## Press Release: IMF Announces Staff Level Agreement with Ukraine on US$14-18 Billion Stand-By Arrangement _IMF News, March 27, 2014_ ## Source details **Canonical URL:** [Press Release: IMF Announces Staff Level Agreement with Ukraine on US$14-18 Billion Stand-By Arrangement](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr14131) ## Other formats - [Markdown version](/en/news/articles/2015/09/14/01/49/pr14131/index.md) - [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr14131/index.json) - [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr14131/bundle-manifest.json) ## Bibliographic details - Authors: Arrangement Press Release No. - Published: March 27, 2014 --- ### Summary - IMF mission worked in Kyiv during March 4-25 to assess the economic situation and discuss an economic reform program. - Mission Chief for Ukraine: Nikolay Gueorguiev. - Date of release: March 27, 2014. - The mission reached a staff-level agreement on a two-year Stand-By Arrangement (SBA). - Financial support from the broader international community unlocked by the program amounts to US$27 billion over the next two years. - IMF assistance under the program will range between US$14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for. - The agreement is subject to approval by IMF Management and the Executive Board; Executive Board consideration is expected in April following adoption of a package of prior actions by the authorities. ### Macroeconomic assessment and key statistics - Exchange rate policy (until recently): pegged and overvalued. - Current account deficit: over 9 percent of GDP. - International reserves fell to a critically low level of two months of import in early 2014. - 2013 fiscal deficit: 4½ percent of GDP. - 2013 deficit of the state-owned gas company Naftogaz: nearly 2 percent of GDP. - Without policy action, combined budget/Naftogaz deficit would widen to over 10 percent of GDP in 2014. - Large foreign debt repayments loom in 2014-15. - Economic outlook: economy falling back into recession; no market access at present. ### Program objectives - Restore macroeconomic stability. - Put the country on a path of sound governance and sustainable economic growth. - Protect the vulnerable in society. - Focus areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; governance, transparency, and the business climate. ### Monetary and financial sector measures - Exchange rate: National Bank of Ukraine (NBU) floated the exchange rate in February to safeguard reserves and address currency overvaluation. - Monetary policy: will target domestic price stability while maintaining a flexible exchange rate to eliminate external imbalances, improve competitiveness, support exports and growth, and facilitate gradual rebuilding of international reserves. - Inflation framework: NBU plans to introduce an inflation targeting framework over the next twelve months to firmly anchor inflation expectations. - Financial sector reforms will focus on: - (i) ensuring that banks are sound, liquid, and well-capitalized; - (ii) upgrading the regulatory and supervisory framework of the NBU, including complying with international best practice and supervision on a consolidated basis; - (iii) facilitating resolution of non-performing loans in the banking sector. ### Fiscal policy and projections - Short-term: fiscal policy will secure priority spending during the coming months. - Medium-term: implement deeper fiscal adjustment over the medium-term. - Initial stabilization in 2014 will be achieved through a mix of revenue and expenditure measures. - For 2015-16, the program envisions a gradual expenditure-led fiscal adjustment—proceeding at a pace commensurate with the speed of economic recovery and protecting the vulnerable—aiming to reduce the fiscal deficit to around 2½ percent of GDP by 2016. ### Energy sector reforms - Aim: reduce the sector’s fiscal drag, attract new investment, and enhance efficiency. - Key step: commitment to step by step energy reform to move retail gas and heating tariffs to full cost recovery, along with early action towards that goal. - Mitigation: scaled up social protection to mitigate the impact on the most vulnerable. - Additional measures: improve the transparency of Naftogaz’s accounts and restructure the company to reduce costs and raise efficiency. ### Governance, transparency, and business climate - Central elements of the program include: - adoption of a new procurement law to close loopholes allowing evasion of a competitive procedure; - measures to facilitate VAT refunds to businesses; - an independent quarterly audit of the Naftogaz accounts. - Coordination: measures will be fully developed with assistance from the World Bank, EBRD, and other international financial organizations. - IMF commitment: prepare a comprehensive diagnostic study covering the anti-corruption and governance framework, the design and implementation of laws and regulations, the effectiveness of the judiciary, and tax administration. ### Implementation and conditionality - Program success depends on steadfast implementation of the authorities' economic reform program. - The package of prior actions by the authorities is a precondition for Executive Board consideration in April. - The program is expected to unlock US$27 billion in broader international support over the next two years, including IMF assistance of US$14-18 billion. *Press Release No. 14/131 — March 27, 2014. IMF COMMUNICATIONS DEPARTMENT. Media Relations.* --- ## Content in this bundle - [Pr14131apdf (PDF)](/-/media/websites/imf/imported/external/arabic/np/sec/pr/2014/pr14131apdf.pdf){rel="external" type="application/pdf"} - [Pr14131cpdf (PDF)](/-/media/websites/imf/imported/external/chinese/np/sec/pr/2014/pr14131cpdf.pdf){rel="external" type="application/pdf"} - [Pr14131jpdf (PDF)](/-/media/websites/imf/imported/external/japanese/np/sec/pr/2014/pr14131jpdf.pdf){rel="external" type="application/pdf"} - [Pr14131rpdf (PDF)](/-/media/websites/imf/imported/external/russian/np/sec/pr/2014/pr14131rpdf.pdf){rel="external" type="application/pdf"} --- ## References - [Ukraine and the IMF](http://www.imf.org/external/country/UKR/index.htm) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr14131_