By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Thursday said it has agreed a $14-18 billion stand-by arrangement with Ukraine.
Nikolay Gueorguiev, mission chief for Ukraine said in a statement that the deal will further unlock credits to worth $27 billion over the next two (2) years.
“The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board. Consideration by the Executive Board is expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,’’ Gueorguiev said.
According to him, Ukraine’s macroeconomic imbalances became unsustainable over the past year. Ukraine until recently pegged and overvalued exchange rate drove the current account deficit to over 9 percent (9%)of gross domestic product (GDP), and a lack of competitiveness led to the stagnation of exports and GDP.
The IMF’s mission chief for Ukraine affirmed that with significant external payments and limited access to international debt markets, international reserves fell to a critically low level of two month of import in early 2014. ‘’The 2013 fiscal deficit was 4½% of GDP, and the government accumulated sizeable expenditure arrears. The 2013 deficit of the state-owned gas company Naftogaz reached nearly 2% of GDP, driven by the sharp increase in sales at below-cost prices. Without policy action, the combined budget/Naftogaz deficit would widen to over 10% of GDP in 2014,’’ he said.
Gueorguiev further affirmed that following the intense economic and political turbulence of recent months, Ukraine has achieved some stability, but faces difficult challenges. ‘’To safeguard reserves and address currency overvaluation, the National Bank of Ukraine (NBU) floated the exchange rate in February. Measures implemented in February and March helped stabilise financial markets and ensured that critical budget payments have been met. Nonetheless, the economic outlook remains difficult, with the economy falling back into recession. With no current market access, large foreign debt repayments loom in 2014-15,’’ the IMF chief said.
