Newsletter Issue 138 | April 2020

Why an IMF programme is urgently needed

In December 2019, Ukraine reached a staff level agreement with the IMF on a 3-year extended fund facility (EFF). The agreement was supposed to unlock a USD 5.5 bn programme, conditioned on the fulfilment of a set of prior actions. Notwithstanding last year’s rather favourable macroeconomic dynamics, the IMF programme was considered as an important tool for anchoring structural reforms and facilitating further support by the EU and the World Bank.

Unfortunately, the fulfilment of the prior actions leading to the programme’s ultimate adoption by the IMF’s executive board did not make much progress until March, when the corona pandemic and the resulting economic crisis suddenly hit the country. Faced with a large recession and a tripling budget deficit, the pressure for a swift conclusion of a (possibly upgraded) IMF programme has risen dramatically. The two main remaining prior actions were the agricultural land market reform and a law to prevent nationalised banks from being returned to their former owners.

While the law on the land market was finally adopted in the second reading, the final approval of the banking law is still pending. Being passed in first reading, a few deputies attempted to delay the final conclusion by introducing a total of 16,335 amendments for the second reading. However, the parliament has already responded to this challenge by changing its procedures to allow for a quick approval during the next few weeks, which would open the door for an IMF deal.

Download Newsletter 138 | Apr 2020