The Ukrainian delegation is headed to the U.S. to continue negotiating with the IMF, seeking to close the deal on a multi-billion dollar extended fund facility.
Several Ukrainian ministers joined by central bank officials flew to Washington D.C. on Oct. 15 to meet with IMF and World Bank representatives at their annual conference, according to Prime Minister Oleksiy Honcharuk and the National Bank of Ukraine. They will hold a series of working meetings with financial institutions and the banking company Clearstream through Oct. 20.
NBU head Yakiv Smolii and his deputies, Kateryna Rozhkova and Dmytro Sologub, will be part of the delegation.
The new extended fund facility would replace a $3.9 billion standby agreement that expires at the start of January. The size of the potential new loan has been estimated to be anywhere from $5-6 billion to $8-10 billion.
Besides providing urgently needed funding, a successful agreement is the number one factor investors are looking at to gauge the health of Ukraine’s economy and the brightness of its economic future.
Despite Ukrainian officials’ repeated insistence that the loan will be secured before the end of the year, negotiations have reportedly stalled in recent weeks following concern about billionaire oligarch Ihor Kolomoisky’s influence over President Volodymyr Zelensky’s government.
One of Kolomoisky’s main goals is to reclaim control of PrivatBank, the state’s largest lender, which once belonged to him but was nationalized in 2016. A financial audit had found that fraudulent insider lending gouged a $5.5 billion hole in PrivatBank’s ledger, which required a taxpayer-funded bailout to fix.
Rozhkova said to Reuters that the PrivatBank issue represented a “red line” for the IMF.
Tymofiy Mylovanov, the Minister of Economic Development, Trade and Agriculture denied that the talks stalled, writing on his Facebook page that negotiations are ongoing.
An IMF delegation spent two weeks in intensive analysis of Ukraine’s macroeconomic situation in September. The delegation left without closing an agreement and had mixed grades for Ukraine’s performance. The team praised the country’s macroeconomic stability, lower fiscal deficits and restructured banking system, but it criticized Ukraine’s poor rule of law, weak business environment and low rate of growth.
While the team was in Ukraine, a Financial Times article quoted Honcharuk saying he would back a compromise with Kolomoisky over PrivatBank. He later denied making the comment and said that his words were taken out of context. But in the public eye the damage was done, according to multiple banking analysts, officials and lawyers.
At the same time, the house of former NBU head Valeria Gontareva was burned in an apparent arson attack. Gontareva presided over the decision to nationalize PrivatBank in 2016 and told the Kyiv Post that the oligarch was threatening and pursuing her. Kolomoisky declined to comment to the Kyiv Post and brushed off other media’s allegations with a joke.
The billionaire has already scored some important victories in Ukraine. In March and April, two courts ruled that the nationalization of PrivatBank was illegal. Last week, lawyers involved in a key PrivatBank court case in Ukraine told the Kyiv Post that the judge is heavily biased in favor of Kolomoisky, adding to concerns.
It will be up to the Ukrainian delegation to overcome these concerns during the upcoming meetings in Washington.
Separately, the IMF on Oct. 15 improved its outlook for the country, projecting a 3 percent growth in 2020, up from 2.7 percent.
The IMF also expects a decrease in the Hryvnia’s rate of inflation to 5.6 percent by the end of 2020 and estimates that government debt will fall from 57 percent of GDP to 54.3 percent in 2020.
