The IMF Board of Directors approved a $ 5 billion cooperation program with Ukraine. The stand-by financing program is designed for 18 months.
“I believe that this is our great victory. Everything was completely agreed Last night. The IMF fully accepted our program,” President Zelensky commented on the IMF decision.
According to the representative of Ukraine at the IMF, Vladyslav Rashkovan, the first tranche has already been sent to the accounts of the Ukrainian government. Finally, it will appear on the Cabinet’s accounts “taking into account the time difference and the speed of funds flow in international payment systems.”
Prime Minister Denys Shmygal specified that Ukraine would receive it in “one or two days.”
Now let's move on to the rest of the details.
What is Stand-by?
This type of loan has been granted to IMF member countries since 1952.
Each tranche of financial assistance is issued to the country if it fulfills certain conditions.
The size of the first tranche is $ 2.1 billion. At the same time, Zelensky said that the size of the first tranche was increased from 1.9 billion to the indicated amount due to his agreement with IMF Managing Director Kristalina Georgieva.
The issuance of the remaining funds will be divided into four stages. The second tranche is expected to amount to $ 1.4 billion.
What will the money be used for?
Quote from the IMF website:
“The new program aims to help Ukraine deal 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 to ensure that Ukraine is ready to return to growth after graduation crisis.”
There are four priorities:
- Mitigation of the economic consequences of the crisis, including by supporting households and enterprises;
- Ensuring continued independence of the central bank and a flexible exchange rate;
- Ensuring financial stability in the reimbursement of costs by banking decisions;
- Promotion of key management and anti-corruption measures to preserve and deepen recent achievements.
In May, Yakiv Smoliy, the head of the National Bank, said that all the funds from the tranche received would go towards paying off the state budget deficit.
On the eve of receiving the tranche, Prime Minister Denys Shmygal said that he would be aimed at developing the economy, as well as supporting small and medium-sized businesses.
“The first tranche, of course, is the money that will go to the people, not the bankers. We can use it directly in the budget to overcome the consequences of Covid-19, to develop the economy, to support small and medium-sized businesses. This is money for the development of the economy,” Shmygal assures.
What are we offering in return?
The Ministry of Finance and the National Bank will soon publish a memorandum of cooperation with the IMF. Earlier, according to Serhiy Marchenko, the head of the Ministry of Finance, they did not publish the document, “because it could be perceived as a preemptive decision of the Board of Directors of the Fund.”
Among other things, the memorandum also contains measures that Ukraine needs to implement during the program.
It is expected that the document will be published on Friday, June 12.
Earlier, the presumptive text of this memorandum was published on the blog by MP Oleksandr Dubinsky. The text has a number of requirements for Ukraine. In particular, the continuation of medical and pension reforms, as well as the abolition of restrictions on increasing utility tariffs for the population. However, Ukrainian officials did not comment on the reliability of this text.
Prime Minister Shmygal has already managed to clarify that there is no increase in the retirement age and obligations to raise tariffs in the IMF memorandum.
So let’s wait for Friday.