Friday, 11 September 2009A collapse of Ukraine's loan program with the International Monetary Fund would hurt the country's rating, which is already low due to concern over Ukraine's finances.
A Ukrainian presidential aide said on Tuesday that Ukraine has not met conditions set by the IMF and is therefore unlikely to receive another tranche of its $16.4 billion loan by the end of the year.
Ukraine is rated single-B with a negative outlook. This rating falls into the category of junk status. The IMF said on Saturday that a lack of political unity ahead of a presidential election in January was weighing on the currency but that otherwise, it was pleased with the central bank and government actions. Considering those events, Ukraine, at risk for delay in receiving further bailout aid from the International Monetary Fund this year, may need to take further steps to offset a potential increase in its financing needs.
Moreover, a shakeup of the banking system and the economic contraction forced Ukraine to turn to the IMF for a $16.4 billion loan in November 2008. The country has received $10.6 billion so far and seeks another $3.8 billion as the next installment near the end of October or beginning of November.
The IMF and Ukraine's cooperation was stalled earlier this year for three months while the government struggled to reach an agreement to cut the budget deficit. According to the IMF, inflation will slow to 14 percent this year and 9 percent in 2010.
Ukraine was hit hard by the world slowdown, and regarding imports, there was a significant increase in the price of natural gas from Russia. The country has also suffered from a reversal of capital flows, threatening liquidity in the banking system, and from October 2008 to March 2009, the National Bank of Ukraine lost US$14 billion in reserves.
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Friday, 11 September 2009
Simge Soyer (JTW)
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