kyiv (Reuters) – Ukraine expects the International Monetary Fund (IMF) to approve a $5 billion loan on June 5 and disburse the first tranche of $1.9 billion the next day, it said on Friday. Prime Minister Denys Shmygal told Reuters.
President Volodymyr Zelenskiy said Ukraine was at risk of default without the money, which Shmygal said he expected to see approved at an IMF board meeting. Kyiv has struggled for months to pass reforms demanded by the fund amid concerns about corruption and influence peddling.
The country’s precarious financial situation and haggling over reform come at a time when Zelenskiy is trying to negotiate with Russia, which annexed Ukraine’s Crimea region in 2014 and backed a pro-Russian uprising in eastern Ukraine. .
The IMF declined to comment on Shmygal’s statement. His remarks offered the sharpest timing the government has yet given for when it expects the disbursement of IMF loan tranches, money badly needed by the government to cope with an economic shock caused by the coronavirus pandemic.
“Today with the President we will have a phone call with Ms. Kristalina [Georgieva], the head of the IMF. The board meeting will be held on June 5, and probably on June 6 Ukrainian time, we hope to receive the installment,” he said.
The second tranche, worth $1.6 billion, is expected from September and the third tranche, worth $1.5 billion, would come next year, Shmygal said. Ukraine also expects to receive 600 million euros from the European Union soon after the first tranche from the IMF.
SHARP ECONOMIC DECLINE
Shmygal also disclosed a preliminary estimate of economic growth in the second quarter of this year, saying gross domestic product could fall by 12%.
The government has previously said the economy will contract by nearly 5% for the full year.
The government expects the second quarter to be the hardest hit, and Shmygal said Ukraine could rebound to 3.6-4% growth next year.
Ukraine moved quickly to impose lockdown measures in March to contain the coronavirus pandemic. It has recorded fewer cases than much of western Europe, but many businesses have been closed or restricted.
The prime minister also said the government would not restrict wheat exports for the next two months, even if the quota the government had previously agreed with traders ran out.
Ukraine is one of the world’s top grain exporters and had previously signaled it may not allow exports above the quota. But Shmygal said the extra overseas sales were a vital source of foreign exchange and a way to support farmers.
The severe economic downturn caused by the pandemic has also drawn attention to Ukraine’s ability to service its debt this year.
Shmygal said the government repaid a billion dollar Eurobond this week, which he said “shows that we can and are able to service the external and domestic debt in an absolutely calm manner. “.
“The support of our creditor partners is necessary for Ukraine for economic development,” he said.
Ukraine was able to repay the money without dipping into central bank reserves, which stand at $26.2 billion, he said.
While Ukraine continues to borrow domestically, “today, in the current situation, there is no urgency to go to foreign markets and borrow there, first because situation is unfavourable”.
Editing by Andrew Osborn and Frances Kerry
