Transcript of a Conference Call on Ukraine with Mission Chief Ceyla Pazarbasioglu,
Assistant Director of the IMF’s European Department
Friday, May 8, 2009
MS. PAZARBASIOGLU: Good day. We are just fresh out of the Executive Board Meeting on Ukraine, and I’m happy to report that the Executive Board approved the completion of the review. We have a press release perhaps which you may have already received.
I would just like to make a few points. As you know, this was the first review and the release of the second tranche which is SDR $1.9 billion. This is about U.S. dollars 2.8 billion.
And during the discussion at the Executive Board, we discussed the economic developments, both globally, regionally, and the implications for Ukraine, as well as policies that the authorities are adopting to address the challenges and to manage the country out of crisis as soon as possible.
And during these discussions, the Executive Directors raised some questions to which we responded. But overall, they were supportive of the program, and the authorities’ policies under the program.
Mr. Lipsky, the First Deputy Managing Director who chaired the meeting, summarized the discussions, which are in the press release that you have received.
So I don't want to go into details, given that you have the press release. And I’d like again to repeat that the challenges facing Ukraine are difficult. But there is stability, which has been achieved in the last few weeks. We also think that much has been done by the authorities, the Cabinet of Ministers and their ministries. And, therefore, we look forward to continued dialogue, continued debate, with Ukraine and we’ll be back in Kiev soon for the next review. Let’s see if you have any questions. Thank you.
QUESTIONER: My question is do you feel that the program is now adequately financed, in other words, with the tranche and maybe with some other financing which I frankly may not be aware of.
MS. PAZARBASIOGLU: Thank you for your question. Based on the information we currently have and the developments, the program is adequately financed.
But, as we discussed and you will see in the publications which will come out in the next week, that the next mission will reassess carefully the financing needs of the country.
But I would like to tell you that based on debt roll over experience so far, this is not an issue at this point in time. But, as I said, we will look into this issue during the next review, which we hope to conduct sometime in June.
QUESTIONER: Thanks. Two questions. One is the staff made the recommendation to approve this; they also recommended that the third disbursement be increased to $2.8 billion. I was wondering if the Board signed off on that.
My other question is about the currency policies. It says that there were some waivers of non-observance for various stuff, including exchange rate restrictions and multiple currency practices.
And then down below, it says the National Bank of Ukraine affirmed its commitment to implementing a flexible exchange rate policy and get rid of the limits on flexibility as soon as possible. Can you address what's going on there?
MS. PAZARBASIOGLU: Thank you for the question. As I said, the staff report and the letter of intent and all the documents will be published over the next weeks. The authorities have consented to publication, so you will see all the details.
The Executive Board did approve the rephasing and the access that the IMF staff, together with the authorities, have put together. Accordingly, the next review, or the next disbursement rather, which will be available after 15th of June, is 2.125 billion SDRs, which is approximately US$3 billion.
In terms of exchange restrictions, the authorities have put together a timetable, and most of the restrictions they have already eliminated. And, given the timetable, the Executive Board did approve the authorities’ intention and the request for waivers.
QUESTIONER: What kind of restrictions were they?
MS. PAZARBASIOGLU: Again, all these will be very clear once the documents will be published. But some of these are restrictions such as in terms of amount of Hryvnia that could---that residents can transfer.
There is another restriction on proceeds from the sale of investments. And the authorities have eliminated them and other restrictions which are not in line with the articles of the IMF, which were imposed prior to the approval of the program, are put on a very specific timetable, which again have been put together by the authorities and approved by the Board.
OPERATOR: Thank you. And at this time, we have no additional questions in queue.
MS. PAZARBASIOGLU: What I can do is just quickly summarize what the key discussion points were, and what we would be looking forward in terms of the next review.
The discussions at the Board focused on fiscal policy, the authorities—the revisions in the deficit target to 4 percent of GDP, and that this is economically justifiable, given the contraction.
And, also, there were discussions about exchange rate policy and the central bank’s policies going forward in terms of transparent and announced auctions and also taking measures to avoid disruptive exchange rate depreciation.
The third key issue that was discussed was the restructuring of the banking system—the diagnostic phase that has been completed by the National Bank, and the Executive Directors commended the National Bank for conducting this program in a professional manner; and also going forward the recapitalization of some of the banks, which will be nationalized, as well as the eventual privatization of these banks were discussed.
In terms of the next review, the key issues will be mainly insuring that the authorities continue with prudent fiscal policies, as they have committed, as well as progress on bank restructuring and bank recapitalization. This is a key issue. The financial system has stabilized. The authorities have done much in terms of restoring confidence to the system, and we look forward to working closely with the authorities, both ourselves as well as the World Bank, to ensure that the Ukrainian banking system is restored to operating fully, efficiently, and, therefore, contributing to credit growth and economic growth in general.
We also have had continuous discussions and dialogue with the authorities, which we much appreciate, in terms of sharing of information, as well as discussing policies. And we, ourselves as well as the World Bank, have been providing technical support to the authorities in these challenging times, both in terms of monetary policies, exchange rate policies, fiscal policies, bank restructuring. And this effort will go on.
As I said, these are challenging times for all countries, not only Ukraine, and we are—all departments at the IMF are contributing to provide the technical support necessary to get out of the crisis as soon as possible. Thank you.
[Conclusion of press conference call.]