Photo by Ibrahim Boran on Unsplash

The International Monetary Fund agrees to continue talks with Ukraine in September, but an expert says that a deal between the two still remains unlikely. 

Ukraine has only received about half of the 5 million dollar loan program from the International Monetary Fund, IMF, which was agreed upon last year. Payments have stopped for over a year due to slow reform progress in Ukraine, according to the IMF, which has asked Ukraine to do more to battle corruption and make reforms. 

Ukrainenu has previously written about how time is running out to secure the rest of the loan, and Ukrainian President Volodymyr Zelensky recently got personally involved and took direct contact with the IMF to move things along. It seems to have had an effect. 

Yesterday, the Managing Director at International Monetary Fund, Kristalina Georgieva, praised Ukraine for its economic progress. She also agreed to visit Ukraine in September to continue the otherwise stalled talks with Ukraine, writes Kyiv Post

“Very constructive call with President Zelensky on Ukraine’s sound economic progress made under the IMF program. Look forward to our productive engagement to advance our work on remaining issues during a mission in September,” Georgieva wrote on Twitter. 

The cooperation between the IMF and Ukraine went off track soon after the two parties agreed on the loan last year. The IMF made it clear that Ukraine had to secure the independence of the National Bank of Ukraine, NBU. Still, soon after the first tranche was paid, Yakiv Smolii resigned as the head of the NBU, citing political pressure from the Presidential Office as the reason for his resignation. The loan has since been stalled. 

The leadership of the IMF will soon go on holiday, and the loan program will quickly expire, meaning that Ukraine might not receive any money unless they manage to revive talks again. The Ukrainian government hoped to reach a staff-level agreement this month, which would only need final approval by the leadership of the IMF, but that now seems unlikely. 

It might be a new program

The new meeting between the IMF and Ukraine in September does not mean that a deal is in sight. Serhiy Fursa, an investment banker at Dragon Capital, wrote on Facebook that Ukraine still needs to show progress in reform work to convince the IMF. 

“Is there any theoretical possibility for Ukraine to receive money under the IMF program? In theory, yes. But very theoretical. In September, the issue of the budget arises, which will delay the negotiations even further,” he wrote. 

Alexander Paraschiy, head of research at Concorde Capital, agrees

“The call between Zelensky and Georgieva is the only tangible achievement in Ukraine’s talks with the IMF and a clear indicator that Ukraine failed to meet its commitments to the fund, so far. The IMF mission in September gives little chance for Ukraine to get any tranche from the fund by the time the state budget for 2022 is voted on, which is no earlier than late November,” said Paraschiy, “That said, it looks increasingly unlikely that Ukraine will be able to get any tranche under the on-going SBA program (which terminates in December). For Ukraine’s image in the West, this is not good news.”

Kristian Andersson, the head of the Swedish bank SEB in Ukraine, previously told Ukrainenu that the IMF and Ukraine might try to agree on a new loan instead. 

“The current program expires by the end of the year in autumn, and I think that Ukraine and IMF will try to focus on making a new program, probably a longer three-year program, instead,” said Andersson, “Here, it will be interesting to see what will be the demands of the IMF, but they might be getting a little bit tired with Ukraine. They made a program last year, paid one tranche. But Ukraine then did not meet any more demands. So, I think that the next program will be with less money upfront and will clear demands.”