On Jan. 8, the International Monetary Fund released a 111-page economic report on Ukraine, following the approval of a 14-month stand-by agreement on Dec. 18. Under the new aid program, Ukraine is scheduled to receive a total of 2.8 billion special drawing rights ($3.9 billion) worth of IMF financing.
“Ukrainian authorities have been able to restore macroeconomic stability and growth following the severe economic crisis of 2014–15, however, efforts to create a more dynamic, open, and competitive economy have fallen short of expectations,” the report reads.
In 2019, Ukraine will be forced to pay off $1.8 billion of foreign debt, with the country’s external and publicly guaranteed debt equating to 65.2 percent of Ukraine’s gross domestic product, or $82.5 billion, according to the IMF.
The organization has stated that a new stand-by agreement must anchor Ukraine’s economy during the election year and until a new government is formed in late 2019. The country received $1.4 billion on Dec. 18, with two additional $1.3 billion transfers will be released after the completion of semi-annual reviews on May 15 and Nov. 15, according to the fund.
The program is designed to continue the ongoing fiscal consolidation to decrease public debt, further reducing inflation, while maintaining a flexible exchange rate, strengthening the banking system, while promoting asset recovery and reviving bank lending, additionally advancing reforms, particularly, improving tax administration and governance.
The previous agreement between Ukraine and the IMF was terminated prior to its official expiration date in March. The economic benchmarks under the so-called Extended Fund Facility, signed in 2015, were largely not met by Ukraine, with the country severely underperforming. “Only three reviews were completed under the EFF arrangement, instead of the originally planned 15,” the report states.
Ukraine’s real GDP is yet to reach 2014 numbers, while inflation and unemployment remains higher than expected.
The IMF has worsened Ukraine’s GDP growth forecast to 2.7 percent in 2019, from the previous 3.3 percent. The inflation rate will be 7.3 percent this year, the IMF forecasts. The organization also forecasts that 8.6 percent, or 3.6 million Ukrainians will remain without a job in 2019.
