Ukraine, IMF reach staff level agreement on new $5 bln stand-by arrangement
KYIV. May 22 (Interfax) - The International Monetary Fund (IMF) and the Ukrainian authorities have reached a staff level agreement on economic policies for a new $5 billion Stand-By Arrangement (SBA) to help Ukraine cope with the coronavirus pandemic, the IMF said in a statement early on Friday morning.
"The new SBA, with a requested access of SDR 3.6 billion (equivalent to US$5 billion), aims to provide balance of payments and budget support to help the authorities address the effects of the COVID-19 shock, while consolidating achievements to date, and moving forward on important structural reforms to reduce key vulnerabilities," the statement quoted Ivanna Vladkova Hollar, the head of the IMF staff team negotiating with Ukraine, as saying.
"This will ensure that Ukraine is well-poised to return to growth and resume broader reform efforts when the crisis ends. The arrangement is also expected to catalyze additional bilateral and multilateral financial support," Hollar said.
"The agreement is subject to approval by Fund Management and the IMF Executive Board. Board consideration is expected in the coming weeks," she said.
On Thursday night, Ukrainian President Volodymyr Zelensky signed laws on banking (No. 2571-d) and amendments to the Tax Code (No 1210) to implement a number of provisions of the BEPS plan. Those were the last preconditions met by Kyiv to unlock the new program.
Zelensky, the Ukrainian National Bank, and the previous national government reached a staff level agreement with the IMF in early December 2019 on opening a new three-year EFF program worth of $5.5 billion. It was possible to increase funding to $8 billion. The program was due to replace the 14-month stand-by arrangement worth of SDR 2.8 billion (about $3.9 billion) to support Ukraine through the period of last year's presidential and parliamentary elections. It expired on February 17, 2020.
Ukraine managed to receive only the first tranche of the stand-by funding, SDR 1 billion (approximately $1.4 billion). Two more tranches were planned upon semi-annual reviews, but the election of the new president and the appointment of the new government led to the decision to start the elaboration of a new cooperation program. The IMF did not fund Ukraine in 2019, while Kyiv paid almost SDR 1.4 billion as a result.
The coronavirus pandemic prompted Ukraine and the IMF to start discussing the 18-month stand-by arrangement worth of $5 billion. The new program's approval by the IMF will also entitle Ukraine to macro-financial assistance from the European Union (500 million euros) and a loan from the World Bank (up to $1 billion).
Kyiv expects to start receiving funding from the IMF by the end of this month upon maturity of $1 billion Eurobonds issued five years ago on the U.S. guarantee or in early June.