IMF approves loan for Ukraine (04/28/96)

IMF approves loan for Ukraine

by Roman Woronowycz

JERSEY CITY, N.J. - The International Monetary Fund has tentatively approved a new standby loan for Ukraine after suspending disbursement of the 1996 tranche because it felt Ukraine's administrative controls were inadequate.

The IMF decided in early April to freeze the $900 million in funds, the second part of the $1.5 billion agreed to in 1995 (and raised in February to $1.7 billion), when Ukraine exceeded agreed to inflation limits by 8-10 percent. Ukraine's first quarter inflation rate came in at 21 percent. It also was concerned that Ukraine had failed to meet budget limitations for a second consecutive quarter.

Oleh Hawrylyshyn, IMF's alternate executive director for Ukraine, told The Weekly that the IMF suspended the payment and called a meeting in Kyiv because it was getting varying stories from different departments of the government as to why inflation remained high, and why expenditure goals were changing. "[The IMF] wanted to know how administrative control was going to be maintained so that this doesn't happen again," said Mr. Hawrylyshyn.

He said that Deputy Prime Minister of Economic Reform Viktor Pynzenyk sat in for Deputy Prime Minister of the Economy Roman Shpek, who was away on travel, and that details were ironed out rather quickly.

The new schedule agreed to by IMF management, which still needs to be approved by its board of directors, should go into affect after the board meets on May 10, said Mr. Hawrylyshyn. "The new standby will provide essentially what was expected previously, mainly $900 million for the remainder of the year," he explained. "The payments will come in such a way that a relatively larger pay out will come in the beginning." By the end of June the IMF expects to be back on the schedule set previously.

The 1996 budget aims for an approximate budget deficit of 6 percent of gross domestic product and an inflation rate under 40 percent, according to the Wall Street Journal. Last year Ukraine's inflation rate hit 182 percent, the highest in the world among nations not at war.

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