The International Monetary Fund will consider the disbursement of a fresh billion-dollar tranche to Ukraine on Monday, after having assessed the economic impact of Kiev’s decision to ban commercial trade with eastern breakaway regions where government forces are battling Russian-backed separatists.
Jerome Vacher, the IMF’s resident representative in Ukraine, said in a statement early on Thursday:
Consideration of the third review of Ukraine’s arrangement under the Extended Fund Facility by the IMF’s Executive Board, together with the 2016 Article IV consultation, is being scheduled for April 3, 2017. Completion of the third review will enable the disbursement of about US$ 1 billion.
Ukrainian officials said a decision on disbursement from the $17.5bn assistance programme – originally expected in March – was delayed after the Fund’s executive board requested a macroeconomic impact assessment in light of the economic blockade, which has heavily affected the crucial steel, coal and electricity sectors.
In an updated forecast shared with the IMF, Ukraine’s central bank blamed “effects of the trade blockade” for revisions to its 2017 economic growth estimates, which were reduced from 2.8 per cent to 1.9 per cent.
Posting some 2.3 per cent growth in 2016, Ukraine made a fragile recovery from a deep recession that saw its GDP plunge by nearly 17 per cent over the previous two years as Russia occupied the Crimean Peninsula and fomented a proxy separatist war in the country’s industrial eastern heartland. Economists say Ukraine’s chances of securing sustained economic growth hinge on its ability to double down on structural reforms linked to the IMF programme.
To secure continued IMF assistance, Ukraine’s government has pledged to overhaul a dysfunctional pension system, form a functioning agricultural land market and crack down on rampant corruption.