IMF publishes “Memorandum of Cooperation with Ukraine”

The International Monetary Fund has published a memorandum which defined the terms of cooperation with Ukraine under the approved Stand-by program. The document, in particular, contains the basic conditions and steps for Kyiv to receive $ 5 billion.

The official Ukrainian translation of the document was published by the Ministry of Finance of Ukraine.

It is noted that the approved Stand-by program will focus on supporting macroeconomic and financial stability. It will cover the following areas:

• fiscal policy;
• monetary policy;
• financial sector policy;
• energy policy;
• anti-corruption policy.

The letter of intent states that “we will continue to strengthen the rule of law and the fight against corruption”, as well as commit to a policy aimed at financial stability maintenance and equal rules for everybody creation.

The main priorities of the program are:

• mitigating the impact of the crisis on the economy, including support for households and businesses;
• ensuring further independence of the central bank and the floating exchange rate;
• providing financial stability together with the return of funds which have been lost during the banking system “cleaning”;
• advancing in key public administration and anti-corruption reforms.
• According to the memorandum, Ukraine will receive the first tranche of $ 2.1 billion, after that the program will be revised four times – in June, September, December 2020 and in June 2021. After each of the first two reviews, Ukraine should receive about $ 700 million, and $ 1.5 billion after the last two inspections.

Contemporaneously, Ukraine is to approve a plan to reduce non-performing loans of state-owned banks by the end of June, revise heating tariffs with full gas costs reflection by the end of August, and adopt a simplified procedure for changing gas suppliers by household consumers.

The amendment of the Deposit Guarantee Fund regulation and some laws to improve the mechanism of banks liquidation and assets return are planned at the end of October 2020.

New amendments should be made to the banking law with stronger requirements for capital, reserves and shareholders, as well as corporate governance improvement by the end of November as well as increasing the NBU powers increase to calibrate capital and liquidity requirements upon a bank’s risk profile.

The budget expenditures audit related to the COVID-19 control should be completed by the end of March 2021.

Natalia Tolub