A few months ago, Ukraine received the next credit tranche from the International monetary Fund (IMF) and signed the new Memorandum. The Fund according to the EFF program can give a loan of 17 billion dollars. The conditions of the program are reviewed each quarter. After the President, Prime Minister, NBU head and Finance Minister sign the document (Memorandum), where the authorities confirmed their intention to implement the recommendations of the Fund. The following Memorandum, and therefore the next portion of the loan (tranche) shall be payable after fulfillment of obligations. Until the next revision of the program the Ukrainian government should implement two important reforms. Pension and land.
To adopt laws necessary for reforms, the Ukrainian Parliament had in may. This would allow to obtain credit tranche in June-July. However, as stated by the government, to vote for the bill before the parliamentary recess will fail, and therefore, the loan Ukraine at best will only get in the fall. The website “Today” figured out how the dollar can affect the transfer of the tranche and that Ukraine must fulfill to receive credit.
From Ukraine are waiting for reform
Ukraine in a Memorandum pledged until the end of may to pass bills on pension and land reforms. However, to fulfill this terms of the power did not. At the end of June the head of the IMF Christine Logard during a meeting with President Petro Poroshenko stated the need to accelerate the pace of reform. A week later, Bloomberg announced that in summer Ukraine tranche is not received, it at least can migrate in the fall.
The draft pension reform is already in Parliament. In the document the government has considered the recommendations of the IMF tightened the conditions for obtaining a minimum pension, has reduced the list of those who may be early to retire, have increased the number of those who will pay contributions to the Pension Fund. Read more on pension reform can be read here.
In the framework of land reform, Ukraine has committed itself to develop a bill that will allow selling of agricultural land and to remove the moratorium on the sale of land at the end of this year. “We also run an awareness campaign for the public to explain the benefits of this reform”, – stated in the Memorandum. About how in Ukraine can pass the land reform, can be read here.
As the Director of the analytical Department Cocncorde Capital Oleksandr Parashchiy said: to get the next tranche of the requirement of the land reform was removed.
Christina Logard. AFP PHOTO / FABRICE COFFRINI
In addition, according to the Memorandum, Ukraine needs this summer to revise the remuneration system in the public sector to reduce. No cost and no layoffs. “We will begin the medium-term programme for the reduction of employment in the public sector. Plan to reduce the number of employees in the public sector (excluding military) by at least 4% by the end of 2017, and another 10% by the end of 2019”, – stated in the document.
In the public sector to implement the Memorandum should gradually monetize (pay money) subsidyand and enter so-called “subscription fee” on gas and heating. By the way, fee for gas will lead to the fact that the current tariff will be divided into two components, one of which will have to pay all year round. The website “Today” in detail wrote about anoplate for heating.
The tranche transfer hit rate, but not much
At the opening of the morning trading following the news about the freezing of the tranche, dollar prices went up. This effect was obvious, says the analyst of “Alpari” Maxim Parkhomenko. In the coming time it will have a negative impact on the currency, but experts do not expect sharp fall of the hryvnia. “Because of the activity of exporters and the beginning of harvest until at least the end of the summer the dollar will be trading around 26 USD. In the future, already in the autumn, it is likely strengthening of the us dollar to 27 and more. Frost tranche will have a negative impact in the short term, but globally will not affect the situation on the currency market till the end of summer,” – said the expert.
“Because of the activity of exporters and the beginning of harvest until at least the end of the summer the dollar will be trading around 26 USD. In the future, already in the autumn, it is likely strengthening of the us dollar to 27 and more. Frost tranche will have a negative impact in the short term, but globally will not affect the situation on the currency market till the end of summer,” – said the expert.
At the same time Alexander couple notes: information on the tranche influences the foreign exchange market only psychologically, directly from the loan rate of the hryvnia does not. However, when there is news about the delay of the tranche, the demand for currency grows, market players are expected devaluation and with a steady demand it themselves provoke.
The IMF meeting. Ryan Rayburn / IMF
The experts say: Ukraine is important not installment himself, and the cooperation with the International monetary Fund. The IMF is the last point of contact of the country in acute economic crisis. If the Fund will cease cooperation with Ukraine – it will be a signal to other lenders and investors who are closely watching the decision of the organization.
We will remind, on April, the IMF approved the allocation of Ukraine the fourth tranche of the extended Fund in the amount of one billion dollars. Money started to arrive at the NBU fifth of April.
The entire program provided Ukraine with about $ 17 billion, of which Kiev has already received us $ 8.7 billion.
According to calculations of the international rating Agency S&P, the next tranche of the IMF, as well as the related funding from external donors is likely to come to Ukraine in the second half of 2017 – provided that Ukraine makes progress in carrying out key land and pension reforms.