KYIV, Feb 13 - Ukraine will have to make more progress on economic reforms before the International Monetary Fund can decide on resuming a $5 billion loan to the country, an IMF official said Saturday.
“Discussions will continue,” Goesta Ljungman, an IMF representative in Ukraine, said in a statement.
The comments indicates that Ukraine will probably not be able to get an installment from the IMF anytime soon, analysts said.
Prime Minister Denys Shmyhal said earlier this month that he hoped the IMF would be able to resume the loan no later than in March.
“Ukraine is not getting any new IMF tranche now,” Anders Aslund, a senior fellow at the Atlantic Council, a Washington-based think tank, said. “The IMF ended the review of its $5 bn loan program without clearing the next tranche because conditions haven’t been met.”
The development is major setback for the government, which has been seeking to resume borrowing from the IMF no later than in March in order to be able to pay out more than $11 billion in foreign and domestic debts before end of June.
“This is an extremely bad sign,” Oleksiy Honcharuk, a former prime minister, said on Saturday. “That’s a sentence for the government.”
Online negotiations via a video link between Kyiv and Washington has continued for almost seven weeks, three time as usually, as the IMF has looked into the government’s progress on reforms and the fight against corruption.
The talks also focused on improvements to the legislative and regulatory framework for bank supervision and resolution, strengthening governance of the central bank, policies to reduce the medium-term fiscal deficit, legislation restoring and strengthening the anti-corruption framework and the judiciary, as well as on energy policy.
The government recently decided to lower by 30% prices of natural gas for households for several months, a move that raised concerns at the IMF over increased state regulation in the energy sector.
Ukraine’s natural gas industry was one of the most corrupt sectors of the economy before the government started to liberalize the sector in 2015. Existence of two sets of prices – market price and price set by the government – creates ample opportunities for corruption.
The government agreed to set the gas price at 6,999 hryvnias per 1,000 cubic meters, down from about 10,000 hryvnias/1,000 cu m that regional gas companies have been charging households in January.
“Kyiv has moved backwards on reforms key to IMF program, eg, decision to cap natural gas prices,” Steven Pifer, a former U.S. Ambassador to Ukraine, said after the IMF statement. He suggested that the IMF may agree to continue review of the loan in the spring
Ukraine expects to receive $2.2 billion spread across three equal tranches from the IMF in 2021, according to the National Bank of Ukraine. The IMF approved the $5 billion loan program in June 2020 and disbursed the first tranche of $2.1 billion to help the economy, which has been hit hard by the coronavirus pandemic.
Further loans have been frozen due to the slow pace of reforms. (tl/ez)