IMF chief names benefits of, risks to new Stand-By Arrangement for Ukraine

IMF chief names benefits of, risks to new Stand-By Arrangement for Ukraine

The new Stand-By Arrangement for Ukraine, approved by the IMF Executive Board on June 9, is aimed primarily at overcoming the impact of the pandemic crisis, as well as creating conditions for a speedy economic recovery, IMF Managing Director Kristalina Georgieva has said.

At the same time, given the uncertainty of the situation, there are significant risks to the program, the IMF's press service reported.

"The new Stand-By Arrangement will provide an anchor for the authorities’ efforts to address the impact of the crisis, while ensuring macroeconomic stability and safeguarding achievements to date. Together with support from the World Bank and the European Union, it will help address large financing needs," Georgieva said.

According to her, the program will focus on safeguarding medium-term fiscal sustainability, preserving central bank independence and the flexible exchange rate, and enhancing financial stability while recovering the costs from bank resolutions.

At the same time, concerted reform efforts aimed at tackling corruption and strengthening governance will be critical to ensure macroeconomic stability and achieve sustainable and inclusive growth, Georgieva said.

"The risks to the new program are very large. The uncertainty about the severity and length of the global downturn is exceptionally high. On the domestic side, uncertainty about the direction of economic policies remains substantial," she said.

She said that public debt in Ukraine remains high and government financing needs are large.

"While fiscal policies under the program will initially be directed at addressing the impact of the crisis, fiscal policy will need to be tightened as the recovery sets in, to place public debt back on a downward path," Georgieva said.

She said that the National Bank of Ukraine (NBU) had skillfully managed monetary policy during a very challenging period.

"Central Bank independence should be preserved, and monetary and exchange rate policies should continue to provide a stable anchor in the context of the inflation-targeting regime, while allowing orderly exchange rate adjustment and preventing liquidity stress," the IMF chief said.

She stressed that Ukraine's financial policies should strike a balance between preserving financial stability and assisting the recovery.

"Full and timely implementation of policies under the Fund-supported program will be critical to mitigate economic risks and lay the ground for stabilization and recovery," Georgieva said.

The IMF Executive Board on June 9 approved an 18-month Stand-By Arrangement for Ukraine, with total access of about $5 billion. The approval of the SBA enables the immediate disbursement of about $2.1 billion.


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