IMF hopes to discuss resumption of Stand-By Arrangement with Ukraine's new government

The Ukrainian authorities have expressed interest in resuming their program with the International Monetary Fund (IMF), but the specific modality and conditions for this have not been discussed yet, Director of the IMF External Relations Department Gerry Rice has said.

"Obviously, Ukraine has just had an election, so we look forward to engaging with the new government," he said at a press briefing in Washington on November 1.

As reported, a technical mission of the IMF worked in Kyiv from October 26 to November 2, 2012 to discuss with the Ukrainian government reform in the financial sector, particularly steps taken by the authorities to solve problems related to bad loans. The sides also discussed possible ways for the creation of more favorable conditions for bank crediting and priority reforms that are to be implemented in 2013.

As reported, in late July 2010, the IMF decided to renew its loan partnership with Ukraine through a new SBA worth SDR 10 billion (over $15 billion). According to the National Bank of Ukraine (NBU), the country succeeded in getting two tranches for a total of $3.4 billion.

The new program was frozen at the stage of the second review in the spring of 2011. For over a year, Ukraine has been trying to persuade the IMF to drop its objections to the government's subsidizing natural gas tariffs for households until the completion of its gas talks with Russia. The current Stand-By Arrangement terminates in late 2012.

The Ukrainian government thinks that it is reasonable to prolong the current program with the IMF and hopes to do this in late 2012 or early 2013.

In early November, Fitch forecast that Ukraine's external financing requirement would grow in 2013, as repayments to the IMF will rise to $6 billion. Fitch believes this probably exceeds the government's capacity to borrow externally and will require partial refinancing by the IMF itself. Without this funding, there is a risk that reserves will continue to fall, and the hryvnia depreciate, which would likely trigger a downgrade, the agency said.

The parliamentary elections were held in Ukraine on October 28. Their final results have not been announced yet. However, according to preliminary vote calculation results, the ruling Regions Party will be able to form the parliamentary majority either by uniting with the Communist Party of Ukraine, or with self-nominated candidates in majority constituencies.

In 2010 Ukraine refused to amend the constitution by providing the Verkhovna Rada, Ukraine's parliament, with the right to form the government. Thus, the membership of the Cabinet of Ministers of Ukraine should not be automatically changed after the parliamentary elections. However, some analysts say that some personnel reshuffles may take place in the government soon.