Ukraine Seen Resuming IMF Loan in Summer as Graft Ranking Stuck

  • Place in annual corruption index won't move much, survey shows
  • Economists split on chance of early parliamentary elections

The International Monetary Fund will probably resume disbursements to Ukraine from a $17.5 billion bailout loan this summer, though the nation is unlikely to make much headway in worldwide corruption rankings during the next year.

Transfers from the Washington-based lender, delayed for half a year, will restart in August, according to three of eight economists in a Bloomberg survey. Two said cooperation will be restored in June, while one each saw it happening in April, May or September.

Gridlocked Ukrainian politics have stalled the IMF loan, clouded the outlook for recovery from a 1 1/2-year recession and raised the specter of early elections. President Petro Poroshenko has called for a decision on a new government next week to end the uncertainty. With foreign donors warning that failure to tackle corruption endangering billions more in bilateral aid, the hryvnia has plunged 18 percent against the dollar in the past six months.

“The IMF money isn’t critically needed from a short-term perspective, therefore no material progress is expected until later in the summer months,” said Gunter Deuber, an analyst at Raiffeisen Bank International in Vienna. “Muddling through is likely to continue for some time.”

IMF Priority

Parliament Speaker Volodymyr Hroisman, suggested by Poroshenko’s party as a candidate to take Arseniy Yatsenyuk’s job as prime minister, has said reinstating cooperation with the IMF is a priority. The fund said last month it was concerned by Ukraine’s delay in raising utility tariffs, part of efforts to trim subsidies and narrow the budget gap.

While Poroshenko has vowed the new government will reinvigorate efforts to stamp out graft, all 12 economists in the survey said the the former Soviet republic’s place in Transparency International’s next Corruption Perceptions Index will stay in the 100 to 150 bracket. It was ranked 130th out of 167 nations in the 2015 survey, with first being seen as least corrupt.

The political tumult was triggered when key officials quit, alleging graft among ruling party lawmakers. Poroshenko has himself been forced to defend the use of offshore structures after his name featured this week in leaked documents from a Panama-based law firm.

‘Fractious Nature’

While political tensions are threatening to persist, economists were split on the prospect of early parliamentary elections. While six said a ballot wouldn’t take place before 2019, as scheduled, one sees a vote as early as the second quarter, two see one in the third and two see one in the fourth. One analyst said an election will happen in 2017.

Ex-Premier Yulia Tymoshenko said in a February interview that a snap ballot was the only way out of the crisis. While her party would benefit under such a scenario, the popularity of Poroshenko and Yatsenyuk has tumbled, reducing their incentive to hold a vote.

Early elections are likely “to end the current impasse,” said Lilit Gevorgyan, a senior analyst at IHS Economics in London. “However, fresh elections may also be inconclusive considering the fractious nature of the current pro-reform forces and the inability of any of them to gain overwhelming public support.”

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