Press Release: IMF Managing Director Issues Statement on Ukraine

IMF News, June 12, 2015

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Canonical URL: Press Release: IMF Managing Director Issues Statement on Ukraine

Date of statement: June 12, 2015.
Program period: 2015–18.
Program supported by: exceptional financing from the IMF under the recently approved extended arrangement (EFF), and financial assistance from the EU, U.S., other International Financial Institutions, and bilateral partners.
Program objectives include: substantial fiscal consolidation, energy sector reforms, rehabilitation of the banking system, build-up of the National Bank of Ukraine’s (NBU) international reserves to prudent levels, and improvement of the business environment to enhance productive potential.

IMF policy requirement for program review: an assessment that the program is fully financed and public debt is sustainable with high probability.
Debt operation announced by the authorities aims to achieve three objectives:
- (i) generating $15.3 billion in public sector financing during the program period;
- (ii) bringing the public and publicly guaranteed debt/GDP ratio to under 71 percent of GDP by 2020;
- (iii) keeping the budget’s gross financing needs at an average of 10 percent of GDP (maximum of 12 percent of GDP annually) in 2019–25.
Rapid completion of the debt operation with high participation by private creditors is described as vital because Ukraine lacks the resources under the program to fully service its debts on the original terms.

To ensure economic and financial stability, objectives must be achieved in a manner consistent with maintaining a strong international reserves position over the medium term, in line with program projections.
The NBU’s international reserves cannot be used for sovereign debt service without the government incurring new debt, which would be inconsistent with the objectives of the debt operation.
The statement highlights that Ukraine’s debt repayment capacity is limited by its fiscal capacity.

Achieving financing and debt-sustainability objectives depends critically on financial support from Ukraine’s private creditors, in addition to official assistance.
The IMF encourages voluntary pre-emptive agreements in debt restructurings.
If a negotiated settlement with private creditors is not reached and the country determines that it cannot service its debt, the Fund can lend to Ukraine consistent with its Lending-into-Arrears Policy.

The Ukrainian authorities face large challenges, including substantial macroeconomic risks stemming from the unresolved conflict in the East.
Authorities have reaffirmed determination to tackle economic imbalances and deepen structural reforms to achieve robust and sustainable growth.
The Managing Director indicates that the program warrants support from the international community, including the private sector, which is characterized as indispensable for success.

Press Release No. 15/272 — IMF Communications Department, June 12, 2015.