## IMF Survey: Helping Ukraine Avoid a Hard Landing

_IMF News, November 10, 2008_

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**Canonical URL:** [IMF Survey: Helping Ukraine Avoid a Hard Landing](https://www.imf.org/en/news/articles/2015/09/28/04/53/socar111008a)

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## Bibliographic details
- Authors: Camilla Andersen IMF Survey
- Published: November 10, 2008

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### Overview
- A $16.4 billion loan for Ukraine was approved by the IMF's Executive Board on November 5 to help strengthen confidence and restore economic stability after Ukraine was hit by the global financial crisis.
- The program is supported by a two-year Stand-By Arrangement with the IMF and was negotiated after the authorities requested IMF support in mid-October.

### Preconditions and causes of the crisis
- Ukraine's export structure: steel constitutes 40 percent of the country's exports, earning $17 billion a year in revenues.
- Pre-crisis boom factors:
  - Insatiable global demand for steel.
  - Generous incomes policies passed on to the population.
  - Rising capital inflows fueling a consumption boom and a rising current account deficit.
- Overheating indicators by 2008:
  - Inflation running at 25-30 percent.
  - Wages hiked by 30-40 percent.
  - Import bill growing by 50-60 percent.
- Crisis triggers and transmission:
  - Financial crisis hitting the world economy in mid-2008 curtailed access to international capital markets.
  - Currency markets sold off the hryvnia.
  - Credit rating agencies downgraded the country's debt.
  - Ukrainian authorities sought IMF support in mid-October; a tentative agreement was reached later that month using the IMF's emergency lending procedures.

### IMF-supported program components
- Exchange rate policy:
  - Flexible exchange rate to act as a shock absorber and help restore competitiveness.
- Banking sector measures:
  - Recapitalization of viable banks to allow them to resume lending and minimize bankruptcies.
  - Prompt resolution of banks with difficulties to speed recovery of the financial sector.
- Fiscal and incomes policies:
  - Prudent fiscal policy with a government aim to achieve a balanced budget in 2009 (subject to review in light of developments).
  - Phased increases in energy tariffs to support fiscal consolidation.
  - Balanced incomes policy: adjust minimum wage and other social transfers in line with projected inflation.
- Social protection:
  - Increase in targeted social spending amounting to 0.8 percent of GDP to shield vulnerable groups, with the government prepared to expand the safety net if necessary.

### Program goals and expected outcomes
- Three key government goals:
  - Help the economy adjust to the new economic reality through a floating exchange rate and fiscal/incomes measures.
  - Restore confidence and financial stability via bank recapitalization and prompt resolution of troubled banks.
  - Protect vulnerable groups with targeted social spending increases of 0.8 percent of GDP.
- Growth and inflation projections (conditional):
  - The IMF believed the Ukrainian economy could be back at its estimated potential growth rate of 5-6 percent by 2011.
  - Inflation expected to come down to single-digit levels.
  - These projections assume the global economy starts recovering in the second half of 2009.

### Risks and contingency planning
- Downside risks:
  - Recovery could be impeded if global conditions continue to deteriorate.
  - Further deleveraging in global financial markets could hinder recovery.
- Mitigants:
  - The authorities' program is based on conservative assumptions.
  - Contingency plans have been specified to address adverse scenarios.

*IMF Survey: Helping Ukraine Avoid a Hard Landing*

---


## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [IMF approves Ukraine loan](https://www.imf.org/external/np/sec/pr/2008/pr08271.htm)
- [IMF mission chief webcast](https://www.imf.org/external/mmedia/view.asp?eventID=1306)
- [Ukraine and the IMF](https://www.imf.org/external/country/UKR/index.htm)
- [IMF set to lend to Ukraine](https://www.imf.org/external/pubs/ft/survey/so/2008/CAR102608A.htm)
- [Countries in IMF loan talks](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW102208A.htm)
- [IMF ready to lend quickly](https://www.imf.org/external/pubs/ft/survey/so/2008/POL100908B.htm)
- [World must act together](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW101308A.htm)
- [Key issues: IMF lending](https://www.imf.org/external/np/exr/key/lending.htm)
- [emergency lending procedures](https://www.imf.org/external/np/exr/facts/crislend.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar111008a_