KIEV: Ukraine’s fiscal and balance-of-payments pressures should ease if the country receives at least $1 billion worth of International Monetary Fund support this year as it puts its reform efforts back on track, the government’s top economic adviser said.
Ivan Miklos, senior economic adviser to new Prime Minister Volodymyr Groysman, told Reuters in an interview that Ukraine will likely need more reform legislation passed to meet requirements for the IMF to fully release $1.7 billion in delayed funds. “The goal is, if not to receive the tranche in one amount, to deliver it in two parts, the first one in July and the second one in autumn,” Miklos said on Tuesday evening.
An IMF spokesman could not be immediately reached for comment on the status of Ukraine’s $17.5 billion bailout program. Miklos added if the delayed third tranche is broken up, the first portion disbursed may be around $1 billion.
That amount would be sufficient to keep external pressures at bay, because it would also trigger a $1 billion U.S. government loan guarantee and an economic stabilization loan from the European Union. As of June 1, Ukraine’s central bank reported $13.5 billion in foreign currency reserves as it purchased dollars to smooth excessive fluctuations in the hryvnia currency.
Miklos said that is about enough to cover 3.5 months’ worth of imports, while higher exports of grains, steel and other commodities have also improved Ukraine’s external buffers. But Miklos, a Slovakian who twice served as that country’s finance minister, said he was concerned that the improved financial situation may also diminish the Ukraine parliament’s appetite to pass difficult reform legislation.
“There is not sufficient ownership of reform” in parliament, he said. “There is not sufficient understanding that the reforms are necessary.” Other Eastern European countries such as Poland, Slovakia, Georgia and the Baltics successfully undertook similar reforms not to satisfy international institutions, but because they were important to transform those countries into functioning economies and democracies, he said. In Washington, Miklos said he hoped to persuade the Obama administration, the IMF and the World Bank that Ukraine’s new cabinet, which took power in April after months of political turmoil, had resumed progress on reforms.
“The main message is to convince partners that the new government is ready and eager to do reforms,” he said. He cited passage of energy legislation that shifted gas prices to market-based levels – a major shift from heavily subsidized prices that prevailed before a 2014 uprising brought Western-backed leaders to power.
Miklos also said further progress has been made on newly passed legislation to root out corruption in Ukraine’s graft-ridden judiciary system, to liberalize the pharmaceuticals market and to expand a new online public procurement system. But progress has lagged on pension reforms demanded by the IMF and improvements to Ukraine’s tax system, while the privatization of a major state-run fertilizer plant in Odessa has drawn criticism from the Fund and the European Bank for Reconstruction and Development.
