The IMF Executive Council approved an 18-month stand-by program for Ukraine. The total size of the program is about $ 5 billion. The first tranche will be in the amount of $ 2.1 billion; it has already arrived in Ukraine.
The remaining funds will be divided into 4 stages of the program review:
- September 1, 2020.
- December 1, 2020.
- May 15, 2021.
- October 15, 2021.
Under each of these dates, according to the stand-by program, Ukraine must fulfill certain conditions. We will not dwell in detail on what stand-by is in general. Now let’s dwell on what exactly Ukraine will have to do for the sake of this money. Fortunately, a memorandum with the IMF, the publication of which was long-awaited, is finally published by the Ministry of Finance.
For starters, the general disposition.
What is the IMF program focused on?
The Fund said that the program should help Ukraine "to cope with the problems of the Covid-19 pandemic by ensuring a balance of payments and budget support while maintaining achievements and promoting a small set of key structural reforms."
In other words, the task is: to cope with economic problems due to the coronavirus, to carry out reforms. About this Ukraine agreed with the IMF.
What should Ukraine do for this?
There are several points that have already been mentioned more than once. And they became part of the program.
The so-called "anti-Kolomoisky law", that is, a ban on the return of nationalized banks to their former owners.
This law is known to have already been voted and signed by Zelensky. Now it is being disputed in the Constitutional Court.
Land Market Law. It was also adopted back in early March. But now this law is also disputed in the Constitutional Court.
And these, of course, are not all conditions.
An important part of the memorandum with the IMF is the regulation of the Coronavirus Foundation. Ukraine agreed to a number of conditions, in particular, to complete transparency and audit of spending on the fight against Covid-19.
Health care reform will continue. At least Ukraine has made such a commitment.
In 2020, it is planned to do this "by extending the new financing regime to the links of secondary and specialized assistance."
Education reform will be accelerated. In particular, "the optimization of the number of institutions of primary and secondary education" will be carried out. Simply put, the number of schools will be reduced.
Ukraine also promised to "transform the university financing system and tie wages to results."
Pension reform is also promised to be continued.
In particular, Ukraine promises to abstain:
- From the introduction of new special pensions and benefits.
- From the further discretionary increase in payments.
- From the adoption of changes that would lead to a decrease in the effective retirement age.
The memorandum also mentions “the creation of the necessary prerequisites for the introduction of well-regulated private funded pension systems”.
The rule of law will be strengthened. In particular, Ukraine promises that the selection process on judges and disciplinary mechanisms will be carried out by “persons with a high level of competence, trust, and good faith”.
Tariffs for gas from July 1 become similar to the market prices. Heat supply companies will be able to revise tariffs several times a year to match the market.
That is, in the near future we should expect an increase in tariffs for gas and heating.
Privatization will continue. In particular, tenders for the sale AS MINIMUM of two large state-owned enterprises will be announced by the end of December 2020.
About three more enterprises will be put up for sale by the end of June 2021.
Ukraine promises to avoid actions that can be regarded as pressure on the National Bank and emphasizes the need to maintain its independence.
Also, Ukraine "will adhere to the procedures for appointing the head of the National Anti-Corruption Bureau (NABU) and preserving limited and serious reasons for his dismissal."
That is, it seems that the issue of dismissing Artem Sytnyk from the post of head of the NABU has been removed from the agenda.
Moreover, the powers of NABU are going to be strengthened "through the use of a wide range of techniques."
We are talking about "conducting operations undercover, removing information from communication channels, access to computer systems, and controlled delivery systems."
What is it all for?
In a letter of intent, Ukraine indicated that the IMF program is needed to:
- Cover the urgent needs of the balance of payments.
- Cover budgetary needs aimed at responding to unpredictable crisis situations.
It will also help to mobilize international financial support, "especially from the EU and the World Bank."