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Ukraine won’t need IMF loan when gas talks with Moscow are over

November 15, 2011, 21:01 UTC+3

The Ukrainian government said many times that it hoped to receive two tranches, each of $1.5 billion, before the yearend.

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KIEV, November 15 (Itar-Tass) —— Ukraine will not need a loan of the International Monetary Fund (IMF) when gas negotiations with Russia are over, Ukrainian Prime Minister Nikolai Azarov told the national First Channel.

“We are working with the IMF, supporting our arguments with forecasts and proving that our forecasts are realistic,” he said. “The Russian gas price is the main problem impeding Ukraine-IMF negotiations.”

“This does not mean that we will immediately apply for a loan [when the negotiations are over]. There is no such need. We lived through this year without tranches and paid our debts regularly,” he said.

The IMF is ready to intensify negotiations with Ukraine on a review of the stand-by program after Ukraine attains final results at the gas negotiations with Moscow, IMF Resident Representative in Ukraine Max Alier said at the sixth annual conference of the Adam Smith Institute, “Ukrainian Banking Forum”, on Tuesday.

He said the IMF decided to wait for an outcome of the Ukraine-Russia gas talks. “Our mission was here for two weeks, we were actively negotiating at different levels... It was a very fruitful discussion [and] we understood each other well. We understood our positions well. The government of Ukraine believes that another agreement with Russia on gas will be signed... and we agreed to wait until the final results," Alier said.

The Fund representative presented a forecast of Ukraine’s macroeconomic indicators in 2012. He forecasted a general deterioration of the economic situation, for instance, the deficit of Ukraine’s balance of payment might reach 5.5% of GDP, the GDP growth might keep within 3.5-4%, and the inflation would be less than 10%.

The IMF mission announced on November 4 that it had taken a pause for making additional technical work. The mission visited Kiev from October 25 to November 3 to elaborate recommendations for the IMF Board of Directors on the completion of the review of the stand-by program and the granting of the next loan tranche to Ukraine.

A mission of the International Monetary Fund (IMF) is completing consultations with the Ukrainian authorities and non-governmental organizations on the allocation of the next tranche of the stand-by loan, the Ukrainian National Bank reported on November 4.

The bank hopes that the IMF and the Ukrainian government would resolve the remaining problems soon and the tranche necessary for further advancement of the Ukrainian reforms would be granted.

Deputy Prime Minister Sergei Tigipko and Finance Minister Fedor Yaroshenko visited Washington DC to discuss further cooperation with the IMF administration.

The Ukrainian government said many times that it hoped to receive two tranches, each of $1.5 billion, before the yearend. The government said that the money would be added to the Ukrainian National Bank reserves.

Ukraine needs the IMF loan in the first turn for maintaining the exchange rate of the hryvna. It has a deficit in the balance of trade and a rather high demand for hard currency for paying for Russian gas. The gold and foreign currency reserves of the Ukrainian National Bank reduced by more than $3 billion in the past month.

An IMF demand to Ukraine is the growth of gas and heating charges.

The $16 billion loan was approved on July 29, 2010, to support the economic reforms in Ukraine. The program takes 2.5 years, and the loan has an annual interest of 3.5%.

Ukraine received the first tranche of $1.89 billion immediately after the approval of the program. The IMF Board of Directors approved the allocation of the second tranche, $1.5 billion, on December 22, 2010, on a number of conditions, including the pension reform.

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