Press Release No. No 10/281

Press Release: IMF Announces Staff Level Agreement with Ukraine on US$14.9 Billion Stand-By Arrangement

July 3, 2010

An International Monetary Fund (IMF) mission visited Kyiv during June 21-July 3, to discuss economic policies that could be supported by a Stand-By Arrangement (SBA) with the IMF. At the conclusion of the visit, Thanos Arvanitis, Mission Chief for Ukraine, issued the following statement today in Kyiv:

“The mission has reached a staff-level agreement with the authorities of Ukraine on an economic policy program that can be supported by a 2½ year Stand-By Arrangement in the amount equivalent to SDR 10 billion (US$14.9 billion). The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board. Consideration by the Executive Board is expected in late July, following approval of legislative changes relating to the budget and financial sector.

“The goal of the authorities’ economic program is to entrench fiscal and financial stability, advance structural reforms, and put Ukraine on a path of sustainable and balanced growth. Policies under the program include fiscal adjustment to contain the 2010 consolidated general government deficit to 5½ percent of GDP in 2010 and 3½ percent in 2011 with a view to setting public debt firmly on a declining path. The fiscal adjustment is to be achieved by tax and social security structural reforms, expenditure rationalization combined with efforts to improve tax administration. Additional resources are allocated in the budget to protect the poorest segment of the population.

“Financial sector reforms are focused on restoring the health of the banking system, including by ensuring an adequate level of capitalization and strengthening the independence of the National Bank of Ukraine.

“Energy sector reforms will help to strengthen the gas sector and improve Naftogaz’s financial position, limiting its deficit to 1 percent of GDP in 2010 and balancing its finances in 2011, while, at the same time, protecting the most vulnerable people. Legislative reforms will be aimed at modernizing the economy and improving business environment, to restore robust economic growth over the coming years.”