By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Wednesday approved a two-year $17 billion loan facility for troubled and cash-strapped Ukraine.
The IMF said its executive board approval Wednesday was under its exceptional access policy and paves the way for immediate disbursement of $3.19 billion.
The Fund said Ukraine’s economic program supported by it aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable.
Following this approval, Christine Lagarde, managing director of the IMF said deep-seated vulnerabilities—together with political shocks—have led to a major crisis in Ukraine. ‘’The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress,’’ she said.
“Showing unprecedented resolve, the authorities have developed a bold economic program to secure macroeconomic and financial stability and address long-standing imbalances and structural weaknesses to lay a firm foundation for high and sustainable growth. The program focuses on (i) maintaining a flexible exchange rate to restore competitiveness; (ii) stabilising the financial system; (iii) gradually reducing the unaffordable fiscal deficit; (iv) eliminating losses in the energy sector, while enhancing social safety nets; and (v) decisively breaking with problematic past governance practices,’’ Lagarde affirmed.
Ukraine has been under pressure from international creditors and the country is expected to use part of the initial disbursement to settle $2.2 billion in back payments to Russian state-controlled OAO Gazprom for natural gas and pay for future imports.
‘’In this context, it is important to reach an early agreement on repayment of accumulated arrears and the gas price dispute with Gazprom to prevent disruptions in energy trade between Russia and Ukraine,’’ the IMF chief said.
According to her, Ukraine plan to eliminate the large quasi-fiscal losses of Naftogaz by 2018 and strengthen the company’s transparency and governance. ‘’To this end, they have embarked on the path of meaningful, broad-based, and sustained gas and heating increases over several years, starting from May 2014,’’ she said.
Lagarde said a strong and comprehensive structural reform package is critical to reduce corruption, improve the business climate, and achieve high and sustainable growth in Ukraine.
She affirmed that the government of Ukraine have already enacted a new public procurement law, reducing room for misuse of public resources and has started the process of addressing governance issues in state-owned companies and are seeking recovery of stolen assets. ‘’They are also planning to build capacity to more effectively conduct enforcement of anti-money laundering and anti-corruption legislation, as well as enhance the effectiveness of the judiciary and tax administration,’’ the IMF MD said.
