WASHINGTON

The Pak Banker - - COMPANIES/BOSS -

The Ex­ec­u­tive Board of the In­ter­na­tional Mon­e­tary Fund (IMF) to­day com­pleted the first re­view of Ukraine's Ex­tended Ar­range­ment un­der the Ex­tended Fund Fa­cil­ity (EFF). The com­ple­tion of this re­view en­ables the dis­burse­ment of SDR 1,182.1 mil­lion (about US$1.7 bil­lion), which would bring to­tal dis­burse­ments un­der the ar­range­ment to SDR 4.72 bil­lion (about US$6.68 bil­lion).

Ukraine's four-year SDR 12.348 bil­lion (about US$17.5 bil­lion) EFF was ap­proved on March 11, 2015 to sup­port the gov­ern­ment's eco­nomic pro­gram, which aims to put the econ­omy on the path to re­cov­ery, re­store ex­ter­nal sus­tain­abil­ity, strengthen public fi­nances, main­tain fi­nan­cial sta­bil­ity, and sup­port eco­nomic growth by ad­vanc­ing struc­tural and gov­er­nance re­forms, while pro­tect­ing the most vul­ner­a­ble. Fol­low­ing the Ex­ec­u­tive Board's dis­cus­sion, Mr. David Lip­ton, First Deputy Man­ag­ing Di­rec­tor and Act­ing Chair, said the Ukrainian econ­omy re­mains frag­ile, but en­cour­ag­ing signs are emerg­ing. In re­cent months, the ex­change rate has sta­bi­lized, do­mes­tic-cur­rency re­tail de­posits have been in­creas­ing, and the pace of eco­nomic de­cline is mod­er­at­ing. Con­tin­ued pru­dent poli­cies and fur­ther re­forms should al­low the econ­omy to turn the cor­ner and growth to re­sume in the pe­riod ahead.

"Since the ap­proval of a fi­nan­cial ar­range­ment un­der the IMF's Ex­tended Fund Fa­cil­ity, the author­i­ties have made a strong start in im­ple­ment­ing their eco­nomic pro­gram. The mo­men­tum needs to be sus­tained, as sig­nif­i­cant struc­tural and in­sti­tu­tional re­forms are still needed to ad­dress eco­nomic im­bal­ances that held Ukraine back in the past.

"Main­tain­ing an ap­pro­pri­ately tight mon­e­tary pol­icy and build­ing up of­fi­cial for­eign ex­change re­serves will be crit­i­cal to en­trench ex­ter­nal sta­bil­ity and an­chor in­fla­tion ex­pec­ta­tions. As dis­in­fla­tion takes root, mon­e­tary pol­icy can be care­fully eased to sup­port eco­nomic ac­tiv­ity. Re­moval of ad­min­is­tra­tive mea­sures on for­eign ex­change oper­a­tions should pro­ceed in a grad­ual and se­quenced man­ner, once the en­abling con­di­tions are in place.

"Restor­ing a sound bank­ing sys­tem is key for eco­nomic re­cov­ery. To this end, the strat­egy to strengthen banks through re­cap­i­tal­iza­tion, re­duc­tion of re­lated-party lend­ing, and res­o­lu­tion of im­paired as­sets should be im­ple­mented de­ci­sively.

"The author­i­ties rec­og­nize that con­tin­ued fis­cal dis­ci­pline is needed to re­duce risks and strengthen public fi­nances. Strong po­lit­i­cal sup­port should be mo­bi­lized to sus­tain bud­getary con­sol­i­da­tion and energy sec­tor re­forms go­ing for­ward, while en­sur­ing an ad­e­quate so­cial safety net. At the same time, restor­ing debt sus­tain­abil­ity will re­quire the com­ple­tion of a debt op­er­a­tion con­sis­tent with pro­gram ob­jec­tives. The author­i­ties and the hold­ers of their sov­er­eign debt should con­tinue their ef­forts to reach an agree­ment ahead of the next pro­gram re­view. In the event that talks with pri­vate cred­i­tors stall, and Ukraine de­ter­mines that it can­not ser­vice this debt, the Fund could con­tinue to lend to Ukraine con­sis­tent with its Lend­ing-in­toAr­rears Pol­icy.

"Fur­ther sub­stan­tial progress with struc­tural re­forms is es­sen­tial to en­able strong re­cov­ery of pri­vate ac­tiv­ity. In this re­gard, ef­forts to fight cor­rup­tion, im­prove the busi­ness cli­mate, and re­form state-owned en­ter­prises should be stepped up."

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