News Brief: IMF Mission Reaches Agreement with Ukrainian Authorities
July 31, 1998
IMF Mission Reaches Agreement with Ukrainian Authorities
Mr. Mohammad Shadman-Valavi, Head of the International Monetary Fund (IMF) mission currently in Ukraine, said in Kyiv today:
"A staff team from the IMF has reached tentative agreement with the Ukrainian authorities on a stabilization and structural reform program for the period July 1, 1998–June 30, 2001 that could be supported under the Extended Fund Facility (EFF), in an amount equivalent to approximately SDR 1.6 billion (165 percent of quota), or nearly US$2.2 billion. IMF Management intends to propose this program for the consideration of the Executive Board in late August 1998.
"The program aims to promote economic growth and consolidate the recent gains in stabilization. Real GDP is projected to grow by 3-5 percent per annum. Annual inflation is targeted to be reduced to about 10 percent in 1998, and about 8 percent during 1999–2001. A key pillar of the program is the strengthening of the financial position of the government, and a reduction in the budget deficit of the general government from 5.6 percent of GDP in 1997 to 3.3 in 1998 and to about 2.0 percent per annum, thereafter.
"The Fund staff also welcomes the structural measures adopted by the authorities to improve the business environment and create conditions for economic growth. These include measures to: (i) rationalize the tax structure and reduce the tax burden over time; (ii) strengthen fiscal and monetary institutions; (iii) launch an administrative reform and rationalize the size of budgetary organizations; (iv) adopt transparent privatizationprocedures to further deregulate the economy and reduce government intervention in economic activities; and (v) reform the energy and agricultural sectors. These steps will encourage activity in the private sector, attract investments to Ukraine, and reduce the incentive to operate in the shadow economy.
"Adoption of a strong growth-oriented program supported by an EFF arrangement should enable Ukraine to attract new credits from other international organizations and the international capital markets, and encourage private creditors to maintain their current exposure to Ukrainian borrowers."