Ukraine and the International Monetary Fund

Ukraine has been a member of the International Monetary Fund (IMF) and the World Bank since 3 September, 1992. The country is one of the IMF's four largest borrowers.

History

Independence–Yanukovych

Ukraine became a member of the IMF and the World Bank on 3 September, 1992. The IMF approved a $2.2 billion Extended Fund Facility (EFF) with Ukraine in September 1998. In July 1999, the three-year program was increased to $2.6 billion. Ukraine's failure to meet monetary targets and structural-reform commitments caused the EFF to be suspended or its disbursements delayed several times. The last EFF disbursement was made in September 2001. Although Ukraine met most monetary targets for the EFF disbursement which was due in early 2002, the tranche was not disbursed due to the accumulation of large VAT-refund arrears to Ukrainian exporters (which amounted to a hidden budget deficit). The EFF expired in September 2002, and the government of Ukraine and the IMF began discussions the following month on the possibility and form of future programs.

The IMF granted Ukraine a $16.4 billion loan in October 2008,IMF Props Up Hungary and Ukraine as Crisis Continues
Spiegel.de (27 October 2008) of which the government had received $10.6 billion in May 2010.Government to direct most of International Monetary Fund's loan to currency reserves
Kyiv Post (12 May 2010) Further payments were frozen in late 2009, after Ukraine raised minimum wages and pensions contrary to IMF recommendations.

Ukraine was the IMF's third-largest borrower in May 2010, after Romania ($12.5 billion) and Hungary ($11.6 billion). The IMF approved a 29-month, $15.15 billion loan to Ukraine on 28 July, 2010. Among other effects, this led to a 50-percent increase on household natural gas utility prices in July 2010 for Ukrainian consumers (a key demand of the IMF in exchange of the loan). The Fund said on 20 December, 2013, that the second Azarov government had only partially implemented the 2010 agreements, "and in this connection the program had not been implemented".

In December 2013, Ukrainian Prime Minister Mykola Azarov noted "the extremely harsh conditions" of a renewed IMF loan presented by the Fund on 20 November of that year. The conditions, which included steep budget cuts and a 40-percent increase in natural-gas bills, were the last argument supporting the Ukrainian government's decision to suspend preparations to sign the Ukraine–European Union Association Agreement on 21 November, 2013. The decision to postpone signing the agreement led to the Euromaidan protests. On 7 December, 2013, the IMF clarified that it was not insisting on a 40-percent single-stage increase in natural-gas tariffs; the Fund recommended a gradual increase to an economically-justified level, with compensation to the poor in the form of increased social assistance. On 10 December, 2013, Ukrainian president Viktor Yanukovych said: "We will certainly resume the IMF negotiations. If there are conditions that suit us, we will take that path". However, Yanukovych repeated that the IMF conditions were unacceptable: "I had a conversation with U.S. Vice President Joe Biden, who told me that the issue of the IMF loan has almost been solved, but I told him that if the conditions remained ... we did not need such loans".Ukraine to resume talks with IMF soon, says Yanukovych
Interfax-Ukraine (10 December 2013) In December 2013, Ukraine again applied to the IMF for about $20 billion to meet the costs associated with signing the Ukraine–European Union Association Agreement.

Post-Maidan

In February 2014, Yanukovych and Azarov were overthrown and replaced by the first Yatsenyuk government.Ukraine crisis timeline
BBC News The following month, the IMF required Ukraine to reform its natural-gas price subsidies in return for an aid package of about $15 billion. One of the expected effects was a 50-percent price increase for natural gas sold to domestic consumers. The increase was expected to become effective on 1 May as part of a set of intertwined contingencies required by the IMF to provide financial support to Ukraine. The European Union required Ukraine to secure the IMF aid package in return for about €1.6 billion in EU support. Before the increase, all natural gas bought by the government of Ukraine was resold to consumers with government subsidies at below-market prices. Gas prices for district heating companies were also expected to rise by 40 percent on 1 July. Anders Aslund, a former economic adviser to the Ukrainian government, believed that Ukraine's expenses could be reduced by two percent of its gross domestic product if gas subsidies were halted. On 27 March, 2014, the IMF announced that it would issue a $14-18 billion rescue package for Ukraine;http://www.ft.com/cms/s/0/737e3bd8-b587-11e3-81cb-00144feabdc0.html#axzz35r6JLhpy in return, the Fund demanded that Ukraine establish an anti-corruption bureau. The previous day, Ukraine announced that household natural-gas prices would rise by 50 percent on 1 May, 2014. On 4 September of that year, Ukraine received $1.39 billion from the IMF.

On 11 March, 2015, the Fund approved a four-year, $17.5 billion EFF for Ukraine; its first tranche of $5 billion was forwarded on 13 March, 2015. The second $1.7 billion tranche was transferred on 4 August, 2015. The third tranche would be released after a review of the EFF, in which the IMF wanted to see a decrease in corruption.IMF expects more anti-corruption efforts from Ukraine - Vacher
UNIAN (10 March 2016) The third, $1 billion tranche was agreed to be forwarded on 15 September, 2016, despite Russian opposition. Russia opposed the decision because, since December 2015, Ukraine had defaulted on a $3 billion debt payment to Russia. The fourth tranche was forwarded in spring 2017. Because of a 2017 memorandum between Ukraine and the IMF, only pension reform was achieved and the country received no further financing from the Fund.Year’s_balance:_thorny_road_to_bright_economic_future,_UNIAN
_(30_December_2017)

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