Ukrainian Premier Signals IMF Delay as Key Reform Not Ready

Updated on
  • Hroisman says in interview that land bill possible by year-end
  • Next tranche of IMF aid may now be held up until autumn

The next transfer of Ukraine’s $17.5 billion international bailout will be delayed until later this year because parliament won’t pass all of the required reforms before its summer recess.

While a pension overhaul is on schedule and steps are being taken to create an anti-corruption court, a bill on land reform won’t be submitted in time, Prime Minister Volodymyr Hroisman said in an interview. The delay will hold up the $1.9 billion fifth tranche of the nation’s International Monetary Fund rescue, though the government remains committed to the program, he said.

Volodymyr Hroisman on July 3.

Photographer: Vincent Mundy/Bloomberg

“We won’t make it by the recess,” Hroisman said Monday in the capital, Kiev, referring to the land bill, which may instead pass by year-end. “We’re working on the reforms and the fifth tranche will arrive.”

IMF aid has been the bedrock of Ukraine’s economic revival in the wake of a second pro-European revolution in a decade, the annexation of Crimea and a Russian-backed insurgency that’s now in its fourth year. But the program has been dogged by delays as controversial reforms to reshape the former Soviet republic meet opposition. The latest disbursement had been planned for June or July. Parliament breaks for summer on July 14 and reconvenes in September.

The government’s 10-year dollar-denominated bond fell to a six-week low, sending the yield up three basis points to 8.236 percent at 11:36 a.m. in Kiev. The IMF holdup could push back Ukraine’s plans to return to international debt markets.

Ukraine is set to meet some IMF requirements for this latest tranche, namely a revamp of its pension system. The Washington-based lender has backed a plan under which citizens must contribute to the state fund for 25 years rather than 15 at present to be eligible for benefits. The retirement age wouldn’t rise.

Other reforms are trickier. Lifting a ban on farmland sales is opposed by populists in parliament, who say the authorities and businessmen will cheat farmers and snatch territory. Sunflower oil-maker Kernel Holding SA said in April that the moratorium should remain in place until the authorities come up with a “balanced consolidated position.” The agriculture minister resigned the following month.

“It seems pension reforms will be passed by parliament, given the unprecedented media activity by the government and the president to create positive public opinion,” Oleksandr Parashchiy, head of research at Kiev-based investment bank Concorde Capital, said by email. “As for land reform, the situation is much worse, as we see a negative public reaction to lifting the ban on farmland sales, and the IMF may remove this issue from the agenda.”

Still Committed

Hroisman, whose government is in talks with farmers’ groups, said the matter is more complicated than simply removing the restriction on sales. The cabinet wants to exclude big companies and foreigners from buying farmland and proposes allowing individual purchases by Ukrainians of as much as 200 hectares, he said.

“We understand now which model we want, in whose interest it should be,” Hroisman said. “We’ll prepare the draft law in full as soon as possible. It’s 99 percent ready. One element is lacking: access to long-term funds for Ukrainian farmers” at a reasonable price.

Among other reforms, legislation on privatization is in the works to jumpstart delayed sales of state assets, according to Hroisman, 39. Preparing for a visit to the U.K. to meet Prime Minister Theresa May and investors, he reaffirmed his nation’s IMF path.

“Someone says the IMF demands reforms from Ukraine, but I want to underline that we shouldn’t take it as the IMF needing reforms -- Ukraine needs reforms,” he said. “We should implement the IMF program in full. That’s our task.”

(Updates with analyst’s comment on reforms in eighth paragraph.)
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