10:16 20.03.2017

IMF board of directors briefly postpones discussion of allocation of 4th tranche to Ukraine - Finance ministry

The Board of Directors of the International Monetary Fund (IMF) has slightly postponed a meeting, initially scheduled for Monday, to discuss completion of the third review of its extended fund facility program for Ukraine, the Ukrainian Finance Ministry said on its website.

"The meeting has been postponed only because of the need to clarify the calculation of the economic consequences of the measures Ukraine introduced in response to the blockade and seizure of Ukrainian enterprises in the non-government-controlled areas of Donetsk and Luhansk regions, and also in light of the Russian recognition of documents issued in those areas," the ministry said.

"Clarifying these calculations is important for both sides to ensure maximum efficiency of the program. Relevant consultations have already begun. We are planning to complete them in the very near future," Finance Minister Oleksandr Danyliuk said.

For its part the National Bank of Ukraine (NBU) told reporters that Ukraine remains in the cooperation program with the IMF.

"The latest developments in the country need to be studied further on the subject of their potential impact on the economy and be taken into account in macroeconomic forecasts of the cooperation program with the Fund," the NBU said on Facebook.

The NBU, too, is planning to update its macroeconomic forecasts to account for the effect of the trade blockade of the breakaway areas of Donetsk and Luhansk regions. The NBU monetary policy committee will hold an extraordinary meeting on Monday, March 20, to discuss the matter.

"Updated macro forecasts will be submitted to the IMF. The dialogue and technical consultations from the IMF continue," the NBU said.

On March 16, Ukrainian President Petro Poroshenko signed a decree enacting the National Security and Defense Council resolution of March 15 to temporarily suspend cargo transportation across the contact line in Donetsk and Luhansk regions. The resolution does not apply to humanitarian cargo and people crossing the contact line.

On March 4, the IMF and the Ukrainian authorities reached agreement on a memorandum on economic and financial policy which paves way for completion of the third review of the EFF program, following which Ukraine could be granted a fourth tranche of SDR 734.05 million (around $1 billion).

The four-year EFF program launched by the IMF in March 2015, in the total amount of SDR 12.348 billion (around $17.25 billion), initially involved quarterly reviews of the program, with the first tranche of $5 billion, and the next three, SDR 1.18 billion each (around $1.65 billion), to be paid during 2015, and decreasing quarterly tranches to SDR 0.44 billion ($0.61 billion) in 2016-2018.

Ukraine was able to receive, with a slight delay, the second tranche, $1.7 billion, under this program, in early August 2015, followed by a lengthy pause because of the country's failure to meet a number of conditions, political crisis and changes in the government.

Since the arrival of a new government led by Volodymyr Groysman in April 2016 talks over continued funding have resumed but it was not until mid-September that the IMF decided to allocate the third tranche, $1 billion.

On March 16, Danyliuk said that Ukraine could receive the next IMF loan tranche under the EFF program next week. "The meeting [of the IMF Executive Board] will take place next Monday, and we're expecting the tranche next week, which is very positive," Danyliuk said at a Dragon Capital conference in Kyiv last Thursday.

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