IMF APPROVES MASSIVE CREDIT PROGRAM TO UKRAINE.

The International Monetary Fund’s Board of Directors has given final approval to a US$2.2 billion, three-year Extended Fund Facility (EFF) to Ukraine. A first tranche, worth US$257 million, is to be disbursed immediately. Disbursement of subsequent tranches will depend on Ukraine’s compliance with the reform program agreed between Kyiv and the IMF in July. The IMF expects the Ukrainian government to reduce inflation, balance the budget, liberalize import and export tariffs, modify its value-added and excise taxes, deregulate business and ease tax pressure on it. (See the Monitor, July 29 and August 3) The IMF will monitor the compliance on a monthly basis. Earlier this year, the IMF had suspended lending because of the slow pace of Ukraine’s reforms.

The impact of Russia’s financial crisis on Ukraine may have modified earlier plans on the destination of the EFF’s initial tranches. These are likely to be used primarily for replenishing the foreign exchanges reserves of the National Bank of Ukraine (NBU). The NBU is running low on those reserves due to its effort to support the hryvnya following the collapse of the Russian ruble.

The resumption of lending by the IMF has in turn reopened the way for World Bank credits to Ukraine. The World Bank announced yesterday that it is prepared to lend Ukraine between US$800 million and 1 billion for projects that envisage: reform of the coal-mining industry, restructuring of the energy sector, modernization of agriculture, development of small and medium-size businesses, administrative reform, and upgrading the financial-banking system. (Zerkalo Nedeli [Kyiv], September 5; UNIAN, September 4 and 7; Eastern Economist Daily [Kyiv], September 8)

AZERBAIJANI OPPOSITION ATTACKS ALIEV FOR INVITING ARMENIA TO EU-SPONSORED CONFERENCE.