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No Misappropriation of Ukraine Funds

A Letter to the Editor
By Thomas C. Dawson
Director, External Relations Department
International Monetary Fund

Financial Times
April 12, 2001

Sir, Your article on Ukraine's central bank ("Ukraine reopens case of bank reserves 'misuse'", April 6) neglects the facts and mis-states the role of the International Monetary Fund in assessing the management of Ukraine's foreign reserves during 1997-98.

The financial operations referred to in your article about the Ukrainian prosecutors' new investigation have been covered exhaustively in three independent audits, numerous IMF press releases and the conclusions of the IMF executive board meeting devoted to this issue and published on September 6, 2000. The IMF documents, including summaries of the audits, are available on the IMF website, www.imf.org.

It is not "unclear" where "most" of the Dollars 700m in central bank reserves went. In fact, as detailed in the audits, the positions were simply unwound and the National Bank of Ukraine received all the income streams it was due. (In one minor transaction unrelated to the Dollars 700m, principal could not be recovered because of liquidity problems at a foreign bank.)

No instances of misappropriation of funds were uncovered, as you say in your article. In addition, since 1998 the NBU has instituted procedures for avoiding any similar transactions, including carrying out and publishing audits on a quarterly basis.

Overall, this is hardly a picture of "a case that the IMF has done its best to shut", as your reporter alleges. Specifically on the investigation of the former deputy governor, the individual transactions mentioned publicly by the Ukrainian prosecutor were described and analysed in the audits, and there is no reason for us at this stage to revise our conclusions.




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