Igor Mazepa

Igor Mazepa: IMF stand-by program is necessary for other international creditors to come to Ukraine

Ukraine plans to sign with the IMF a new stand-by program for USD 3.9 bln over a period of 14 months. It should replace the EFF program of expanded financing that concludes in March 2019, under which we received USD 8.5 bln out of USD 17.5 bln that was planned.

Often the IMF signs stand-by programs with states emerging from pre-default status. Does this mean that the IMF has noticed improvement in Ukraine’s economy and is satisfied with the path of reforms? Hardly. The new program is more likely a compromise ahead of the elections and expectedly “turbulent” year. After all, the intensive EFF program proposed introducing systemic reforms and a clear monitoring of Ukraine fulfilling its assumed requirements that, obviously, can’t be conducted in 2019. The stand-by program won’t include widescale reforms: the main thing is for the Ukrainian government not forget to fulfill its obligations that it took upon itself for the previous tranches. (These include household prices for natural gas and restricting the budget deficit to earlier agreed upon limits.) And all for the sake of ensuring economic stability in the country.

Yet unlike the EFF program (under which loans were issued for 10 years), Ukraine will have to return its received funds during the course of five years under the new program. Undoubtedly, such shortened loans are a minus for our country, which is already overburdened with short-term debt.

To speak of Ukraine’s cooperation with the IMF on the whole, Igor Mazepa believes that it’s very important for our country. From the viewpoint of Ukraine’s ability to pay its debt and finance its budget deficit, we don’t have any alternatives to IMF cooperation. Ukraine is suppoed to pay USD 9 bln in foreign debt by the end of 2019, which is impossible without the program of IMF cooperation. Continued IMF cooperation provides conditions for other lenders (the EU, IFIs, private creditors) to come to Ukraine with their money.

Yes, Ukraine continues to remain under IMF control. And our government can’t be happy about that. But the biggest changes in Ukraine, unfortunately, are occurring under the pressure of foreign creditors. It’s unfortunate because both the government, and the public, could have themselves addressed the need for reforms and actively implement them. For as long as that doesn’t happen, it’s positive that there are Western lenders who won’t allow Ukraine to slide off the path of reforms.