Ukraine receives $2.7 billion from IMF and may get new stand-by loan tranche

However, only three weeks remain to review the stand-by tranche that was never started, whereas last time the process took more than a month and a half.

On August 23, Ukraine received about $2.7 billion as part of the new allocation of special drawing rights (SDR) by the International Monetary Fund. 

More details on what this tranche is, under what conditions it was granted and what further financial assistance Ukraine can expect.

1.9 billion SDR or $2.7 billion

In early August, the International Monetary Fund issued special drawing rights worth $650 billion to support the global economy. These funds were to be distributed among IMF member countries according to their quotas in the organization. For Ukraine, this figure is 0.42%, which, converted into the allocated SDR amount, came to $2.7 billion.

This SDR issuance was a response to the worsening economic crisis caused by the coronavirus pandemic. The amount is a record: the last time the IMF carried out an SDR issuance was in 2009, due to the global economic crisis.

As reported on Facebook by First Deputy Governor of the National Bank of Ukraine Yekaterina Rozhkova, Ukraine received an IMF tranche on August 23.  

Yekaterina Rozhkova
First Deputy Governor of the National Bank of Ukraine

Today 1.9 billion SDR arrived in Ukraine's account at the IMF! These are funds from the new issuance, which the IMF Executive Board distributed among countries in proportion to their capital in the IMF. An excellent gift for Independence Day!.

In comments to the post, Rozhkova clarified that 1.9 billion SDR is equivalent to about $2.7 billion.

The SDR is a non-cash unit of account of the IMF, whose value is determined by a mathematical model based on fluctuations in the exchange rates of major currencies. 

At the same time, all 190 IMF member countries receive SDRs, including almost $1 billion for the unrecognized regime of Belarus, despite calls from IMF partners not to allocate funds that could be used for repression. Russia also received almost $18 billion, despite extensive sanctions for violating international law and human rights.

These funds are issued without any conditions and are not counted in the country's debt balance, so they should not be confused with IMF loans, which are issued at interest on condition that certain reforms are carried out.

What is known about Ukraine's cooperation with the IMF under the stand-by program

In June 2020, the IMF approved a stand-by program for Ukraine to provide a loan of about $5 billion at a reduced interest rate, subject to economic reforms, including "the independence of the National Bank of Ukraine".

At the same time, Ukraine received the first tranche of $2.1 billion under the program without any reform conditions. In total, the program provides for four reviews to release tranches of $700 million each.

The first review began at the end of 2020, and already in February the IMF refused Ukraine the tranche. The failed review means that Ukraine will definitely not receive at least $700 million of the total $5 billion program. Three reviews remain.

Earlier, it was expected that the second program review would begin in July, but the IMF mission has not yet started work in Ukraine.

Meanwhile, on August 23, European Commission Vice-President Valdis Dombrovskis said that Ukraine had met all the conditions for receiving a new tranche, and therefore the IMF could respond positively when reviewing the program.

Valdis Dombrovskis
Vice-President of the European Commission

As for the macro-financial assistance itself, all the main conditions on Ukraine's side have been met. That is, the question is how the negotiations with the IMF are going.

However, a snag has emerged: the deadline for reviewing the program to release this macro-financial assistance is September 14. And as Dombrovskis said, this deadline cannot be extended, so this work must be agreed and coordinated with the IMF now.

No official comments from IMF representatives or the Ukrainian government about the reasons for this delay have been received. Meanwhile, the first program review took IMF experts more than a month and a half, whereas in this case just over three weeks remain.