Press Release No. 09/25

Press Release No. 09/25
February 6, 2009

A mission from the International Monetary Fund (IMF) headed by Ms. Ceyla Pazarbasioglu has been holding discussions with the Ukrainian authorities regarding the first review of Ukraine's Stand-By Arrangement with the Fund.

Ms. Pazarbasioglu issued the following statement today on the status of discussions:

"Since the adoption of the IMF supported program, the global economic environment has deteriorated markedly. Ukraine's economy has not been excluded from this process. The economic situation remains difficult associated with decline in demand for steel products and the sharply reduced access to international capital markets. While the economic outlook for Ukraine has become more uncertain, the underlying dynamism of the economy and a consistent implementation of sound policies should allow a gradual resumption of growth.

"The authorities have responded to these challenges. The currency has undergone a large adjustment, which has improved the outlook for Ukraine's export industries. The current account deficit has started to narrow and, despite the currency depreciation, inflation has continued to decline. The diagnostic phase of the bank recapitalization program has been completed, and its effective implementation should help restore confidence in the banking system.

"The sharper-than-expected contraction in economic activity requires a recalibration of economic policies. In particular, the IMF team and the authorities have discussed potential revisions to the program's balanced budget target for 2009, taking into account the availability of financing. The ongoing discussions are focusing on appropriate fiscal measures, monetary and exchange rate policies, and measures to strengthen confidence in the banking system.

"Significant progress has been made in discussions on fiscal, monetary, and exchange rate policies, and on measures to strengthen confidence in the banking system, but a few issues remain outstanding. Discussions between the Ukrainian authorities and Fund staff on these issues will continue in the coming weeks, and we expect the mission to return soon to complete discussions."