11:16 03.07.2020

Ukraine fulfills only one out of seven benchmarks of memo with IMF with deadline before July 2020

3 min read
Ukraine fulfills only one out of seven benchmarks of memo with IMF with deadline before July 2020

On June 19, the Verkhovna Rada adopted bill No. 2284 that simplifies the implementation of investment and the introduction of financial instruments, and this was the only out of seven structural benchmarks in the memorandum with the IMF on the new Stand By Arrangement (SBA), the deadline for which expired last month.

According to the memorandum, the text of which is posted on the website of the IMF and the Ministry of Finance, before the end of June it was planned to lift the temporary cap introduced on all public sector wages and salaries of UAH 47,000, which was introduced for the lockdown period.

"This cap is to be lifted by end-June, as containment measures are gradually eased. Should further burden-sharing be needed, we will explore other mechanisms for efficient redistribution," the Ukrainian side said in the memorandum.

The structural benchmark of the SBA was that the state-owned banks' legacy non-performing loans (NPL) reduction plans, including the option of taking NPL resolution decisions that could realize final losses, will be endorsed by the shareholder and approved by the Financial Stability Council (FSC) and the National Bank of Ukraine (a structural benchmark for end-June 2020).

According to Interfax-Ukraine, the holding of the meeting of the FSC was planned for June 30, but information if it was held and the results are not available.

As part of Ukraine's efforts to reduce the ultimate costs of bank failures to the state, the country said that it was working on a strategy paper that will propose by end-June 2020 a set of credible measures to improve asset recoveries from former owners of failed banks and their related parties, including through the use of administrative mechanisms.

"By end-June we will legislate an October 1st, 2020 deadline for all new utility service contracts incorporating the revised heating tariffs to be concluded," the Ukrainian government said in the memo.

In addition, it was planned to select a supplier of last resort (SOLR) through a competitive tender by end-June 2020 in order to annul PSO of Naftogaz Ukrainy from July 1, 2020 in the market of gas supply for households. However, the tender was announced only at the end of month, and PSO were extended until August 1, 2020.

"By end-June 2020, we will also enact legislation that establishes a partial credit guarantee fund to ensure financial support to small farmers through provision of portfolio credit guarantees; streamlines land transfer procedures and decentralizes land management (No. 2194), transferring state land to communal ownership and shifting land use control functions from the cadaster to appropriate bodies; and establishes a transparent process for electronic land auctions and mandates the sale of state and communal land on such auctions (No. 2195)," the government said in the memo.

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