Ukraine Kept Waiting by IMF for Next $1.7 Billion Loan Payment

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  • Negotiations on the tranche to continue in the coming weeks
  • Worse-than-expected decline this year will deepen contraction

Ukraine’s government will have to wait a bit longer for the third installment of a $17.5 billion bailout from the International Monetary Fund.

“Understandings were reached on most issues,” Nikolay Gueorguiev, the IMF mission chief for Ukraine, said Saturday in an e-mailed statement after several days of discussions with the country’s officials. “However, as the authorities still need more time to fully flesh out their policy proposals for 2016 in some areas, discussions will continue in the coming weeks.”

Ukrainian President Petro Poroshenko said last month he expects the country will receive the $1.7 billion installment by November to replenish the central bank’s reserves.

Ukraine sought international assistance for an economy battered by an 18-month pro-Russian military conflict in its eastern industrial heartland. The government, which agreed with its main creditors led by Franklin Templeton on restructuring $18 billion of debt, needs the approval of other bondholders to complete a deal that would write down the principal by 20 percent. It also needs Russia’s backing because a $3 billion Eurobond the previous pro-Russian president, Viktor Yanukovych, sold to the Kremlin matures in December. Russia insists on full repayment on time.

In the statement, the IMF said it expects Ukraine to return to growth in 2016, with its gross domestic product up 2 percent as macroeconomic conditions gradually stabilize.

The IMF revised its forecast for 2015 to an 11 percent contraction from 9 percent previously due to Ukraine’s worse-than-expected economic decline in the first half, the Washington-based group said in an e-mailed statement. GDP fell 14.7 percent in the second quarter from a year earlier as the country was battered by a pro-Russian insurgency in its eastern industrial heartland.

A cease-fire between Ukrainian forces and the separatists has held since the sides agreed on Oct. 2 to a light-weapons withdrawal during talks in Paris. Ukraine’s central bank lowered its benchmark interest rate for a second straight month in September as a more stable hryvnia helped slow inflation.