OREANDA-NEWS. November 10, 2009. In an interview with Reuters Television on Saturday, International Monetary Fund chief Dominique Strauss-Kahn said that work with the Ukrainian government would continue only after presidential elections in January. Strauss-Kahn fingered decision-making by Ukrainian politicians that ran counter to pledges made a year ago when the USD 16.5 bln loan program was setup. The announcement follows Ukrainian President Viktor Yushchenko signing into law a bill that increases social standards on October 30. The IMF specifically called for a veto on this law as a requirement for allocation of the fourth, USD 4 bln, tranche that was slated for allocation in November.

Concorde Capital: The tranche, most likely, would have gone directly to the government as did the previous tranche in July. Hence, the delay will make it harder for the government to cover the budget deficit, which might amount to UAH 25-30 bln (USD 3.0-3.7 bln) in 4Q09. Attempts to raise the financing on the domestic debt market might push domestic interest rates up, as the last time the government managed to attract hryvnyas on the domestic market in October, it did so at ~29%. The widening of the budget deficit and increase in the negative sentiment related to postponing of the fourth tranche might put pressure on the UAH exchange rate. We expect the NBU can opt not to spend excessive amounts via interventions and allow the UAH to depreciate by 10-15%. The NBU has USD 27.7 bln in its foreign exchange reserves as end-October – enough to keep the UAH exchange rate from depreciating sharply.