IMF to arrive in Kyiv on Jan. 8, president sees loan stabilizing hryvnia

An IMF team will begin work in Kyiv on Jan. 8, a day after the Orthodox Christmas holiday, according to a Dec. 29 statement released by the IMF mission to Ukraine, which said it expects to conclude its work before the end of January. The IMF is “moving expeditiously” to continue discussions with Ukrainian authorities on its economic reform program, the statement said.



In other news, Ukrainian President Petro Poroshenko commented that the hryvnia will strengthen against the U.S. dollar as soon as the Ukrainian government signs an agreement to receive the next IMF loan tranche. The current rate of UAH 17-19/USD has a significant panic component, he said. The exchange rate was UAH 8/USD at the year’s start.



Alexander Paraschiy: We agree that uncertainty was one of drivers that led to deep devaluation of the Ukrainian currency in 2014, via outflow of dollar deposits from banks, a decreased rollover rate for international loans and excessive cash retail demand for U.S. dollars. But other important components were heavy hryvnia printing to support state expenditures and banking system stability, as well as an inconsistent central bank policy overall that led to significant deterioration of international reserves by the year’s end.



Clearly, continuing IMF cooperation can become a factor that will decrease panic on the currency market, but we see a lot has to be done to restore this cooperation. In particular, the government will have to significantly adjust the state budget, adopted in a rush on the early morning of Dec. 29, which assumes heavy printing of the local currency next year again (at least UAH 130 bln, vs. UAH 150 bln printed in 2014).



The 2015 budget as it is now doesn’t meet IMF requirements, and we do not believe the IMF will provide new lending to Ukraine unless it’s brought in accordance. The current mission will work with Ukrainian officials to adjust it by Feb. 15, which is a deadline announced by Prime Minister Arseniy Yatsenyuk in remarks on Dec. 29.



All this implies Ukraine will receive new money from the IMF in late February 2015, at the earliest. Clearly, this is a significant delay, as compared to the expectations of the loan arriving in late December, as expressed by top officials just a month ago. The late February arrival is discouraging news for the country, whose international reserves are at about USD 7.5 bln, or about 1.5 month of future imports, at the moment.

Источник: Конкорд Капитал