The IMF May Deny the Tranche for Ukraine in 2018

Florian Jenward
Created by Florian Jenward
On Aug 27, 2018
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The issue on another tranche for Ukraine as well as its size is still open. The breach of the demands, which are obligatory to get the next tranche, turned out to be the stumbling block in the dispute between the government in Kiev and the IMF. To recap, the main requirements are the creation of an anti-corruption court in Ukraine, the increase in domestic gas tariffs, the adoption of the law on the privatization, and the implementation of the land reform. At the moment, only one requirement (the adoption of the law on the privatization) of four has been carried out by Ukraine. This was stated in the letter, sent by the IMF Managing Director Christine Lagarde to the Prime minister of Ukraine Volodymyr Groysman.

Also, Lagarde expressed her dissatisfaction with the fulfillment of the Ukraine's obligations on pension system reforming and called on Poroshenko to stick to the terms. However, the Ukrainian government doesn't hurry to fulfill the previously reached agreements, allegedly being afraid of the reaction of the society and exercising caution on the threshold of Presidential elections. Obviously, such moves like a greater increase in the retirement age, the reductions of preferences for some social groups, and the abolition of the social pays for those pensioners who still work are unwanted for the Ukrainian authorities and may negatively impact the President Poroshenko's rating. It also refers to the increase of the domestic gas tariffs. Kiev does its best to avoid the alignment of prices to the European level, explaining its actions with the financial inability of many Ukrainians to pay for the public services.

However, the debtor status imposes some obligations on Ukraine and greatly limits its freedom to perform as well as the tactical gap. In 2017, the state debt of Ukraine to the IMF has reached about twelve billion dollars, but the current status of the Ukrainian economy doesn't allow paying off even a small part of it. There is the only way out from the situation for Ukraine. It's to use next tranche (and apparently not only one) to solve the internal problems. Thus, sooner or later, Ukraine will be forced to fulfill all requirements of the IMF.