Ukraine Expects IMF to Rule on New Aid Disbursements Next Month

  • *Ukraine hopes to get two IMF tranches worth combined $3.4b
  • *Ukrainian central bank to intervene if hryvnia is volatile

The International Monetary Fund will decide whether to resume lending to Ukraine at the end of next month, after the country’s parliament approved the 2016 state budget, Central Bank Governor Valeriya Gontareva said.

The former Soviet state hopes the Washington-based lender will extend two tranches of its $17.5 billion bailout worth a combined $3.4 billion, Gontareva told reporters in Kiev on Tuesday. The funds, originally slated for this year, were delayed by months of wrangling over the budget and a new tax code.

“The budget was adopted recently, and all other pre-conditions have been met,” Gontareva said. “I hope that everything will be fine. I don’t see any obstacles that could prevent us from getting the third and the fourth tranches.”

Ukraine, which turned to the IMF after the collapse of a pro-Russian government in 2014 triggered a separatist conflict, needs the funds to steady the economy and shore up its central bank reserves. After months of political squabbling, lawmakers approved a budget with a deficit inside the IMF’s target last week. Still, the Fund has warned it won’t extend cash if the law doesn’t meet its requirements and lawmakers made many amendments to the government’s draft of the bill.

Ukraine’s government bonds due 2019 stayed unchanged, trading at 92.875 cents on the dollar as of 3:15 p.m. in Kiev on Tuesday, data compiled by Bloomberg showed. The hryvnia lost 1.85 percent to 23.9265 against the dollar. The 2016 budget’s envisioned hryvnia rate of 24.1 per dollar is “realistic,” although the estimate faces many risks, Gontareva said. Low prices for Ukrainian exports and the devaluation of other former Soviet countries’ currencies are adding pressure on the hryvnia, she said.

The central bank will ease some capital controls after the country receives the delayed tranches, Gontareva said. The regulator will gradually lift foreign currency restrictions next year, depending on the economic and financial situation, she added.

Ukraine will stick to the hryvnia’s free float, Gontareva said, adding that the central bank is ready to intervene to prevent sharp fluctuations.

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