Ukraine may very soon receive over $ 4 billion from creditors.
Of this amount, $ 2.7 billion from the IMF has already been credited to the reserves of the National Bank. And soon another 1.4 billion should be received from the same IMF and the European Union. The Cabinet of Ministers is already counting money, and Prime Minister Denis Shmygal allowed an increase in social benefits. What will the external loans be spent on and when all the money arrives, reports with reference to.
The IMF and the European Union in the near future can positively close the issue of long-awaited tranches for Ukraine. The European Commission (EC), literally today, must decide on the allocation of the second tranche of macro-financial assistance in the amount of 600 million euros.
The program with the EC ends on September 14, the loan for it is tied to cooperation with the IMF. Ukraine could not receive the money on “macrofin” for almost half a year due to problems in negotiations with the Fund, since the authorities were delaying the fulfillment of preconditions.
Brussels was waiting for a positive signal from Washington. Such a signal was received recently, when the IMF was convinced that Ukraine fulfills the terms of the stand-by memorandum.
“Such a“ signal ”was given, but not publicly, but in the process of working communications between the European Commission and the IMF,” said one of the Ukrainian officials familiar with the negotiation process.
The fact that there is reason to expect the second tranche of «macrofin» in mid-September, the EC reported to the newspaper at the beginning of the month. “There is hope that the commission will be able to make a decision on the loan and the provision of funds by September 14,” — said in the response of the EU Delegation to Ukraine. This money will go to finance the budget deficit, and not to the revenue side of the treasury.
IMF tranche «on the way»
As for the second tranche from the IMF under the stand-by program, Ukraine has fulfilled all the “structural beacons” required to revise the program. At least, this is what the authorities insist on. Back in late July, President Volodymyr Zelenskyy spoke about the fulfillment of all conditions, stressing then that the country was ready to receive the next tranche.
The only thing left to do is to adopt the bill (# 5459-1) on NABU. But so far there are controversial points in this document, approved in the first reading back in May. It is planned to continue its consideration in the coming months, said Galina Yanchenko, deputy head of the anti-corruption policy committee.
“Considering that Sytnik (Artem Sytnik — director of NABU, — ed.) Expires in about six months, in my opinion, it is critically important to select and approve the new head of NABU without violating the Constitution, so that neither NABU nor the new director will go under the risk that they may be demolished by the decision of the Constitutional Court, ”Yanchenko said.
At the same time, the deputy clarified, NABU wants them to retain the status of a law enforcement agency. It is this question that is the subject of negotiations. “So the bill is on the agenda, but since there is a debatable issue, there is no rush to consider the law until it is resolved,” Yanchenko said.
The IMF mission plans to come to Kiev to revise the program in the third decade of September, said the representative of Ukraine in the IMF Vladislav Rashkovan. The fact that the mission is scheduled for the second half of September was said at the end of August. The head of the NBU, Kirill Shevchenko, even hopes to increase the size of the tranche, which so far should amount to $ 700 million.
To date, there are practically no obvious reasons for the failure of such a scenario development. The reduction of the electricity tariff for the population by the introduction of a financial JI was agreed with the lender, and the limit of the state budget deficit of 3.5% of GDP, as recommended by the IMF, was taken into account by the Ministry of Finance when drawing up the document.
The dismissal of three independent members of the NJSC Naftogaz Supervisory Board, although it caused concern in the US State Department, will not affect the continuation of cooperation with the IMF. This publication was told by several sources familiar with the preparations for the mission's visit. Because of what, in their opinion, it is quite possible to expect a successful revision of the program in September-October. And in this case, the allocation of the second tranche, taking into account the procedure for submitting the issue to the IMF Board of Directors, can be expected not earlier than November.
The program is planned to be extended by six months to select the remaining $ 2-2.3 billion, Finance Minister Sergei Marchenko confirmed earlier. The next two tranches will possibly be combined into one, which, probably, Ukraine can receive no earlier than March 2022. There are purely formal reasons. For example, the IMF will analyze the statistical results of 2021, which will appear officially not earlier than February.
What will $ 4 billion be spent on
Prime Minister Denis Shmygal said that the IMF funds will increase social payments. Here it was about $ 2.7 billion that have already been transferred to the NBU accounts. In fact, there are several options for using money: financing the deficit, replacing «short» and expensive debts with «long» and cheaper ones. After all, the cost of borrowing for Ukraine after the allocation of the IMF tranche may decrease.
Another option is to buy out warrants. These are debt securities issued in 2015 as part of the restructuring of the state debt with a yield depending on GDP growth. But this option is currently unprofitable, says Alexander Paraschiy, an analyst at Concorde Capital.
“Now warrants are traded at 115% of the nominal value. In the summer, the Ministry of Finance bought them out at 86% of the face value. A ransom that is more expensive than par will result in a very big scandal, ”the expert noted.
Yelena Belan, chief economist at Dragon Capital, is confident that warrants should be gradually eliminated, but it is necessary to see how the market situation is suitable for this, and whether there is money for it.
“Despite the significant overfulfillment of the tax plan — at the end of the year, I think there will be 80 billion hryvnia — there will still be no extra money in the budget. Part of the additional revenues will be spent, and the budget deficit will still be significant — somewhere around 180 billion hryvnia, which is 6.5 billion dollars in equivalent, ”says Belan.
The economist believes that the loan will be used to pay off debts, including $ 1 billion of Eurobonds issued under US guarantees, plus $ 300 million of other external repayments. Not to mention the fact that payments on domestic debt also need to be made in the absence of special demand for government bonds. “So the Ministry of Finance is using this cheap and long enough money in part to pay off debts,” Belan said.
Former Finance Minister Igor Umansky is convinced that there can be no options for using money from the IMF and the EU. “If you don’t know what to do, act according to the law. According to the law on the state budget, money — $ 2.7 billion — from the IMF can be directed only to the revenue side of the state budget. Moreover, the IMF, I think, will insist on this to reduce the deficit on this volume. To send them to other purposes, it does not matter — to social payments or something else, it is possible only by changing the law on the state budget, ”Umansky said.
The money from the EU and the tranche under the IMF program, in his opinion, should go to finance the deficit. Moreover, there are currently not enough sources to finance the budget. “For 8 months, non-fulfillment of the plan for expenditures — 78 billion hryvnia. And this was the period of the «light» regime — the main expenses are at the end of the year. Of these — 65.5 billion in the total fund, protected articles — 32.2 billion. And you say — use cases. We cannot carry out the planned expenses, ”the financier noted.
As of the beginning of this week, the Ministry of Finance had not yet made a request to convert SDRs into dollars. But, according to the newspaper's information from sources in banking circles, closer to the end of September such a request will be submitted, since the government plans to extinguish payments on the state debt. And what is important: the Ministry of Finance does not have to use 2.7 billion dollars from the IMF this year. They can be selected as needed and later.