IMF and Ukraine reached a staff level agreement on US $14–18 billion loan agreement to help the Ukrainian government to promote the national economic reform programme.
On 27 March, Nikolay Gueorguiev, IMF Mission Chief for Ukraine, announced the IMF and Ukraine agreement to journalists in Kyiv. Mr. Gueorguiev said, “the mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF. The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US $14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for.”
The IMF and Ukraine agreement still needs to be approved by the IMF management and the Executive Board. The Board is expected to approve the deal in April, after the Ukrainian government adopt a package of actions aiming to promote the economic reforms. Mr. Gueorguiev said that Ukraine’s macroeconomic imbalances became unsustainable over the past year. “The 2013 fiscal deficit was 4½ percent of GDP, and the government accumulated sizeable expenditure arrears. The 2013 deficit of the state-owned gas company Naftogaz reached nearly 2 percent of GDP, driven by the sharp increase in sales at below-cost prices. Without policy action, the combined budget/Naftogaz deficit would widen to over 10 percent of GDP in 2014,” the IMF official said.
According to Mr. Gueorguiev the national reform programme promoted by the Ukrainian government will aim to restore macroeconomic stability and “will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency, and the business climate.”