Tags: Global Economy

Ukraine Expects $2.2B from IMF in 2021

Ukraine expects to receive a $2.2 billion spread across three tranches from the International Monetary Fund (IMF) in 2021. This was a statement from the Central Bank Governor Kyrylo Shevchenko in an interview on Monday.

This is the first time a senior Ukrainian official divulged Kyiv’s expectations since IMF loan talks restarted in December. This came after the programme was derailed last year due to concerns over the pace of reforms.

The Central Bank Governor also disclosed for the first time that the government was planning to issue Eurobonds. These are worth about $2.4 billion in 2021.

He said they expect three tranches, SDR 0.5 billion each. That’s for a total of about $2.2 billion this year and the rest of the money in 2022.

Last June, the IMF approved a $5 billion programme to support Ukraine’s economy. It fell into recession due to the coronavirus pandemic.

When asked whether Kyiv could anticipate receiving money by the end of Q1, Shevchenko said the mission’s work continues. Based on the results of this week, it will be clearer what agreements they are reaching. 

Fulfilling its IMF Commitments

The central bank was fulfilling its International Monetary Fund commitments playing down concerns over the central bank’s independence. Those were on a spotlight last year when his predecessor resigned citing political interference.

However, parliament may need to pass some draft laws as conditions for more loans, without specifying which ones.

The authorities did not discuss a possible extension of the 18-month programme. This followed media reports that Ukraine had asked for this.

The central bank also expects foreign portfolio investors will bring in about $1 billion. That is by purchasing government bonds in the domestic market in 2021.

Shevchenko said there is a new optimism in international markets, and they hope that this optimism will not bypass Ukraine. The central bank kept its key interest rate unchanged in January, at the historically low level of 6% despite rising inflation. The bank predicts it will rise to 7% this year compared to a target of around 5%.

In real terms, interest rates were negative, as they were below the rate of inflation, as a way to stimulate economic growth.

However, Shevchenko said, the central bank is ready to increase the rate to return inflation to the target range.

They would like all market players to know clearly that they will react immediately. If they see further strengthening of fundamental inflationary pressures, the rate will change, Shevchenko added.

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