Ukraine - Staff-level agreement with IMF on 1st review of SBA The Ukrainian authorities have reached Staff-level agreement with the IMF on completion of the first review of the Stand-by Arrangement (SBA). If related prior conditions are met this will lead to a disbursal of US$1.4 bn on approval from the Executive Board. The authorities are working hard to implement the program although some indicators have worsened given the extent of the fighting in the East of Ukraine. The IMF now sees real GDP contracting by 6.5% this year instead of the 5% previously seen. Moreover, the fiscal and quasi-fiscal deficit will be 10.1% of GDP instead of the 8.5% projected due to revenue undershoots because of collection problems and increased security spending. Nevertheless, the structural fiscal position has been tightened by some offsetting measures and the Fund believes that major imbalances will have been addressed by 2016 as long as the fighting proves to be relatively short-lived. The target level for net international reserves has been reduced to allow for some FX intervention to stop destabilising currency moves. However, the government remains committed to a flexible exchange rate. The larger fiscal deficits resulting from these changes to the program increase the financing requirement for Ukraine. This may ultimately lead to the program being augmented if implementation remains sound.
Posted on: Tue, 22 Jul 2014 09:07:24 +0000
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