No Holdups for Ukrainian Minister Targeting Next IMF Tranche

  • Finance Minister Oleksandr Danylyuk speaks in Kiev interview
  • Fourth tranche of $17.5 billion bailout due in November

Ukraine’s finance minister foresees no delays in receiving the next slice of aid from a $17.5 billion bailout, predicting the government can smooth out differences with the International Monetary Fund over pay increases for state employees in next year’s budget.

The $1.3 billion tranche, the fourth from the rescue loan, will arrive as planned in November, Oleksandr Danylyuk said late Friday in an interview. The minister, appointed in a government shakeup in April, wants to accelerate an IMF visit slated for this week to discuss 34 billion hryvnia ($1.3 billion) of salary boosts for judges and other civil servants that the European Union is seeking to improve governance.

“We got preliminary positive feedback from the IMF on the budget,” Danylyuk said in his office in Kiev, the capital. “We must submit a draft to parliament for the second reading in two weeks. I’d like to discuss it with the IMF. That’s why I want them to come” as soon as possible.

Ukraine only recently resumed its IMF rescue, sealed in the wake of the former Soviet republic’s second pro-European revolution in a decade and amid a Russian-backed insurgency in its east. The program has been dogged by delays as officials failed to adopt the 2016 budget on time and to crack down on corruption. The fund has warned a “slim and fragile” majority in parliament is a potential obstacle to further reforms, including land sales and privatizations.

In a potential boost to state coffers, Ukraine wants to auction the Odesa Pryportovyi Plant ammonia maker by year-end and plans to generate 17 billion hryvnia in 2017 by offloading government-controlled assets.

“If we fail with the state-asset sales, it means state policies on building a successful country fail,” Danylyuk said. “We can’t let that happen.”

Lawmakers approved Ukraine’s 2017 budget in the first reading on Oct. 20. After completing next year’s fiscal planning, the Finance Ministry will turn its attention to overhauling pensions, which is required by December to qualify for the fifth IMF tranche. Transfers from the budget to support the pension fund were almost 95 billion hryvnia in 2015. This year, the government sees that figure reaching almost 145 billion hryvnia.

For more on Ukraine’s history with the IMF, click here

Retirement reform is an unpopular topic in Ukraine and has been a stumbling block in previous IMF loans. More than 12 million of the nation’s 43 million people are pensioners, with monthly payments averaging 1,700 hryvnia ($66). Judges, prosecutors and soldiers are among those who can still retire early, a throwback to communist times. The government of ousted President Viktor Yanukovych raised the pension age in 2011 under an earlier IMF program, though reneged on a pledge to develop private pension funds.

Opposition to further increases in the retirement age has come from within the government itself, with Pavlo Rozenko, a deputy prime minister for social issues, ruling out such a move this month. Others battling the proposal include ex-Premier Yulia Tymoshenko, now an opposition leader.

“It’s not only an issue for cooperation with the IMF, it’s a very important issue for the financial system,” Danylyuk said, promising that pension reform would be passed. “There’ll be no populism from the government side, though the issue is very sensitive.”

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