The program of the International Monetary Fund (IMF) on the support of Ukraine is a key factor of the creditworthiness as it mitigates law outside liquidity and reduces the risks of the refinancing as the international rating agency Fitch Ratings reported.
The agency emphasized that the increase of the exchange rate and monetary policy that was oriented for the stability of the prices and bank settlement promoted the improvement of the macro-economic stability of Ukraine.
It is noted that the law outside liquidity is the key weakness of the sovereign credit. The flexibility of the exchange rate and moderate external imbalances should restrict the short-term pressure of the balance of payments but the IMF program is the key to the observation of the international reserves and increase of the amount of the payments on the sovereign debts.
"Pension reform, an updated privatisation bill, and passing a law to set up an independent anti-corruption court, including an amendment to meet international commitments, highlight the government's efforts to finalise the review. The main outstanding issues are potential modifications to the 2018 budget to meet the programme's 2.5% of GDP deficit target, and adjusting household heating tariffs," the report says.
The agency provided that the index of the profitability improved in the second half of 2018 in Ukraine, however, probably, it will be needed to hold the underestimation of costs for the achievement of the deficit target levels. The end of the consideration of the program will allow to pay the fourth IMF tranche (possibly $1,9 billion) and increase the reserves and unblock other multilateral and potentially market financial funds.
" Sovereign external debt amortisations are USD1.8 billion for the rest of 2018 and increase to USD3.3 billion in 2019 and USD3.9 billion in 2020 (including bond repayments of USD1.6 billion in September 2019 and USD2.4 billion in 2020)".
Fitch does not expect that the further IMF payments will surpass the fourth tranche as the program will end in 2019.
At the same time, it is emphasized that the continuation of the cooperation with the IMF and international partners will play an important role for the maintenance of the improving of the macro-financial stability, restriction of the reforms and safe access to the official and market financing.
Ukraine cooperates with the IMF since 1992. Kyiv got nine tranches during this time.
Ukraine partially repaid the IMF under the stand-by program of 2014. Kyiv repaid two tranches - $37 billion and $87 billion.
The loan program for Ukraine in the amount of $17,01 billion was approved by the IMF at the end of April 2014. The first tranche of the stand-by loan in the amount of $3,19 billion was sent to Ukraine at the beginning of May.
The IMF Board of Directors approved the allocation of $17,5 billion for Ukraine in March 2015 by the EFF (Extended Fund Facility) four-year program instead of the stand-by program.
The stand-by program was replaced by the “scheme of extended funding” due to the long-term need of Ukraine’s pay balance.
Ukraine received the first $5 billion tranche under this program in March of 2015, the second one – $1,7 billion in August of 2015, the third one - $1 billion in September of 2016, and the fourth one - $1 billion in April of 2017.