Ukrainian authorities' discussions with IMF could drag on, says S&P

Discussions between Ukrainian authorities and the International Monetary Fund (IMF) on a new Stand-By Arrangement could take several months, experts from the Standard&Poor's (S&P) international rating agency have said.

"The provision of new loans from the IMF depends on the implementation of key structural reforms... The discussions with the IMF could take up to several months, and the agreements signed will be difficult to implement," reads a report from S&P.

According to the S&P experts, problematic issues include an increase in domestic tariffs for gas, budget consolidation and a more flexible currency exchange rate regime.

The report notes that in the period from January 29 to February 12, 2013 the government of Ukraine and the IMF are to start talks regarding a new program. The previous program expired on December 27, 2012.

As reported, in late July 2010, the IMF decided to renew its loan partnership with Ukraine through a new Stand-By Arrangement worth SDR 10 billion (over $15 billion). However, the country succeeded in getting two tranches worth a total of SDR 2.25 billion.

The new program was frozen at the stage of the second review in the spring of 2011. For a year and a half, 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.

According to the report, the needs of the government and the National Bank of Ukraine (NBU) in funding in 2012 rose to a historic high and will remain high in the medium term.

"We are expecting the cost of debt repayment to the IMF to condition a historically maximum need in external financing in 2013-2017... The government also has a significant need to refinance debts in the national currency," reads the report.

According to S&P, the total costs of the government and the National Bank of Ukraine for servicing and repaying the debt to the IMF are expected to grow from $3.9 billion in 2012 to $6.4 billion in 2013.