IMF Reaches Staff-Level Agreement on $5 Billion Ukraine Loan
(Bloomberg) -- The International Monetary Fund took a big step toward restarting a $5 billion loan to Ukraine after the eastern European country convinced the lender it’s serious about reforming its economy.
Following a virtual review of the government’s progress, the Washington-based fund said Monday that it had concluded a staff-level agreement to unlock the financing, which has been frozen for more than a year because its terms weren’t met. That will now require sign-off by the IMF’s board, planned for November.
A six-month extension to the aid program, which is vital to investor confidence and is currently due to expire at the end of 2021, was also agreed on. Ukrainian bonds pared losses.
“An IMF mission team and Ukraine’s authorities have reached a staff-level agreement on an updated set of economic, financial, and structural policies to help address the economic and health crisis caused by Covid-19, while maintaining macroeconomic and financial stability, reducing vulnerabilities, and tackling key obstacles to private investment,” the fund said in a statement.
Ukraine, which is still grappling with the pandemic amid one of Europe’s slowest vaccination campaigns, stands to get a disbursement of about $700 million. It’s so far only received one tranche from the loan, which was sealed in mid-2020.
The IMF said goals of the extended program include sustainable fiscal policy, safeguarding central-bank independence, tackling corruption and “reducing the role of the state and vested interests in the economy to improve the business environment, strengthen corporate governance, attract investment and raise the economy’s potential.”
The central bank has been a particular focus after last year’s abrupt departure of its governor complaining of political meddling. His replacement, picked by President Volodymyr Zelenskiy, has caused controversey for upsetting the team he inherited, prompting several waves of departures.
Legislation sought by the IMF, including on governance at the central bank and on the independence of the anti-graft agency, will be debated Tuesday in parliament, according to a spokeswoman for the ruling party.
Zelenskiy, already in the midst of overhauling his government and senior parliamentary leaders, is seeking to replace the current central bank governor, according to three people familiar with his plans.
The resumption of IMF aid would follow the transfer in August to Ukraine of $2.7 billion in Special Drawing Rights as part of a global allocation of to ease the financial pain from the pandemic.
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