Bloomberg News

Ukraine Considers Seeking New IMF Aid Next Year, Yanukovych Says

June 12, 2012

Ukraine is considering seeking a new aid package from the International Monetary Fund in 2013 after the expiration of its existing $15.6 billion bailout, which has been frozen since last March, President Viktor Yanukovych said.

The IMF program is a “barometer” that shows the former Soviet republic where it has problems and where “everything is fine,” Yanukovych said yesterday. Disbursements to Ukraine were halted because the government failed to raise household utility tariffs, a move the Washington-based lender has sought to trim losses at state-controlled energy company NAK Naftogaz Ukrainy.

“We’re in talks with the IMF,” Yanukovych said in an interview in his office in Kiev, the capital. “We don’t rule out financing starting from next year.”

Ukraine is seeking to shore up its public finances stretched by a current-account deficit that may reach 6.5 percent of gross domestic product this year, according to the IMF. Yanukovych, whose party faces parliamentary elections in October, has refused to increase household fuel costs. Efforts to placate the lender by reducing the price paid to Russia for the fuel by a third have so far failed.

The hryvnia declined to 8.1091 per dollar yesterday, the lowest level since May 23. The yield on the government’s dollar bond due 2013 rose to 10.6028 percent in May from 8.4733 percent the previous month. The yield fell to 9.8303 percent yesterday.

Gradual Increase

While the government is considering raising household gas tariffs in stages starting in 2013, it isn’t ready for a “steep” increase, Foreign Minister Kostyantyn Gryshchenko said May 23 in an interview.

Ukraine, which owes the IMF $5.5 billion, will probably wait until next year to start talks with the lender, investment bank Dragon Capital said May 31 in a note.

“As the political landscape after October parliamentary elections should be more conducive to meeting IMF demands, we expect the authorities to negotiate a new lending program with the fund in early 2013,” Dragon chief economist Olena Bilan wrote.

After expanding 5.2 percent in 2011, Ukraine’s economy grew 2 percent from a year earlier in the first quarter, the statistics service said today on its website, revising up an initial estimate of 1.8 percent growth.

GDP will probably advance about 3.9 percent for the whole year, buoyed by Ukraine’s co-hosting of the European soccer championships with Poland, according to Yanukovych, who maintained the government’s previous macroeconomic predictions.

“We hope that toward the end of the year economic growth will gradually pick up,” he said. “We also hope Euro 2012 will add a little.”

To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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