KYIV, Oct 18 – Ukraine has agreed to implement a set of reforms that may open the way for resumption of lending from the International Monetary Fund once lawmakers approve required legislation and the government keeps fiscal discipline.

Ukraine and the IMF have reached a staff agreement following three weeks of online negotiations to unblock a $5 billion lending program that has been postponed for 1.5 years due to delayed reforms.

Ivanna Vladkova Hollar, who led the IMF team for the talks between Sept. 21 and Oct. 18, said the two sides reached agreement on an updated set of economic, financial and structural policies to help address the economic and health crisis caused by COVID-19.

The agreement does not meet an automatic approval of the lending to Ukraine, as lawmakers will have to approve legislation supporting the program, such as two bills strengthening independence of the central bank, among other things.

President Volodymyr Zelenskiy tweeted on Monday he hopes the agreement will result in the IMF executive board approving the program in November, which would unlock $700 million tranche to Ukraine shortly afterwards.

"This will allow Ukraine to receive about $700 million and once again confirm our close cooperation," Zelenskiy wrote on Twitter.

The developments come as Ukraine’s economy has entered recession in the second quarter, and the economy has probably continued to shrink in the third quarter, according to preliminary report from the Economy Ministry.

The conditions for resumption of lending to Ukraine include maintaining macroeconomic and financial stability, reducing vulnerabilities, and tackling key obstacles to private investment, Vladkova Hollar said.

The program is focused on returning fiscal policies to settings consistent with medium-term debt sustainability while protecting vulnerable populations, strengthening revenue administration, and reducing risks from "quasi-fiscal operations," including in the energy sector, while safeguarding central bank independence and reducing inflation.

Other goals included reviving sound bank lending to the private sector, tackling corruption and moving forward with judicial reform; and improving the business climate, the IMF said.

The approval of the program by the IMF executive board would also secure an extension of the $5 billion loan through to June 2022. The loan is currently set to expire in December, and lack of approval would require Ukraine to negotiate a completely new program that would take time and much effort.

Ukrainian central bank Governor Kyrylo Shevchenko, in a separate statement on Monday, said the central bank had already approved a plan to reduce non-performing loans in state-owned banks, which was a structural benchmark for the first review. (tl-rt)