Publication: Monitor Volume: 5 Issue: 90

On completing its mission to Ukraine on May 8, the International Monetary Fund (IMF) not only promised Ukraine that it would extend the country’s Extended Fund Facility (EFF) loan–of which some US$500 million has already been received–but also justified Kyiv’s hopes for additional funding. Mission leader Mohammed Shadman-Valavi praised the performance of both Ukraine’s government and the National Bank of Ukraine (NBU) over the last half-year, and said that the economic situation in the country has in fact improved. The IMF Board should convene before the end of this month to approve disbursement of the next tranches of the three-year EFF loan to Ukraine. Further, Shadman-Valavi promised US$360-370 million in addition to the original US$2.2 billion, US$160 of which may be delivered this year (Ukrainian television, May 8; see the Monitor, April 29).

The Fund was apparently unimpressed by a report of a parliamentary ad-hoc commission which insisted that the NBU had misused certain monies received from international financial organizations and called on the bank’s head, Viktor Yushchenko, to resign. President Leonid Kuchma, however, defended Yushchenko, saying that he saw no reason for a dismissal. Kuchma called on the lawmakers to refrain from hasty decisions which might affect the country’s financial stability (Fakty i kommentari, May 8; see the Monitor, May 7).

Ukraine’s financial system is visibly, but only very slowly, recovering from the shock of the August 1998 Russian crisis. The government did apparently manage not to accumulate any new wage arrears last month. The overall economic situation, though, remains precarious. Inflation jumped from 1 percent in March to 2.3 percent in April, the highest level so far this year.

The IMF originally wanted to see reforms in the cabinet of ministers and in the agriculture, energy, and banking sectors as conditions for its continued assistance to Ukraine. None of these reforms have yet been seen, however. The current loans are widely perceived in Ukraine simply as support for Kuchma in the October elections and as encouragement for the current government, which is perceived in the West as market-oriented.–OV