IMF Executive Board Completes First Review Under Stand-By Arrangement for Ukraine, Approves Extension of the Arrangement

November 22, 2021

Washington D.C: The Executive Board of the International Monetary Fund (IMF) completed today the first review of Ukraine’s economic performance under the 18-month Stand-By Arrangement (SBA) that was approved on June 9, 2020. The completion of the review allows the authorities to draw the equivalent of about US$699 million (SDR 500 million), bringing total disbursements under the current SBA to about US$2.8 billion (SDR 2 billion).

The Board also approved an extension of the Stand-By Arrangement to end-June 2022 and a rephasing of program disbursements as well as the Ukrainian authorities’ request for a waiver for non-observance of the December 2020 performance criterion on government guaranteed debt in light of the corrective actions already taken.

Ukraine’s IMF supported economic program aims to help the authorities address the effects of the COVID-19 shock, sustain the economic recovery, and move ahead on important structural reforms to reduce key vulnerabilities.

In particular, under the agreed policy priorities the Ukrainian authorities are committed to (i) returning fiscal policies to settings consistent with medium-term debt sustainability while protecting the socially vulnerable, strengthening revenue administration, and reducing fiscal risks from quasi-fiscal operations, including in the energy sector; (ii) safeguarding central bank independence and focusing monetary policy on returning inflation to its target; (iii) ensuring banks’ financial health, including through good governance, with the goal of reviving sound bank lending to the private sector; (iv) tackling corruption and pushing forward with the implementation of judicial reform; and (v) reducing the role of the state and vested interests in the economy to improve the business environment, attract investment and raise the economy’s potential.

Following the Executive Board’s discussion on Ukraine, Ms. Antoinette Sayeh, Managing Director and Acting Chair, issued the following statement:

“The Ukrainian authorities’ program was successful in augmenting fiscal space in 2020 and providing a liquidity backstop by boosting reserves. This allowed the authorities to deploy a strong policy response that cushioned the economic and social impacts of the COVID-19 pandemic while preserving macroeconomic and financial stability.

“The authorities took important corrective actions to address program slippages. Progress has been made in strengthening the de jure independence of the central bank, restoring the integrity of anti-corruption institutions, and implementing the structural reform agenda.

“Risks to the program remain high, including global uncertainty and vested interests. The authorities’ strong ownership as well as full and timely implementation of agreed reforms is crucial to ensure the success of the program.

“Going forward, the authorities’ plans to continue the gradual fiscal consolidation to rebuild fiscal buffers remain essential. The planned tax reforms should be accompanied by decisive measures to contain fiscal risks from off-budget spending and quasi-fiscal activities in the energy sector.

“Maintaining the effective autonomy and governance of the National Bank of Ukraine—a key achievement of previous programs—is paramount. This will aid monetary policy in ensuring that currently high inflation does not become entrenched. Greater efforts are needed to further enhance the transmission of monetary policy, allow exchange rate flexibility, and accumulate reserves. Rebuilding the central bank’s supervisory capacity is also key.

“Improving governance and the rule of law is a key policy priority. Progress on this front requires the full implementation of the enacted law to reform the High Council of Justice. The authorities also plan to strengthen corporate governance frameworks in state-owned enterprises and banks, boost asset recovery from failed banks, and press ahead with the privatization agenda.”

IMF Communications Department

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