International Monetary Fund (IMF) has agreed with Ukraine' government to lend SDR4 billion or around US$5.5 billion for three years period - Photo by President Office

JAKARTA (TheInsiderStories) – International Monetary Fund (IMF) has agreed with Ukraine‘ government to lend SDR4 billion or around US$5.5 billion for three years period. Ukraine had originaly targeted the agreement last September. It said, the program “aims to boost economic growth, to root out corruption actively and to raise the living standards of the citizens.

“I had a very constructive call with President Volodymyr Zelenskyi today. I was pleased to note that IMF staff has reached agreement with the authorities on the policies to underpin a new 3-year, SDR 4 billion (about US$ 5.5 billion) arrangement under the Extended Fund Facility,” said the managing director, Kristalina Georgieva, in an official statement released on Saturday (12/06) after a phone call with the president.

Georgieva adds, this agreement is subject to IMF’ boar management approval.

She continued, “I assured the President of the IMF’ readiness to support the authorities’ policy agenda to maintain macro-economic stability and lift the economy to a path of higher, sustainable, and inclusive growth, including with a new IMF-supported program.”

The head of state said in an official statement, the reforms currently implemented in Ukraine and discussed the terms of the new cooperation program with the Fund. While, Georgieva praised the economic achievements of the new government and the progress made in implementing reforms by the government led by Prime Minister Oleksiy Honcharuk.

With a Russian-backed armed separatist rebellion sapping Ukraine since 2014, IMF assistance has stabilized the economy and lured foreign investors to local government bonds. Zelenskiy will hold his first face-to-face talks with Russian President Vladimir Putin on Monday in Paris, where they’ll be joined by the leaders of Germany and France.

Last October, the IMF and the Ukrainian authorities have reached agreement on economic policies for a new 14-month Stand-By Arrangement. The new scheme will replace the arrangement under the Extended Fund Facility (EFF), approved in March 2015 and set to expire in March 2019.

Building on progress made under the EFF arrangement in reducing macro-economic vulnerabilities, it will focus in particular on continuing with fiscal consolidation and reducing inflation, as well as reforms to strengthen tax administration, the financial sector and the energy sector.

The new program has been developed in close coordination with the World Bank and the European Union (EU), who have parallel operations to support Ukraine. The authorities’ steadfast and effective implementation will be critical for the program to achieve its objectives.

Board consideration is expected later in the year following parliamentary approval of a government budget for 2019 consistent with IMF staff recommendations and an increase in household gas and heating tariffs to reflect market developments while continuing to protect low-income households.

in March, 2015, IMF approved a four-year extended arrangement under the EFF for Ukraine. The arrangement amounts to the equivalent of SDR12.348 billion (900 percent of quota) and was approved under the Fund’s exceptional access policy.

At that time, the approval of the extended arrangement under the EFF enables the immediate disbursement of SDR3.546 billion, with SDR1.915 billion being allocated to budget support.

Ukraine’ economic prospects will improve in the medium-term. Buoyed by restored competitiveness, the current account deficit is projected to stabilize at around 1¼ percent of GDP in 2016–18. By end-2018, inflation will fall to mid-single digits and the central bank will build its international reserves to cover nearly 83 percent of short term debt. Following the debt operation and sustained fiscal adjustment, public debt is expected to decline to around 71 percent of GDP by 2020.

Ukraine’ most prolonged and deadly crisis since its post-Soviet independence began as a protest against the government dropping plans to forge closer trade ties with the EU and has since spurred a global standoff between Russia and Western powers.

After the ouster of President Viktor Yanukovich in Feburary 2014, Russian moves to take control of the Crimean Peninsula signaled Moscow’ intent to retain its sphere of influence and raised serious questions about the ability of the state’s new leaders to provide stability and a path to meaningful reforms.

Yanukovich’ subsequent ouster sowed new divisions between the eastern and western halves of the country, though a new group of transitional leaders promised to form a national unity government and hold elections on May 25, 2014.

Before the new arrangement, EU has announced $15 billion over the next several years conditioned on Ukraine reaching an agreement with the IMF and enacting tough reforms like ending gas subsidies. Washington has promised $1 billion in US loan guarantees and technical assistance.

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