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’s existing IMF program will probably be extended, First Deputy Prime Minister Valery Khoroshkovskyi told reporters today in Kiev.
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 strengthened to 8.0900 per dollar as of 12:30 p.m. in Kiev after falling to its lowest level since May 23 yesterday. The yield on the government’s dollar bond due 2017 rose to 9.8989 today from 9.4497 yesterday.
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.
The government is seeking a discount on its existing 10-year gas-supply agreement with Russia, which Yanukovych calls “very unfair.” The contract has cost Ukraine, which is paying $425 per thousand cubic meters for gas this quarter, $12 billion during the last two years, he said.
Ukrainian Prime Minister Mykola Azarov will meet his Russian counterpart Dmitry Medvedev in Donetsk on June 27 to discuss gas. Russian President Vladimir Putin will visit Ukraine in mid-July to meet Yanukovych.
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’s 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.”