The IMF has published the text of the Memorandum with Ukraine

МВФ обнародовал текст меморандума с Украиной

What the document says?

The international monetary Fund (IMF) published a Memorandum of understanding with Ukraine on economic and financial policy in the framework of the new programme for 2018-2020.

About it reports RBC-Ukraine with reference to the Ministry of Finance.

The Memorandum contains a summary of the policy and strategy to be followed by the Ukraine, as well as concrete steps for the passage and hits the next tranche. The document also contains directions for work in the areas of monetary and exchange rate policies, fiscal policy, and policies in the energy and financial sectors, management of SOEs and business climate, as well as 8 structural milestones.

“The implementation of the provisions of the Memorandum will allow until the end of the program to attract 3.9 billion dollars in financial support from the IMF, which will go to the reserves of the National Bank of Ukraine. This will strengthen the national currency and will help to create a stable and predictable investment climate,” — said in the message.

Monetary policy: the independence of the NBU will continue to adhere to the flexible exchange rate policy; inflation will be 7% from December 2018 to December 2019, and in 2020 — 5% +/- 1%; increase the effectiveness of monetary policy. To this end, the Ministry of Finance will submit to the NBU daily and monthly cash flow forecast.

Fiscal policy: Ukraine will adhere to the approach of fiscal sustainability in the medium term, in particular: a deficit of 2.5% in 2018, of 2.25% in 2019; early 2019 — the abolition of restrictions on wages, of which pay ERUs.

During the program of tax Amnesty, but this limitation does not deny the possibility of conducting future campaigns once the Declaration of assets of natural persons, subject to prior approval of its terms and substantiation of the purposes with the IMF experts. Will also introduce new tax breaks that will decrease tax rates on profits of enterprises. Suspended the introduction of a second tier of the pension system. At the same time, Ukraine will continue dialogue with the IMF experts on the search for the possible introduction of a tax on capital is derived in the form of fiscally neutral, balanced and stable taxation of distributed profits. Surplus budget revenues will be allocated to debt reduction.

Public financial management: Implementation of measures envisaged in the framework of the Strategy of reforming the system of public Finance management for the years 2017-2021, in particular, the introduction of a medium term budget planning in 2019, including the related costs and a clear definition of marginal cost limitations on expenditures.

Administration of income: the Union of Central and regional directorates of the SFS in two legal entities: tax and customs service, subordinate to the Ministry of Finance (until end of April 2019 — structural beacon); the contest for Executive positions before the end of April 2019; improving the efficiency of tax and customs administration.

Energy: the increase in tariffs for gas and heating in accordance with the previously announced schedule; the monetization of subsidies, a pilot project launched in March 2019; unbundling “Naftogaz of Ukraine”; the increase in gas production; financial policy; further improving the stability of the banking system; banks ‘ capitalization (minimum of 7 percent of tier I capital and 10 percent of the CDC (CAR) until the end of March 2019); improving the regulatory framework for operations of related entities; to restore the solvency of the Fund until the end of December 2019; the solution to the problem of non-performing loans (NPLs); improving governance and transparency in state-owned banks

Since the end of December 2018, the Ministry of Finance regularly publishes quarterly KPI for banks, and also reports on the progress of implementation of their strategic plans and restructuring of non-performing loans. The Finance Ministry also will provide regular reports to summarize progress in recovering assets in litigation with respect to the four state banks (the first report will be published before the end of March 2019 — structural beacon). The appointment of an independent Supervisory boards in Oshchadbank and Ukreximbank until the end of March 2019. By the end of April 2019 by the Ministry of Finance will sign memorandums of understanding with each of the state banks (banks operate as commercial and isolated from political interference in operational issues). Entrance EBRD and IFC in the capital of Oschadbank and Ukrgasbank. Legislation is important to ensure that the development of financial markets (“Split”, No. 2413 — structural beacon).

Anti-corruption measures: the anti-corruption court. By the end of April 2019 at least 35 anti-corruption judges appointed in accordance with Act No. 2018/2447 and in accordance with the rules and procedures that guarantees objectivity and transparency of the process (business beacon); independent audit of NABOO (the audit report must be finalized before the end of July 2019 — structural beacon); requirement of full and public Declaration of assets (E-Declaration) continue to apply to publicly significant persons; the fight against money laundering, implementation of AML / CFT (combating money laundering and combating the financing of terrorism) — amendments to the legislation before the end of March 2019, in agreement with the IMF experts.

Privatization: sell “Centrenergo” coal company “Krasnolimanskaya”, enterprises of “INDAR” and “President Hotel Kiev” in the first half of 2019; selling at least 500 small electronic auctions (ProZorro until the end of April 2019); the reduction of the list of companies prohibited for privatization (the bill until the end of April 2019); the adoption of a new law on concessions and concession launch pilot projects (in the first half 2019); the management of public enterprises.

Monitoring of fiscal risks of public enterprises: monitoring and assessment of fiscal risks posed by state-owned enterprises; integrated management system of fiscal risks (with appropriate changes in the legislation will be adopted before the end of July 2019) — assessment will involve government guarantees, PPPs, local borrowing.

Recall, the IMF approved a new loan program for Ukraine on December 18. Under the program, the first tranche of 1.4 billion dollars needs to come to Ukraine until December 25.