Photo by Giorgio Trovato on Unsplash

Time is running out for receiving the second tranche from the IMF loan. One expert says that it is unlikely to happen at this point. 

Ukraine has only received 2.1 billion dollars of the 5 million dollar loan program from the International Monetary Fund, IMF, which was agreed upon last year. IMF has withheld payments to Ukraine due to the slow reform progress in the country, which has not been met in full. Kyiv Post writes that the deadline for the next payment of the remaining 3.8 billion dollars is approaching in September, but that there is no deal in sight. 

The National Bank of Ukraine, NBU, recently stated that there are ongoing negotiations between IMF and the Ukrainian government and wrote that a scenario without any deal “would create risks to financing the state budget deficit, especially in the coming years.”

The Ukrainian government says that the negotiations with IMF are progressing and that Ukraine has met all conditions to receive the next tranche. 

“All the conditions that were agreed on were fulfilled in a sense that the Verkhovna Rada passed them (the bills). We can now put a tick ‘okay’ near those questions on the list,” said Oleh Ustenko, who is an adviser for President Volodymyr Zelensky, according to the paper.

The IMF, however, disagrees, pointing out that Ukraine still needs to strengthen several areas, such as the independence of the NBU and that they do more to battle corruption, such as preserving the National Anti-Corruption Bureau, NABU. 

Unlikely that deal will come

The leadership of the IMF will soon go on holiday, and it only leaves one week to reach an agreement. Serhiy Fursa, who is an investment banker at Dragon Capital, told Kyiv Post that he finds the possibility of a new tranche “impossible” at this point. Elina Ribakova, who is a chief economist at the Institute of International Finance based in the U.S, agrees.

“We believe that expecting money by September is optimistic because the IMF’s conditions for Ukraine have not yet been met,” told Ribakova. She added that it will be unlikely for Ukraine to receive any money at all if the case of no-deal now. 

However, the Ukrainian government still hopes that they can reach a staff-level agreement in July, which will then only need final approval by the leadership of the IMF. The problem for Ukraine is that other loans with the EU and the World Bank are tied up to Ukraine reaching an agreement with the IMF. Ukraine has to pay state debt of almost 3.8 billion dollars in September and more later on.

The money from IMF is not only crucial for the state budget of Ukraine. It is also an essential measure for possible foreign investors evaluating business opportunities in Ukraine, said Kristian Andersson, the head of the Swedish bank SEB in Ukraine, to Ukrainenu earlier this year.

“Investors look at cooperation with IMF, and if that is working well, investors take some confidence in that,” Andersson said.

The Ukrainian government has said that it can pay off its debts even without a second tranche from the IMF due to loans it received earlier this year.