Negotiations with the IMF: Stand-by may not be

Переговоры с МВФ: Программы Stand-by может не быть

Despite the announcements of the signing of a new agreement with the IMF to provide assistance as a loan, experts are skeptical: after all, the money not yet given, and the old agreement and the new Fund forecast indicates that Ukraine’s economy will grow at a slower pace than predicted earlier.

Tranche depends on the adoption of the state budget

The authorities plan to sign an agreement with IMF funding programme stand-by.

“The program is planned to be signed in October – there is a political decision”,- told the media, citing a source close to the negotiations.

Recall that the Memorandum with the IMF on the Ukrainian side signed by the President, Prime Minister, Minister of Finance and the head of the NBU. The IMF mission worked in Ukraine from 6 to 19 September and discussed with the government the terms of the tranche 1.9 billion of the Money was not given. According to media reports, the Fund’s experts demanded that the state budget for next year submitted by the government to the Parliament on 15 September were adopted without significant changes.

Economist, Executive Director of the International Bleyzer Foundation Oleh Ustenko believes that the closer the end of October, the harder it will be to count on a new tranche without the presence of the Parliament adopted the budget.

“The budget is always a battle. Especially if we are talking about the budget of the election year. Therefore, it is difficult to imagine that it would be passed not as usual the New year, and so in advance, as required by the current economic situation”, – he wrote in Facebook.

However, despite the obvious difficulties with getting the next tranche (IMF typically does not release the money during the election period, the presidential campaign starts on December 31), the authorities claim about the new prospects of cooperation with the Fund.

While the mission was in Ukraine, it was announced that the parties will refuse to continue the execution of the current program of cooperation EFF “expanded funding”, which ends in March 2019, and will sign a new Memorandum on the Stand – by program (credit line). It will be designed for 1.5 years and provides 4 to 5 billion dollars from the first tranche of 1.9 billion dollars.

This program has already provided in 2014. Then instead of the promised $ 17 billion, the Ukrainian government received 4.3 billion And in 2015 the program was revised.

Under the current program, launched in March 2015, the IMF pledged $ 17.5 billion dollars. But the Ukrainian government has only received four tranches for a total amount of 8.7 billion dollars.

The allocation of the fifth tranche of the Fund was postponed. According to Prime Minister Vladimir Groisman, the reason for the delay was the fact that the Verkhovna Rada did not have time to take the necessary for granting the loan bills before the start of the summer holidays.

Despite the fact that the money is not given under the old program, the President’s representative in the Verkhovna Rada Iryna Lutsenko stated that the replacement program of assistance to Ukraine on the EFF stand-by indicates the level of confidence of the IMF to Ukraine. They say that the collaboration on this program is usually offered to States that came out of the pre-default state.

Not in favor of such claims, the IMF published a forecast according to which in the coming years Ukraine’s economy will grow at a slower pace than predicted earlier.

So, next year the economy will grow by 2.7% (previous forecast of 3.3%), and in 2020 – 3.4% (instead of 4%). This is stated in the October report the global economy World Economic Outlook, which was prepared by the international monetary Fund.

“A matter of considerable nervousness”

In its forecast, the IMF has improved the current GDP of Ukraine will be 3.5% instead of 3.2%. The Fund anticipates that the average annual hryvnia exchange rate at the end of 2018 will amount to UAH 27.07 per dollar, in 2019 devalue to UAH 28.6. for a dollar, and in 2020 to 29.9 per dollar.

Debt according to IMF estimates will decline in 2018, the country’s public debt will amount to 70.5% of GDP next year was 68.8% of GDP in 2020 – 64,4% of GDP, in 2021 is 60.4% of GDP in 2022 – of 56.4%.

The average annual inflation in 2018 improved by 0.1 percentage point to 10.9%, in 2019 – 0.7 to 7.3. The Foundation has also improved the assessment of the balance of payments deficit in 2018, from 3.7% to 3.1% of GDP, at the same time in 2019, downgraded from 3.5% to 3.9% of GDP.

The managing partner of Capital Times Eric Naiman said: “the IMF has improved the forecast of the balance of payments deficit from 4% to 3% of GDP – most likely thanks to the workers. But this prediction is controversial in periods of economic growth are usually more rapidly growing imports.”

The expert also noted that the IMF still expects Ukraine’s share in the global economy will continue to decline – even in purchasing power parity from 0.29% to 0.28%.

“In 1992 was 1%!”- the expert stressed.

He stated that Ukraine’s GDP in USD and in UAH is greatly improved. So, in dollar terms, Ukraine’s nominal GDP is estimated at 126,3 billion by 2018, 132,9 billion dollars at the end of 2019 and 141,8 billion by the end of 2020.

Note that this forecast is very comforting to creditors of Ukraine. Because in 2015, when GDP was estimated at 84 billion dollars, Finance Minister Natalia Yaresko agreed on debt restructuring with private creditors. They were off about 20% of the Ukrainian debt, and agreed to wait.

Payments begin when the Ukrainian GDP will exceed 125.4 billion dollars. And the amount will depend on the growth of the Ukrainian GDP from 2021 to 2040: up to 3% growth per year – payments to zero from 3% to 4% – 15% of one percent of GDP. If GDP growth is over 4% with GDP growth exceeding 4%, Ukraine will have to pay 40% (in addition to 15% with increment of 3 to 4% of GDP).

When Jaresko made a deal, the media wrote about the onerous conditions in which Ukraine “was left to languish in the third world, deprived of the right to rapid economic growth.”

However, by 2021 we still live. While the need to pay off debts to the IMF, no matter whether he will provide the new tranche of the loan.

So at the beginning of this year Ukraine’s debt to the IMF amounted to more than $ 12 billion for the same loans. 31 Aug listed the IMF of 160.3 million dollars on account of repayment of the principal. By the end of this year should bring about 500 million Eurobond and about 580 million in debt service to the IMF.

To a new loan to obtain, the government should raise the price of gas for the population. The head of Board NAK “Naftogaz of Ukraine” Andrey KOBOLEV reported a gradual increase in gas prices to import parity level. And the National Bank forecast a rise in prices for gas for the population to 25% in 2018. And since utility rates are about 20% in the index of consumer inflation, experts of the NBU predicted inflation of about 1-2% in the near future.

Now experts expect the adoption of the state budget, which will assess the international monetary Fund.

Oleg Ustenko said that if by the end of next week a positive decision of the IMF still will not, it is a matter of considerable nervousness. International reserves of Ukraine in September decreased by 3.5%. As of October 1, they amounted to 16.6 billion dollars.

“Depleted foreign exchange reserves, declining four months in a row, in need of replenishment. “Fat” is too small” – noted the economist.

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