27 Mar 2023 13:39

Ukrainian govt approves draft EFF memorandum with IMF

MOSCOW. March 27 (Interfax) - The Ukrainian government has approved a draft letter of intent of the government and the National Bank of Ukraine and the International Monetary Fund (IMF) and a draft memorandum on economic and financial policy.

The Ukrainian media said on Sunday with the reference to the government website that the government adopted a respective resolution at a meeting on March 24. The documents are traditionally not published at this stage.

The IMF said on March 21 that a staff-level agreement (SLA) had been reached in regard to a new four-year EFF program for Ukraine totaling SDR11.6 billion (about $15.6 billion). The Fund said that a final decision of the Board of Governors was expected in the coming weeks.

It will be a two-stage program. The first stage will last for 12-18 months and aim at the preservation of stability, while the second stage envisages major structural reforms and aims at growth and European integration.

Ukrainian National Bank Governor Andrei Pyshny presumed that the new program would be endorsed by the IMF Board of Governors by the end of March. Yet the schedule of IMF meetings through March 30 does not include Ukraine for now.

Following a meeting with IMF and World Bank representatives, the group of Ukraine's formal creditors (the Paris Club) provided financial guarantees for the new EFF program on March 23. This includes further standstill in Ukraine's payment of debts to the group members throughout the EFF period (2023-2027). The standstill is conditioned on similar actions of Ukraine's private foreign creditors, mostly Eurobond holders.

The Ukrainian Finance Ministry said on March 24 that the Ukrainian government pledged to take a number of measures in the EFF period to manage the sovereign debt and achieve three objectives, namely, restore debt sustainability, maintain liquidity and reduce the financing gap, and create the necessary conditions for the participation of the commercial sector in the post-crisis recovery.

"The Ukrainian authorities will explore a number of alternate scenarios to ensure the debt payment and maximize the efficiency and success of the process, while being aware of the goal of the soonest restoration of Ukraine's access to the market. The Ukrainian government has hired financial and legal consultants to support the process," the ministry said.

According to the ministry, it is expecting to begin talks with commercial creditors on a new rescheduling at the beginning of 2024, so that the talks could be finalized by mid-2024.

The Paris Club said on July 20, 2022, that it was ready to pause Ukraine's servicing of its sovereign debt until the end of 2023 and urged holders of Ukrainian Eurobonds to grant a two-year redemption deferral, which happened in August 2022.