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Nation    

IMF to disburse $1.6 billion to Ukraine
Journal Staff Report

NEW YORK, Dec. 22 – The International Monetary Fund on Wednesday agreed to immediately disburse $1.6 billion to Ukraine after the government promised to go ahead with reforming sectors of the economy.

The release of the money, following a meeting of the IMF’s executive board in Washington, comes amid signs that the government has been facing a financial crunch.

The government has been recently considering an urgent issue of Eurobonds among other measures, indicating that it has been seeking to raise money quickly.

The release of the IMF installment will ease pressure on the government to borrow from other sources, and will also take the pressure off the hryvnia, the local currency.

“Ukraine’s satisfactory performance under the economic program, along with strong policy commitments for the coming year, are supporting a steady recovery in confidence and broadening of economic activity,” John Lipsky, the First Deputy Managing Director and Acting Chair, said in a statement.

The IMF decision comes despite the fact that the 2011 budget draft has not been yet approved by Parliament, and is suggesting that the Washington-based lender is confident that the budget – as well as some other important reforms - will be approved soon.

Prime Minister Mykola Azarov said earlier this week that Parliament may approve the 2011 budget on Thursday.

The latest disbursal increases to $3.4 billion the total amount of money released to Ukraine so far under a $15.3 billion 29-month Stand-by loan, which has been approved on July 28. The loan entails exceptional access to IMF resources, amounting to 728.9% of Ukraine’s quota in the Fund.

“The authorities remain committed to timely implementation of fiscal, energy, and financial sector reforms that are essential to achieve program objectives,” Lipsky said. “Sustained implementation of reforms will help entrench macroeconomic stability, boost confidence, facilitate access to capital markets, and promote more balanced and robust growth.”

The government has been seeking to narrow Ukraine’s budget deficit to 3% of gross domestic product in 2011, compared with 5.5% in 2010.

Tax cuts and other measures anticipated by the 2011 budget will probably boost economic growth to 4.5% on the year in 2011, up from expected 4.1% growth in 2010, according to the government.

The hryvnia, the local currency, is expected to hold its ground against the U.S. dollar at the level of 7.95 hryvnias per dollar in 2011, according to the government’s forecast.

“Fiscal adjustment remains at the core of the program. In the near-term, swift approval of the 2011 budget consistent with program targets, along with tight control over budget execution and efforts to improve tax administration, will be crucial,” Lipsky said.

“Longer term fiscal sustainability depends crucially on structural reforms in the areas of pension, public administration, and state-owned enterprises,” Lipsky said. “In this regard, the timely approval and implementation of the pension reform legislation submitted to parliament will be key.”

“Recent steps to strengthen the financial position of Naftogaz, including through revenue collection improvements, are also important. Further efforts, including gas price increases and structural reforms, are needed to create a more viable and transparent energy sector,” Lipsky said.

“Important progress has been made in rehabilitating and restoring confidence in the financial system, including private bank recapitalization and steps toward strengthening the supervisory framework,” he said.

“It is now timely to expedite the implementation of measures necessary to tackle the problem of sizeable impaired assets in the banking system that are hindering financial sector’s support for a sustainable economic recovery.” (tl/ez)




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Currencies (in hryvnias)
  28.03.2024 prev
USD 39.23 39.14
RUR 0.425 0.422
EUR 42.44 42.44

Stock Market
  27.03.2024 prev
PFTS 507.0 507.0
source: PFTS

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