News Brief: IMF Completes Fourth Review for Ukraine
December 19, 2000
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review under the Extended Arrangement for Ukraine. As a result, Ukraine will be able to draw up to the equivalent of SDR 190.1 million (about US$246 million), which the authorities have committed to keep in Ukraine's SDR account held with the IMF.
In commenting on the Executive Board's discussion of the review, Stanley Fischer, the First Deputy Managing Director, made the following statement:
"The Ukrainian authorities should be commended for the recent improvements in economic policy implementation and progress on their reform agenda. Economic performance in 2000 has been encouraging, as real GDP growth is expected to be positive (5 percent) for the first time since independence, and there has been a significant turnaround in Ukraine's external position. The authorities are urged to continue with their overall economic strategy, based on a sound budget, tight monetary policy, and the implementation of much-needed structural reforms.
"The strong improvement in the fiscal position in 2000 is welcome, along with the important structural changes to the budget, including a reduction in noncash operations. The adoption of a 2001 budget consistent with macroeconomic stability and growth is welcome, and the authorities are urged to implement it rigorously. Any cuts in tax rates should be preceded by measures to broaden the tax base, so as to ensure revenue neutrality.
"Inflation has been higher than projected in 2000, and it is important to maintain prudent monetary policies. Reducing inflation in 2001 will be important for macroeconomic stability. With regard to the exchange rate, the authorities are urged not to target a particular level, but to be prepared to accept greater exchange rate flexibility in both directions. The authorities should continue to move ahead on financial sector reform and promptly address weaknesses in the banking system.
"The progress made so far on structural reforms, including the passage of a privatization law fostering transparent procedures and strengthened payments discipline in the energy sector, is welcome. It will be necessary to carry out privatizations in a fair and transparent manner as well as improve governance in order to maintain public support for the reform efforts. The authorities are encouraged to deepen and accelerate efforts in the structural areas in order to reduce the role of the state in the Ukrainian economy and bolster private sector confidence and investment. The institution of a privatization review committee to report on the implementation and transparency of the privatization process is also welcome," Mr. Fischer said.