Mr. Horst Köhler
The Managing Director
International Monetary Fund
Washington DC 20431
August 29, 2000Dear Mr. Köhler,
We understand that according to the findings of the IMF staff Ukraine on several occasions in the context of the 1996 and 1997 stand-by arrangements reported information to the Fund that overstated the level of its international reserves, which the staff concluded, resulted in a breach of Ukraine's obligations under the Articles of Agreement to provide accurate information to the Fund and allowed Ukraine to make in December 1997 and February 1998 two purchases of SDR 36.27 million each that it would not have been entitled to make otherwise.
With a view to putting this matter firmly in the past we are now voluntarily effecting the early repurchase of the two purchases referred to above. The early repurchase of
In view of our intention to further develop our cooperation with the IMF, which we have always valued and which has contributed to the implementation of economic reforms in Ukraine, we commit to ensuring the accuracy, integrity and correct definitions of the information that Ukraine provides to the Fund. In the context of the Extended Arrangement approved in September 1998, we have taken a number of steps in this direction and have strengthened safeguards regarding the use of balance of payments support from the Fund. In particular, we have instituted quarterly audits of the reserve position of the NBU by a reputable international audit firm, strengthened the reserve management functions at the NBU, initiated the practice of holding the NBU's reserves in first-rank international banks, and refrained from undertaking any operation that may impair the liquidity of reserves.
We are committed to keeping these measures in place during the period of the EFF and beyond, until such time as the Fund and Ukraine agree that they are no longer necessary. In addition, we intend to keep the proceeds of any purchases made under the EFF arrangement in Ukraine's SDR account held with the Fund and to use those proceeds as agreed separately.
We authorize the Fund to make this letter public.