IMF Statement on Discussions with Ukraine on the Second Review under the Extended Fund Facility Arrangement

Press Release No. 15/457
October 3, 2015

An International Monetary Fund (IMF) mission visited Kyiv during September 22 - October 2, to hold discussions on the second review under the Extended Fund Facility Arrangement (EFF) in support of the authorities’ economic reform program (see Press Release No. 15/107).

At the conclusion of the visit, Mr. Nikolay Gueorguiev, mission chief for Ukraine, made the following statement today in Kyiv:

“The mission held constructive discussions with the authorities on policies needed to complete the second review under the EFF arrangement. Understandings were reached on most issues. However, as the authorities still need more time to fully flesh out their policy proposals for 2016 in some areas, discussions will continue in the coming weeks.

“Following a deep recession, macroeconomic stabilization is gradually taking hold. The exchange rate has been broadly stable, hryvnia deposits are rising, and inflation is receding. Gross international reserves, have increased to US$12.6 billion at end-August, and will be further boosted by a recently agreed swap arrangement with Sweden’s Riksbank for US$500 million. Despite these positive developments, in view of the larger than expected economic decline in the first half of the year, the mission revised down growth projections for 2015 to -11 percent. Growth is expected to reach 2 percent in 2016, supported by recovering consumer and investor confidence, improved export performance, and a gradual easing of credit conditions.

“The authorities recognize that a decisive implementation of economic reforms is indispensable for entrenching macroeconomic stability and restoring growth. They are committed to ensuring fiscal stability through reaching the program’s deficit target of 3.7 percent of GDP for 2016. This will include efforts to offset the loss of one-off revenue and cover spending commitments, including for energy-related assistance to households to help defray the cost of higher energy prices. Discussions on reforms to support the fiscal policy package for 2016 continue.

“The authorities are moving ahead decisively with the rehabilitation of the banking system. While steps have also been taken to improve the business environment, promote privatization, and improve governance, considerable further efforts in these areas remain critical for restoring robust and sustainable economic growth.

“The authorities are looking forward to the broad participation of Eurobond holders in the recently launched debt exchange. This will ensure that public debt is sustainable with high probability and the program remains fully financed. More broadly, continued financial support for Ukraine’s reform efforts from official and private creditors remains vital for the success of the program.”



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