A mission of the International Monetary Fund (IMF) is concluding the first stage of its discussions on a Stand-By Arrangement (SBA) with Ukraine and will return to the country in March, according to Christopher Jarvis, the IMF Mission Chief for Ukraine.
“We have made significant progress toward reaching understanding with the authorities on policies that will bring down the budget and current account deficits, strengthen reserves and create jobs and growth. Important policy issues remain outstanding, and further technical work needs to be completed. We expect the mission to return to Kyiv in March to continue the discussions,” he said in a statement issued on Feb. 12, 2013.
The IMF mission visited Kyiv Jan. 29 through Feb. 12 to discuss economic policies that could be supported by the IMF with the SBA.
According to Jarvis, the IMF forecasts that in the absence of corrective policies, the forecast for 2013 is growth of 0-1 percent and a high current account deficit, which leaves Ukraine vulnerable to shocks.
The IMF says that economic activity sharply slowed in the second half of 2012 as a result of deteriorating trade conditions and uncertainties in the global financial markets. Also in 2012, the current account deficit widened rapidly and the fiscal accounts deteriorated. Large subsidies on gas and heating for households continue to undermine Ukraine’s budget and its balance of payments.
“Ukraine faces serious challenges,” reads the statement. “With better policies Ukraine can achieve better outcomes.”
As reported, Ukraine’s First Deputy Prime Minister Serhiy Arbuzov said on January 14 that Kyiv intended to open a new program of financial cooperation with the IMF worth SDR 10 billion.
The previous Ukraine-IMF SBA, also worth SDR 10 billion, was formally terminated in December 2012.
It was opened late in July 2010, but the country succeeded in getting two tranches worth a total of SDR 2.25 billion ($3.4 billion). The program was frozen at the stage of the second review in the spring of 2011.
For a year and a half, Ukraine had been unsuccessfully trying to persuade the IMF to drop its objections to the government’s subsidizing natural gas tariffs for households until the completion of its gas talks with Russia, but failed.
