IMF Backs Ukraine

The Executive Board of the International Monetary Fund (IMF) completed last Tuesday the fourth review under the Extended Financing Facility (EFF) for Ukraine. As a result, Ukraine will be able to draw up to the equivalent of SDR 190.1 million (Special Drawing Rights, about $246 million at the current exchange rate — Ed.), which the authorities have committed to keep in Ukraine’s SDR account held with the IMF.

Stanley Fischer, IMF First Deputy Managing Director, said this: “The [Ukrainian] authorities are urged to continue with their overall economic strategy, based on a sound budget, tight monetary policy, and the implementation of much-needed structural reforms... Reducing inflation in 2001 will be important for macroeconomic stability. With regard to the exchange rate, the authorities are urged not to target a particular level but to be prepared to accept greater exchange rate flexibility in both directions... The authorities are encouraged to deepen and accelerate efforts in the structural areas in order to reduce the role of the state in the Ukrainian economy and bolster private sector confidence and investment...”

President Leonid Kuchma of Ukraine welcomes the IMF Executive Board’s decision to resume the EFF program for Ukraine, Presidential Spokesman Oleksandr Martynenko told Interfax-Ukraine on December 20. The President stressed that Ukraine continues constructive cooperation with international financial organizations, aiming to promote market reforms and democratic transformations in society.

COMMENTARY

Inna BOHOSLOVSKA, People’s Deputy of Ukraine:

“The clearance of this loan is now of a general political importance. First, the resumption of credit is closely tied with the still unsolved problem of rescheduling Paris Club debts. Secondly, the resumption of IMF funding is one of the conditions imposed by the European Union for the issue of a loan to refurbish the Rivne and Khmelnytsky nuclear power plants. And, thirdly, the granting of this loan can defuse to some extent the domestic political tension caused by Mr. Moroz’s accusations, which could lead to the complete international isolation of this country. We can say this is a showpiece loan granting and a showpiece expression of the fact that the international community still considers Ukraine a partner, without taking into account this political scandal. “There can also negative consequences if the loans are spent the way it has been done in the past. I do not think all the previous IMF funds were utilized to the benefit of Ukraine. We have consumed all the loans given without setting up any new financial, industrial or structural facilities. So if this loan is also to be likewise squandered, if the consumer mentality again prevails over that of the producer, then, naturally, this issue will have negative consequences. But if the government manages to utilize this loan in a proper way, it will only benefit Ukraine.”