By KYIV. Nov 13 (Interfax-Ukraine) – The International Monetary Fund (IMF) staff and the Ukrainian authorities have reached a staff level agreement (SLA) on an updated list of economic and financial policies for the second review of the four-year Extended Fund Facility, the fund said in a statement on Saturday night.
“All quantitative performance criteria for end-June and indicative targets for end-September were met. The majority of structural benchmarks were also met, paving the way for the Executive Board’s consideration, which would enable disbursement of about $900 million (SDR 663.9 million),” the report says.
“The IMF staff and the Ukrainian authorities also held discussions on the 2023 Article IV consultation, which focused on medium-term policies to lay the groundwork for a sustained, resilient, and green recovery on its path to European Union (EU) accession,” it reads.
“The agreement is subject to approval by the IMF Executive Board, with Board consideration expected in the coming weeks,” Chief of the IMF Mission in Ukraine Gavin Gray said.
“The Ukrainian economy continues to show remarkable resilience and further signs of stabilization as recent economic developments point to a stronger-than-expected economic recovery in 2023 and a substantial disinflation, amid strong reserves and a stable foreign exchange market,” it said.
“Ukraine’s four-year EFF Arrangement, with access of about $15.6 billion (SDR 11.6 billion) was approved on March 31. The IMF-supported arrangement forms part of a much larger international support package for Ukraine that now totals around $122 billion. The EFF continues to provide a strong anchor for the authorities’ economic program, and program performance has been broadly on track despite the extremely challenging backdrop,” Gavin Gray said.
“An extremely challenging environment for public finances persists: the fiscal deficit remains very high, reflecting the economic and social cost of the war, entailing large financing needs. To help meet these spending needs while preserving debt sustainability, key priorities include enacting the law to fully restore tax audits and launching the National Revenue Strategy (NRS) in December as planned. The authorities need to stand ready to take additional revenue measures and should continue their efforts to mobilize financing from the domestic bond market. Timely disbursement of committed external support will be critical for budget financing and macroeconomic stability,” he added.
“The authorities should proceed with the planned commercial debt operations in the timeline envisaged, consistent with the aim of restoring debt sustainability in line with program parameters. Preserving sustainability will also require seeking new borrowing on the most concessional terms possible and delivering a revenue-based medium-term fiscal adjustment,” Gray said.
“The National Bank of Ukraine’s (NBU’s) recent move to managed exchange rate flexibility, in line with its strategy, has proceeded successfully. It is a welcome step toward restoring the pre-war monetary policy framework and helps strengthen the resilience of the economy to external shocks,” he added.
“The financial system remains stable, liquid and highly provisioned thanks to extensive emergency measures, but continued vigilance is warranted given war-related uncertainty. Bank diagnostics, reforms to banking oversight, strengthening the governance of state-owned banks (SOBs), and contingency planning remain high priorities,” the report says.
“Steadfast implementation of structural reforms, including in governance, anti-corruption and public investment management, will be crucial in laying the foundations for strong and sustained growth, and support Ukraine on its path to EU accession. The recent adoption of legislation to restore asset declarations and align the AML/CFT law with the Financial Action Task Force (FATF) standards are important achievements. Momentum on the governance front should be sustained, and legislation to strengthen the autonomy of the Specialized Anti-Corruption Prosecutor’s Office (SAPO) should be adopted in December as planned. Meanwhile, efforts to strengthen the governance of state-owned enterprises should continue. In addition, to support anticipated recovery and reconstruction spending, it will be important to ensure mechanisms for managing donor funding are integrated in budget processes, and in line with best practices on public financial management and transparency,” the chief of the mission said.
