Press Release No. 10/511

IMF Completes First Review Under Stand-By Arrangement with Ukraine and Approves €1.2 Billion Disbursement

December 22, 2010

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Ukraine’s economic performance under the program supported by a Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of SDR 1 billion (about €1.2 billion, or US$1.5 billion). Drawing the full amount would bring total disbursements under the program to SDR 2.25 billion (about €2.6 billion, or US$3.4 billion).   

Ukraine’s 29-month SBA was approved on July 28, 2010, in the amount of SDR 10 billion (about €11.7 billion, or US$15.3 billion) in support of the authorities’ economic adjustment and reform program (see Press Release No. 10/305). The SBA entails exceptional access to IMF resources, amounting to 728.9 percent of Ukraine’s quota in the Fund.

Following the Executive Board’s discussion of Ukraine, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, made the following statement:

“Ukraine’s satisfactory performance under the economic program supported by the Stand-By Arrangement, along with strong policy commitments for the coming year, are supporting a steady recovery in confidence and broadening of economic activity. The authorities remain committed to timely implementation of fiscal, energy, and financial sector reforms that are essential to achieve program objectives. Sustained implementation of reforms will help entrench macroeconomic stability, boost confidence, facilitate access to capital markets, and promote more balanced and robust growth.

“Fiscal adjustment remains at the core of the program. In the near-term, swift approval of the 2011 budget consistent with program targets, along with tight control over budget execution and efforts to improve tax administration, will be crucial. Longer term fiscal sustainability depends crucially on structural reforms in the areas of pension, public administration, and state-owned enterprises. In this regard, the timely approval and implementation of the pension reform legislation submitted to parliament will be key.

“Recent steps to strengthen the financial position of Naftogaz, including through revenue collection improvements, are also important. Further efforts, including gas price increases and structural reforms, are needed to create a more viable and transparent energy sector.

“Important progress has been made in rehabilitating and restoring confidence in the financial system, including private bank recapitalization and steps toward strengthening the supervisory framework. It is now timely to expedite the implementation of measures necessary to tackle the problem of sizeable impaired assets in the banking system that are hindering financial sector’s support for a sustainable economic recovery.”