10 Sep 2009 16:41

IMF could defer fourth tranche of stand-by loan to Ukraine, cut off financing

KYIV. Sept 10 (Interfax) - The International Monetary Fund is likely to defer the allocation of the fourth tranche of a stand-by loan for Ukraine and not provide a fifth tranche at all, experts polled by Interfax said.

"The IMF will make a decision on providing the next tranche in late September or early October. If the government does not take real steps by this time to fulfill its commitments to the fund, there is a great likelihood that it will be possible to talk about the fourth tranche being deferred," Concorde Capital economist Nikita Mikhailichenko said.

Commenting on the IMF's requirements, he specifically stressed the need to raise prices on gas and electricity for consumers, reduce budget expenditures and make real steps in resolving the future of troubled banks Ukrprombank and Nadra Bank.

Sokrat analyst Mikhail Salnikov said the issuance of the fourth tranche depends on the fund's loyalty to Ukraine and the government's persistence.

After receiving the fourth tranche, there is a likelihood that the Ukrainian government will try to avoid fulfilling the IMF's directives since it will have already received the bulk of the funds, he said. The IMF, in turn, would likely then refuse to provide the fifth tranche of the loan. He said, however, that the IMF could simply decide not to issue the fourth tranche given Ukraine's violation of previous agreements and also because the peak of payments has already passed.

Andriy Shevchishin, head of the analytical department at TASK investment group, said that the IMF is unlikely to distance itself from Ukraine since the country is an integral part of the global system and the social and financial destabilization there is not beneficial to any foreign donors. "We maintain our expectation that Ukraine will receive the next tranche from the IMF, however the timeline will be pushed back to a later period," he said.