{
  "title": "IMF Survey : Ukraine Unveils Reform Program with IMF Support",
  "publication": "IMF News, April 30, 2014",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sonew043014a",
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  "summary": "Ukraine unveiled a comprehensive program of economic reforms, backed by a $17.01 billion IMF loan approved on April 30 by the institution’s Executive Board.",
  "publishDate": "2014-04-30",
  "sections": [
    {
      "heading": "Overview and financing",
      "content": "- IMF Executive Board approved a $17.01 billion loan on April 30.\n- Loan is under a two-year Stand-By Arrangement.\n- $3.2 billion made immediately available; the remainder subject to frequent reviews.\n- Stand-By Arrangement entails exceptional access amounting to 800 percent of Ukraine's IMF quota.\n- Program expected to unlock additional international official assistance and restore private investor confidence."
    },
    {
      "heading": "Program objectives",
      "content": "- Restore macroeconomic stability.\n- Promote sustainable growth.\n- Strengthen economic governance and transparency.\n- Address deep-seated structural problems and vulnerabilities.\n- Emphasize capacity building to improve policy design and implementation."
    },
    {
      "heading": "Key reform areas and commitments",
      "content": "- Exchange rate and monetary policy\n  - Maintain a flexible exchange rate to restore competitiveness and foster accumulation of reserves.\n  - Focus monetary policy on domestic price stability.\n  - Keep public and minimum wage increases in line with productivity growth.\n\n- Financial sector and banking\n  - Maintain confidence in the financial system.\n  - Strengthen infrastructure for financial regulation and supervision.\n  - Ensure banks strengthen their balance sheets as necessary.\n\n- Fiscal policy and public finances\n  - Meet near-term fiscal obligations and gradually reduce the fiscal deficit.\n  - Stabilize budget revenue and embark on a medium-term fiscal adjustment path that distributes the burden equitably.\n  - Public debt placed on a declining path from 2015 on.\n\n- Energy sector\n  - Achieve a self-sustained energy sector and reduce its fiscal drain.\n  - Eliminate Naftogaz’s deficit by 2018 as a key benchmark toward energy independence.\n  - Raise Naftogaz revenue and reduce costs, increase gas and heating retail tariffs gradually, and implement structural and governance reforms in Naftogaz.\n\n- Governance and structural reform\n  - Implement comprehensive structural reforms including public procurement and tax administration.\n  - Reduce corruption, improve the business climate, and support high and sustainable growth."
    },
    {
      "heading": "Fiscal measures to reduce the deficit",
      "content": "- Expenditure-side measures (emphasis)\n  - Suspend unaffordable wage and pension increases planned by previous government.\n  - Reduce public employment through attrition.\n  - Achieve savings on government purchases enabled by a new procurement law.\n  - Rationalize social assistance spending through better targeting and means testing.\n\n- Revenue-side measures\n  - Eliminate fraudulent tax evasion schemes.\n  - Shift to uniform excises on fuel.\n  - Increase excises on alcohol and tobacco.\n  - Close value-added tax loopholes.\n\n- Rationale and sequencing\n  - Without measures, combined deficit of government and Naftogaz would have reached 12 percent of GDP in 2014.\n  - Program targets a moderate structural fiscal adjustment; the budget deficit will increase between 2013 and 2014 taking into account the weaker economy.\n  - Emphasis in 2015-16 on gradual expenditure-led fiscal consolidation combined with measures to enhance public sector efficiency."
    },
    {
      "heading": "Energy prices, tariff increases, and social protection",
      "content": "- Baseline energy subsidy and price facts\n  - Overall energy subsidies estimated at 7½ percent of GDP in 2012.\n  - Current gas price for households in Ukraine is $85 for one thousand cubic meter.\n  - Russia household gas price is $158 for one thousand cubic meter.\n  - January 2014 regional prices: Romania $ 414, Moldova $ 432, Poland $ 687 for one thousand cubic meter.\n  - Prices in Ukraine are 4 to 9 times lower than in neighboring gas-importing economies.\n\n- Tariff policy and impacts\n  - Envisaged gas and heating tariff increases are gradual but meaningful and broad-based.\n  - Even after programmed increases in 2014, household prices will remain several times lower than in other gas-importing European countries.\n  - Increases will lead to comparatively moderate increases in the share of household budgets spent on utilities.\n\n- Protection for the vulnerable\n  - Government launching a new social protection program: eligible families receive a benefit equal to the difference between pre- and post-increase gas and heating bills.\n  - 4.5 million families—about 27 percent of the total—will receive government support through existing and new social assistance schemes.\n  - In cooperation with the World Bank, social assistance benefits will be re-prioritized to a well-targeted means-tested framework.\n  - For a fraction of the cost of existing utility subsidies, the government could fund additional social assistance programs that would substantially reduce poverty."
