IMF Gives Final Approval to USD 15 bln Facility for Ukraine
OREANDA-NEWS. July 29, 2010. The International Monetary Fund’s executive board yesterday approved a 2.5-year SDR 10 bln (~USD 15.2 bln) stand-by arrangement for
Concorde Capital: it is still unclear whether the money will go only to the central bank’s reserves (the usual IMF practice) or partially to the government to cover the fiscal gap. As we wrote previously (see our flash note of July 5, 2010), if the government receives no or limited IMF funds, this facility still has positive implications for public finance, most importantly in terms of facilitating fiscal discipline. In July, in order to obtain the funds: (i) Ukraine’s parliament cut the planned 2010 fiscal deficit by 7%, reducing outlays (by 5.3%) and making more conservative estimates of future revenues; (ii) the government increased gas tariffs for households by 50% starting August 1; and (iii) parliament increased the independence of the central bank. Following the changes, we expect the fiscal deficit (including Naftogaz) to amount to 6%-6.5% of GDP in 2010 (vs. 7.4% in 2009). According to the IMF program,
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