IMF intends to start closer monitoring of Ukraine due to its outstanding credit
The Executive Board of the International Monetary Fund has decided that Ukraine is expected to engage in post-program monitoring with the Fund, following the expiration on December 27, 2012 of the Stand-By Arrangement (SBA).
The Board passed this decision on July 26 on a lapse-of-time basis without convening formal discussions, reads a press release posted on the Fund's Web site.
The central objective of post-program monitoring (PPM) is to provide for closer monitoring of the policies of members that have substantial Fund credit outstanding following the expiration of their arrangements. Under PPM, members undertake more frequent formal consultation with the Fund than is the case under surveillance, with a particular focus on macroeconomic and structural policies that have a bearing on external viability.
The IMF recalled that the 29-month Stand-By Arrangement (SBA), which envisaged the provision of a total of SDR 10 billion ($15.2 billion), went off-track with only two tranches made in the total amount of SDR 2.25 billion (about $ 3.4 billion).
As of June 30, 2013 Ukraine's outstanding credit to the Fund was SDR 5.27 billion (about $8 billion).
The Fund says that Ukraine's outstanding credit exceeds the 200 percent of quota threshold beyond which PPM is typically initiated.
The first PPM will be conducted in conjunction with the 2013 Article IV consultation in the fall. The Executive Board discussion is tentatively scheduled for December 2013.
Ukraine is currently in talks with the IMF on a new Stand-By Arrangement (SBA). According to Ukrainian First Vice Premier Serhiy Arbuzov, Kyiv pins hopes on borrowing SDR 10 billion from the Fund, which could be used to repay previously borrowed IMF loans with repayments totaling about $6 billion this year alone.
The previous Ukraine-IMF SBA, also worth SDR 10 billion, was formally terminated in December 2012. It was opened late in July 2010, but the country succeeded in getting two tranches worth a total of SDR 2.25 billion ($3.4 billion). The program was frozen at the stage of the second review in the spring of 2011.
For a year and a half, Ukraine had been unsuccessfully 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, but failed.