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KYIV. Nov 6 (Interfax-Ukraine) – The mission of the International Monetary Fund (IMF), led by Gavin Gray, begins on Monday discussions with representatives of the Ukrainian authorities on discussions within the framework of the second review of the Extended Fund Facility (EFF), according to a statement by IMF Resident Representative in Ukraine Vahram Stepanyan.
“An IMF mission, led by Gavin Gray, will today start technical discussions with the Ukrainian authorities on recent economic developments as well as fiscal, financial and structural policies to prepare for the 2023 Article IV Consultation and the second review of the IMF Extended Fund Facility (EFF) Arrangement,” he said, not disclosing other details.
In turn, the National Bank of Ukraine (NBU) said that the mission will work in a hybrid format – offline and online. “The Ukrainian team, which will join the working meetings directly in Warsaw and remotely from Kyiv, will include representatives of the NBU, the Ministry of Finance and other government bodies and institutions,” the central bank said.
According to the NBU, during the second review of the EFF arrangement, the state of Ukraine’s fulfillment of its obligations will be discussed, in particular in the field of fiscal, monetary and exchange rate policy, ensuring financial stability, as well as structural reforms for medium- and long-term economic growth.
“The focus of the meetings, in particular, will be the situation in the country’s financial sector, the results of assessing the stability of the banking sector, the implementation of the Strategy for easing foreign exchange restrictions, the transition to greater exchange rate flexibility and the return to inflation targeting. The results of the transition to a regime of managed exchange rate flexibility and the implementation of risk-based supervision in the financial sector will be discussed,” the National Bank said, listing its agenda items for negotiations with the IMF.
The NBU added that experts will also dwell on the issue of sources of financing Ukraine’s state budget deficit, including international financial assistance and the domestic debt market.
“We are committed to a constructive analysis of the work done and a fruitful discussion regarding further steps. The review will not be easy, but the Ukrainian team has been working coherently and effectively for more than 20 months of full-scale war. We are clearly aware of the critical need to maintain IMF support not only for further financing of budget needs, but also in general, for the development of our country and its European future,” Governor of the NBU Andriy Pyshnyy said, commenting on the launch of the mission.
Based on the results of previous discussions and the mission visit in late September – early October, the IMF generally assessed the implementation of the program positively, expecting a positive decision on a second review in the first half of December if the agreements are fulfilled.
Gray then said that Ukraine has met all quantitative targets for the second review of the program, set at the end of June, and this is an important starting point. According to him, among the structural reforms, the key ones are the adoption in the coming weeks of a law on the restoration of lifelong financial monitoring of politically exposed persons (PEP), as well as amendments to law No. 8401 on the abolition of the 2% single tax on the resumption of tax audits with the possibility of implementation of a risk-based approach.
Among other issues for the success of the second review, Gray also named maintaining the realistic nature of the state budget 2023 and the state budget 2024, generally positively assessing the bills discussed in the Verkhovna Rada, as well as updating the Affordable Loans 5-7-9% state lending program and further progress on the anti-corruption path, in particular, guaranteeing the independence of anti-corruption bodies.
Since then, the Rada has adopted and the president signed the PEP law, as well as amendments to the 2023 state budget to increase its expenses by UAH 317.1 billion. In the near future, the parliament is expected to consider the bill on the state budget 2024 and the bill on the restoration of tax audits in a new edition.
