Ukraine Sees $19 Billion IMF Credit Agreed In June

KIEV, Ukraine -- An International Monetary Fund mission will visit Ukraine next month for talks on a new credit program that the government hopes the Fund will agree to in June, Deputy Prime Minister Sergey Tigipko said on Thursday.

Deputy Prime Minister Sergey Tigipko.

Tigipko, speaking on his return from a week of talks in Washington with IMF officials, said Ukraine was seeking a $19 billion program though he said the Fund had not given a firm answer on this.

A senior IMF official said on Wednesday that the ex-Soviet republic needed to provide more detail on fiscal and financial reform plans before loose ends on a new multi-billion-dollar program could be tied up.

A $16.4 billion bailout program was suspended last year by the IMF because the previous Ukrainian leadership reneged on pledges of financial restraint.

Tigipko said the IMF, whose mission would arrive in Kiev on May 17, was particularly focused on revenue figures in the government's 2010 budget which has just been approved by parliament.

Tigipko indicated that the Fund regarded them as over-optimistic, but he hoped the IMF mission would be convinced by economic performance in April.

"We must show the revenue part of the budget and show how realistic it is. There are differences, but they are theoretical at the moment ... There will be April which will show the realistic tendency in budget revenue," he said.

"We will hold talks on whether our revenue figures are realistic or not, including (being enough to cover) VAT reimbursement," he added.

IMF First Deputy Managing Director John Lipsky, in a statement on Wednesday, said "outstanding issues" had to be clarified including fiscal consolidation, in addition to financial sector and other reforms.


The new administration of President Viktor Yanukovich is anxious to get a new IMF stand-by program under way to help restore investor confidence in Ukraine's struggling economy, which was hit hard by the global downturn.

At the end of 2008 the hryvnia lost more than 60 percent of its value against the dollar because of shrinking markets for Ukraine's main export industries of steel and chemicals and huge foreign debt repayments. Hampered by a lack of investment and loans, the economy shrank by more than 15 percent in 2009.

Parliament on Tuesday hastily approved a 2010 state budget with a relatively tight deficit target of 5.3 percent of gross domestic product, one of the key requirements of the IMF for further credit.

The government has made a commitment to the IMF to try to hold its budget to 6 percent of GDP.

It was able to nail down the detail of the draft budget only after Ukraine received a 30 percent discount on the price of its huge gas purchases from Russia in an agreement on April 21.

Tigipko said he expected the mission to stay in Kiev about 12 days and then report back to the IMF board of directors who would later take a vote on the program. "If there is a vote it will be in June and immediately after this the money will come to Ukraine," he said.

Tigipko said the IMF remained concerned over the financial stability of the state energy holding Naftogaz which imports huge supplies of gas from Russia and transports it to Europe.

Before the April 21 agreement between Russia and Ukraine, Naftogaz was heavily subsidised by the government, selling gas to households and local utilities at a price below that which it paid for its imports.

The company says it is owed about $500 million by consumers who have not paid for gas provided.

Tigipko said Ukraine wanted this time to be able to use some of the IMF credit for covering the budget deficit, despite a trend in the IMF to funnel money solely into national currency reserves.

Source: The Washington Post