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Ukraine to quickly agree with IMF on new price for RF gas

November 16, 2011, 15:11 UTC+3

Under the current economic circumstances, “we should have a debt holder – the IMF” - Tigipko

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KIEV, November 16 (Itar-Tass) — Ukraine will be able to quickly agree with the International Monetary Fund (IMF) on a new price for Russian gas, Ukrainian Vice-Prime Minister Sergei Tigipko told Ukrainian Channel 5.

Under the current economic circumstances, “we should have a debt holder – the IMF”. On the contrary, “investors will badly react to Ukraine” without a cooperation programme with the IMF, Tigipko said.

The vice-prime minister confirmed that he had learnt about the Ukrainian-Russian agreement on a new price for Russian gas (220-230 dollars for 1,000 cubic metres) from mass media. “If we succeed in coming to such agreement, this will be the greatest victory of the president, the cabinet of ministers and the prime minister...,” Tigipko said.

Ukrainian Prime Minister Nikolai Azarov said the country would not need a loan of the International Monetary Fund (IMF) when gas negotiations with Russia are over,

“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”.

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 percent of GDP, the GDP growth might keep within 3.5-4 percent, and the inflation would be less than 10 percent.

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.

An IMF mission 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 Fyodor 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 U.S. dollars, 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 gryvna. 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 three billion U.S. dollars in the past month.

An IMF demand to Ukraine is the growth of gas and heating charges. The 16 billion U.S. dollar 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 percent. Ukraine received the first tranche of 1.89 billion dollars immediately after the approval of the program. The IMF Board of Directors approved the allocation of the second tranche, 1.5 billion U.S. dollars, on December 22, 2010, on a number of conditions, including the pension reform.


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