You're reading: IMF discusses how Ukraine carrying out Stand-By Arrangement program

The Executive Board of the International Monetary Fund (IMF) on Nov. 11, 2011, discussed the ex post evaluation of the 2008 exceptional access Stand-By Arrangement (SBA) for Ukraine, according to an IMF statement on Friday.

However, the IMF did not give any other details regarding the outcome of the discussion.

According to the statement, in 2002, the IMF Executive Board decided to conduct ex post evaluations of arrangements involving exceptional access to the fund’s General Resource Account. The purpose of these evaluations, which have to be completed within one year of the end of the arrangement, is to provide a critical and frank discussion of whether justifications presented at the outset of the arrangement – including the justification for exceptional access – were consistent with fund policies and to review performance under the fund supported program.

A staff team prepares a report that is discussed with the country’s authorities and presented to the Executive Board for discussion.

A similar report on Hungary’s SBA program, which was also approved in 2008, has already been published by the fund.

As reported, the IMF in autumn 2008 decided to disburse about $17 billion to Ukraine under the Stand-By Arrangement (SBA). Under the 2008 SBA, Ukraine received only three tranches worth almost $11 billion. The first $4.5 billion tranche was given to the National Bank of Ukraine (NBU) in November 2008. The IMF’s second tranche – worth about $3 billion – was extended in May 2009, with those funds being split between the NBU and the government of then Prime Minister Yulia Tymoshenko. The third tranche (worth $3.5 billion) was provided in August 2009 and was at the disposal of the Tymoshenko government alone.

The allocation of the fourth tranche, worth $3.8 billion, was scheduled for November 2009 following the third review of the IMF’s cooperation program with Ukraine. The IMF mission ended its work in Kyiv late in October 2009, but did not issue a positive statement on the completion of the review. The IMF said repeatedly that it expected a consolidated position from the Ukrainian authorities in the question of implementing anti-crisis measures and the adoption of the national budget for 2010.

After the Ukrainian government received the third tranche, it also spent about $2.1 billion through the conversion of Special Drawing Rights (SDR) allocated by the IMF as part of a general allocation of SDRs among all the IMF member countries.

After the presidential election and government reshuffles in Ukraine, the 2008 Stand-By Arrangement was suspended, and the IMF decided to renew its loan partnership with Ukraine in the summer of 2010 through a new stand-by program worth SDR 10 billion (about $15.6 billion). In late July 2010, Kyiv received the first tranche of SDR 1.25 billion under the new program. The IMF decided in December 2010 to allocate a second tranche worth SDR 1 billion.

The program foresaw future quarterly allocation of eight more tranches starting from the middle of March 2011 in case of further successful cooperation.

However, an IMF mission that worked in Kyiv in March 2011 could not recommend to the IMF Executive Board that it approve a new tranche for Ukraine. The IMF had expected Ukraine to approve pension reform and settle the problem of low prices of natural gas for households.

On Nov. 4, 2011, an IMF mission released an announcement after its work in Kyiv from Oct. 25 to Nov. 3, 2011, according to which the mission had taken a pause to carry out additional technical work. Discussions of economic policy in Ukraine are expected to begin again soon.

Ukrainian Deputy Prime Minister and Social Policy Minister Sergiy Tigipko and Finance Minister Fedir Yaroshenko early in November 2011 went to Washington, D.C., in the United States, to hold talks with the IMF, the outcome of which has not been made public.

Ukrainian Prime Minister Mykola Azarov said on Nov. 4 that Ukraine would start working with the IMF on adjusting the cooperation program for after the completion of talks with Russia on natural gas prices, which is expected to happen in November 2011.

Ukraine’s government said that due to the delay in the financing, two tranches of the stand-by loan could be combined, which would help replenish the NBU foreign exchange reserves with about $3 billion.