Ukraine’s Financing Needs May Force IMF Loan, Goldman Sachs Says

Ukraine may agree on an International Monetary Fund loan by September because of a wide current-account gap and limited access to global financial markets, according to Goldman Sachs Group Inc.

“The current-account deficit is likely to come in at around 8 percent of gross domestic product, or $12 billion to $14 billion,” Andrew Matheny, a Moscow-based analyst at Goldman, said today in an e-mailed note. “This would bring reserves from the current $25 billion down to $13 billion to $15 billion, in our view an unsustainably-low level.”

Ukraine will probably sign its delayed Association Agreement with the European Union this year and may succeed in renegotiating a natural gas supply pact with Russia, which could save the government about $2 billion a year, Goldman said.

Ukraine is seeking IMF aid after plunging global prices for exports such as steel pushed its economy into recession. While the Washington-based lender has visited the former Soviet republic twice this year, it hasn’t agreed on a new loan because its demands to reduce heating subsidies, make the exchange rate more flexible and tighten fiscal policy haven’t been met.

GDP contracted 1.3 percent from a year earlier in the first quarter, state statistics data show. Growth may rebound in 2014 should the country get IMF aid this summer, according to Matheny.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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