IMF Executive Board Concludes 2016 Article IV Consultation and Completes Third Review of Ukraine’s EFF, Approving US$1.00 Billion Disbursement

IMF News, April 3, 2017

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Canonical URL: IMF Executive Board Concludes 2016 Article IV Consultation and Completes Third Review of Ukraine’s EFF, Approving US$1.00 Billion Disbursement

The Executive Board completed the third review of Ukraine’s economic program under the Extended Fund Facility (EFF).
Completion of the review enables the disbursement of SDR 734.05 million (about US$1.00 billion).
Total disbursements under the arrangement will reach SDR 6,178.26 million (about US$8.38 billion).
Ukraine’s four-year SDR 12.348 billion (about US$17.5 billion at the time of approval of the arrangement) EFF was approved on March 11, 2015.

The Ukrainian economy is showing welcome signs of recovery: growth is returning, inflation has been brought down, and international reserves have doubled.
Progress is attributed to decisive policy actions, including sound macroeconomic policies.
The recent stabilization provides a promising basis for further growth.

Structural reforms need to be accelerated to achieve faster, sustainable growth and to lift incomes.
Specific reform priorities highlighted:
- Privatization should be initiated.
- Developing a market for agricultural land needs to start.
- Corruption must be tackled decisively; despite creation of new anticorruption institutions, concrete results have yet to be achieved.
- Comprehensive pension reform cannot be delayed much longer, including raising the effective retirement age.
- Sustained efforts are needed to improve revenue administration and advance public administration reform.

Despite a large fiscal adjustment, public debt remains high.
The urgency of structural fiscal reforms to ensure medium-term sustainability has increased as pressures to raise wages and pensions are building.

The National Bank of Ukraine (NBU) has skillfully managed monetary policy during a very challenging period.
Important to safeguard the NBU’s independence and keep monetary policy focused on containing inflation and rebuilding international reserves within a flexible exchange rate regime.
Maintaining monetary focus will make room for the gradual removal of remaining administrative measures.
Impressive progress has been made in rehabilitating the banking system, but continued efforts are required to restore banks’ soundness and reinforce their ability to support growth.
The recent nationalization of Ukraine’s largest bank was an important step to safeguard financial stability; it must now be followed by firm efforts to ensure repayment of loans to minimize the cost to taxpayers.
Recapitalization of other banks and the unwinding of related-party exposures need to be completed.

Ukraine’s international partners have provided substantial financial and technical support; their continued assistance remains important for the success of the program.
Good-faith efforts to resolve the remaining sovereign arrears must continue.

Press Release No. 17/111 — April 3, 2017 — IMF Communications Department