    },
    {
      "heading": "Governance, transparency, and anti-corruption measures",
      "content": "- Policy measures include:\n  - Adoption of a new procurement law to reduce exemptions from regular competitive procedures.\n  - Measures to facilitate value-added tax refunds for businesses.\n  - High-frequency audits of Naftogaz’s accounts.\n- IMF will prepare a comprehensive diagnostic study to assess governance arrangements, identify areas for strengthening, rank priorities, and propose remedial measures and time frames for implementation, likely supported under the program."
    },
    {
      "heading": "Risks, ownership, and implementation capacity",
      "content": "- Context and risks\n  - Ukraine experiencing its second major economic crisis in six years.\n  - Vulnerabilities included an overvalued exchange rate, loose fiscal policy, sizable Naftogaz losses, large twin deficits, rising indebtedness, recurrent external financing difficulties, and reserve depletion.\n  - Considerable uncertainties and risks exist from outside (e.g., geopolitical tensions) and within (vested interests).\n\n- Ownership and capacity\n  - Authorities have taken strong ownership of economic reforms and implemented upfront actions demonstrating commitment.\n  - Success hinges on unwavering commitment despite resistance from entrenched vested interests.\n  - Program design includes measures to mitigate identified risks.\n\nIMF Survey: Ukraine Unveils Reform Program with IMF Support — April 30, 2014\n\n---\n\n Content in this bundle\n\n- Cr14106pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- In The News\n- IMF Country Focus\n- Read Press Release\n- Blog: Stabilizing Ukraine\n- Ukraine and the IMF\n- IMF quota\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sonew043014a"
    }
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    "Published: April 30, 2014",
    "IMF Executive Board approved a $17.01 billion loan on April 30.",
    "Loan is under a two-year Stand-By Arrangement.",
    "$3.2 billion made immediately available; the remainder subject to frequent reviews.",
    "Stand-By Arrangement entails exceptional access amounting to 800 percent of Ukraine's IMF quota.",
    "Program expected to unlock additional international official assistance and restore private investor confidence.",
    "Restore macroeconomic stability.",
    "Promote sustainable growth.",
    "Strengthen economic governance and transparency.",
    "Address deep-seated structural problems and vulnerabilities.",
    "Emphasize capacity building to improve policy design and implementation.",
    "Exchange rate and monetary policy",
    "Financial sector and banking",
    "Fiscal policy and public finances",
    "Energy sector",
    "Governance and structural reform",
    "Expenditure-side measures (emphasis)",
    "Revenue-side measures",
    "Rationale and sequencing",
    "Baseline energy subsidy and price facts",
    "Tariff policy and impacts",
    "Protection for the vulnerable",
    "Policy measures include:",
    "IMF will prepare a comprehensive diagnostic study to assess governance arrangements, identify areas for strengthening, rank priorities, and propose remedial measures and time frames for implementation, likely supported under the program.",
    "Context and risks",
    "Ownership and capacity",
    "[Cr14106pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2014/_cr14106pdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[In The News](https://www.imf.org/en/news/search)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[Read Press Release](http://www.imf.org/external/np/sec/pr/2014/pr14189.htm)",
    "[Blog: Stabilizing Ukraine](http://blog-imfdirect.imf.org/2014/04/30/stabilizing-ukraine/)",
    "[Ukraine and the IMF](http://www.imf.org/external/country/UKR/rr/index.htm)",
    "[IMF quota](http://www.imf.org/external/np/exr/facts/quotas.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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