Even under Kiev's current $17 billion IMF bailout, the Fund said Ukraine will not be able to meet all of its targets due to the ongoing fighting and an intensified gas dispute with Russia, which supplies the bulk of Ukraine's natural gas needs.
The momentum in the five-month war shifted last week decisively in favor of the rebels, who are now advancing on a major port as they seek to throw off rule from Kiev. Western countries accuse Moscow of sending troops into Ukraine, a charge Russia denies.
Kiev will now face a $3.5 billion funding shortfall for this year and next due to the fighting, but the IMF said the government should be able to cover most of it with planned debt issues and an expected $900 million in further donor support.
In a detailed review of Ukraine's progress and the state of its economy, the IMF painted a dire picture of a country trying to reform everything from banking management to the legal system, while also boosting spending on fighting in the eastern regions of Donetsk and Luhansk.
Those regions together accounted for 23 percent of Ukraine's industrial production and 14.5 percent of its retail trade in the first quarter. The IMF said it expects gross domestic product in eastern Ukraine to decline by 15 to 20 percent this year, compared to a 6.5 percent decline for the country as a whole.
But outside analysts predict Ukraine's economy may contract by up to 8 percent this year, and are starting to brace for some form of debt restructuring on Ukrainian bonds.
The Fund, which provided a bailout to Kiev as part of an overall $27 billion international rescue, said it would relax some conditions for Ukraine going forward, including for the government's budget deficit and the level of central bank reserves.
In return, Kiev would have to make up for the shortfall elsewhere, including by doing a better job of collecting payments for Naftogaz, the state-run oil and gas company.
The IMF also predicted the government would have to spend more money to restructure the banking sector and support Naftogaz, adding to government debt.
In addition, it warned that Ukraine's reforms may become more difficult if the country calls early elections.
The Fund on Friday confirmed Kiev was on track with most of the loan's conditions so far, allowing the disbursement of $1.7 billion. It said the next disbursement, of about $2.7 billion, would come in mid-December if Kiev complies with the loan conditions.
REUTERS
http://www.todayonline.com/world/ukraine-may-need-bigger-bailout-if-conflict-continues-2015-imf?singlepage=true
2/9/14
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IMF "impressed" with Ukraine commitment to reform
S&P revises Ukraine outlook to stable from negative (Ukraine's official statistics still include Crimea)
Ukraine receives over $3 billion first tranche of IMF credit. - Ukrainian National Bank
Christine Lagarde: Ukraine’s Economy Would Have Collapsed Without Russian Aid. -Russian bailout money averted a catastrophe.
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Ukrainian bailout to cost $100 billion — American analyst...
ReplyDeleteUkraine needs official foreign assistance in the amount “closer to $100 billion rather than the $55 billion that the IMF is now estimating” to save its economy, American economist Desmond Lachman wrote in his blog on The Hill newspaper website on Wednesday.
The former International Monetary Fund (IMF) executive and now analyst at the American Enterprise Institute says “it is all too likely that the IMF is lowballing Ukraine’s needs in much the same way as it did in its Greek bailout programme.” He says the estimates are growing now the same as in the past. “Last May, at the time it launched its Ukraine lending programme, the IMF estimated that Ukraine might need around $35 billion in official external support. Today, some six months later, it is estimating that Ukraine might need around $55 billion in official external financing.”
Lachman says, “One would have thought that this question would have been the main topic under discussion during [Ukrainian President Petro] Poroshenko’s U.S. visit. If Kiev “might need at least an additional $19 billion of external official support to see it through 2015, the White House has agreed to provide Ukraine around an additional $50 million in assistance. This leaves unanswered the basic question as to from where the remaining $18.95 billion is to be obtained,” the analyst says.............http://en.itar-tass.com/world/751372
26/9/14