KYIV, Dec 3 – Ukraine, which has been struggling for 6 months to persuade the International Monetary Fund to resume lending, may try to borrow $1 billion via an issue of eurobonds, Prime Minister Denys Shmyhal said Thursday.
The pans to tap capital markets in December raise eyebrows since without a clear approval from the IMF as foreign investors are lukewarm to lending money to the country or charge prohibitively high interest rates.
"The plan B is always there,” Shmyhal told Korrespondent online magazine. “It remains possible to enter the external borrowing market by December 15. It will also be short-term loans, up to six months. Volumes depend on budget execution and the size of its deficit.”
“In the domestic market it can be UAH 50-60 billion hryvnias,” Shmyhal said. “In the foreign market can be about 1 billion dollars.”
Western analysts pointed to apparent detachment from reality within the government that may be severely misinterpreting signs and indications from the IMF. The Washington-based lender insisted that Ukraine must resume economic reforms and fight corruption before lending can be resumed.
“Such optimism is misplaced,” Anders Aslund, a senior fellow at the Atlantic Council in Washington, said. “If the Ukrainian government does not fundamentally revise its current economic policy and political trajectory, it is unlikely to receive any IMF, World Bank, or European Union funds for as long as Volodymyr Zelenskyy remains president.”
Ukraine was originally expecting to receive $1.4 billion from the IMF in the second half of the year, but some economists see it unlikely for the country to get any IMF loans by the end of the year.
Tymofiy Mylovanov, a recently appointed advisor to presidential office’s chief of staff and a former economy minister, said “There will be no tranche this year. It’s unrealistic.”
The IMF disbursed $2.1 billion in June after approving $5 billion loan deal to help Ukraine fight coronavirus pandemic.
Zelenskiy replaced the reformist Cabinet of Prime Minister Oleksiy Honcharuk in March with old-school bureaucrats that are believed to be linked with wealthy businessmen. The reshuffle immediately stalled economic reforms, triggering criticism from the IMF.
“Zelenskyy does not appear to grasp that the IMF takes its conditions seriously and does not want to be treated as just a source of cheap credits,” Aslund said. “Unlike the Ukrainian government, it is focused on structural reforms so that the Ukrainian economy can start growing at five to eight percent a year, rather than at minimal rates.”
“Perhaps worst of all, he seems unable or unwilling to confront oligarch Ihor Kolomoiskiy, who has launched 600 cases against the nationalized Privatbank and its staff,” Aslund said. “Unless Zelenskyy comprehensively changes his policies and staff, I doubt the IMF will offer his government any more credits.” (tl/ez)