Monetary Fund (IMF) in Washington DC. For the NBU Governor Kyrylo Shevchenko it was the first visit to the IMF since assuming his role in July 2020,” the NBU said in a statement emailed tobne IntelliNews.
“During the meetings, Governor Shevchenko reaffirmed the NBU’s commitment to its independence, as well as the continued implementation of its reform agenda and conditions laid out by the IMF in relation to its current funding to Ukraine. The meetings provided the opportunity to discuss the Covid-19 economic crisis, monetary policy and progress in Ukraine’s financial and anti-corruption reform agenda. The NBU met with senior IMF officials including Head of the IMF’s Mission in Ukraine Ivanna Vladkova-Hollar, Executive Director Paul Hilbers and Director of the IMF’s European Department Alfred Kammer,” the NBU added in an attempt to put an upbeat spin on the trip.
But the talks were obviously painful. Shevchenko listed three issues that are being currently discussed between the IMF and the Ukrainian government including: the decisions of the CCU; the 2021 draft state budget; and the independence of the National Bank.
“If the ways to resolve the issues are being worked out and we are moving ahead from both sides, then I am an optimist – Ukraine has all the chances to host the IMF mission by the end of this year,” Shevchenko said.
An IMF assessment team was due in Kyiv over the summer, but failed to come. No team has been in the capital now for eight months and tranches cannot be released until the assessment team has done its work.
The government still has some wiggle room but its reserves are painfully low.
Ukraine’s gross international reserves dropped 1.5% month on month, or $0.4bn, to $26.1bn in October after declining 8.7% m/m in September, the NBU reported on November 6. That is more than the minimum three months of import cover economists say is the minimum a country should have, but the margin is small.
Moreover, up to $10bn of financing from other donors such as the EU and the World Bank are tied to the IMF deal and also wont be released until the IMF sign off on Ukraine’s compliance to its terms.
“This is a sobering statement from the NBU head, which means that not only is an IMF tranche unlikely (or impossible) in 2020, but it's optimistic even to expect this year an IMF mission to discuss the tranche. This is in line with our base-case scenario of no IMF tranche in 2020, meaning IMF-related financing of Ukraine’s 2020 budget deficit (from the fund, the EU and the World Bank) for a total amount of up to $2.5bn won’t arrive this year,” Alexander Paraschiy of Concorde Capital said in a note. “Therefore, the only viable way for Ukraine to try to fill its budget gap without such money is a massive issue of international Eurobonds. As soon as it becomes apparent to the government that no IMF-related money will come soon, it will be high time for Ukraine to prepare for the new bond issue.”
7 UKRAINE Country Report December 2020 www.intellinews.com
