IMF agrees to $14.9-bn stand-by arrangement for Ukraine

The International Monetary Fund (IMF) mission to Ukraine has agreed to release a loan of $14.9 billion under a two and half-year stand-by arrangement (SBA) to help the country emerge from the ravages of the global recession.

The loan agreement reached on 3 July with the authorities is subject to approval by IMF Management and the Executive Board in late July, following approval of legislative changes relating to the budget and financial sector by the Ukrainian government.

''The goal of the authorities' economic programme is to entrench fiscal and financial stability, advance structural reforms, and put Ukraine on a path of sustainable and balanced growth.'' said Thanos Arvanitis, IMF Mission Chief for Ukraine after completing a two-week mission in Kiev.

Ukraine must make fiscal adjustment to contain the 2010 consolidated general government deficit to 5½ per cent of GDP in 2010 and 3½ per cent in 2011 with a view to setting public debt firmly on a declining path.

The fiscal adjustment is to be achieved by tax and social security structural reforms, reduce expenditure and improve tax administration.

IMF expects Ukraine to focus financial sector reforms on restoring the health of the banking system, including by ensuring an adequate level of capitalisation, strengthening the independence of the National Bank of Ukraine as well as improve state-owned gas company Naftogaz's financial position, limiting its deficit to 1 per cent of GDP in 2010.

During the global economic crisis of 2008-09, Ukraine was one of the countries most affected by the crisis, which saw industrial production fall by 19.8 per cent and GDP fall by 18 per cent in 2008 compared to 2007.