Press Release: IMF Approves Augmentation of Extended Fund Facility for Ukraine
May 27, 1999
The International Monetary Fund (IMF) has approved a request by Ukraine to increase by SDR 274.4 million (about US$366 million) the IMF’s financial support under the current three-year Extended Fund Facility (EFF), which was approved on September 4, 1998, in an amount of SDR 1,645.55 million (about US$2,205 million).1 The augmentation, of which SDR 37.5 million (about US$50 million) is available immediately, is a response to the difficult external position arising from the impact of generally weak commodity prices for Ukraine’s exports, particularly metals, and depressed demand in the region due to the continuing difficulties in Russia. More recently, the Kosovo crisis has disrupted Ukraine’s trade routes along the Danube. The decision was made in conjunction with the completion of the second review of the economic and financial program supported by the EFF, and triggered a total release of SDR 134.7 million (about US$180 million).
Adoption of prudent macroeconomic policies in the first quarter of 1999 enabled the authorities to liberalize the exchange system, without substantial pressure on the exchange rate, while accumulating official external reserves. Although progress in fiscal consolidation has been commendable, every effort must be made to maintain fiscal discipline in the coming months. Despite significant progress in a number of areas of structural reform, including in deregulation and privatization, banking sector and public administration reforms, the overall pace of structural reform needs to be accelerated to promote sustainable economic growth, particularly in the agricultural and energy sectors.
Ukraine’s financial situation remains very fragile. The authorities intend to implement the necessary policy changes to promote financial stability and economic growth. At the same time, however, in view of the country’s heavy debt service obligations, Ukraine’s economic recovery will require the continued involvement of private creditors. In that regard, a collaborative solution to Ukraine’s debt service problem must be found in line with Ukraine’s capacity to pay. The authorities’ recent efforts in this area are consistent with the steps envisaged under the IMF-supported program; progress in this area will be a key factor to be considered in the context of the financing review for the next drawing that is expected to be considered by the IMF’s Executive Board in June 1999.
Ukraine joined the IMF on September 3, 1992; its quota2 is SDR 1,372.0 million (about US$1,838 million). Its outstanding use of IMF credit currently totals SDR 1,969 million (aboutUS$2,638 million).