Ukraine is preparing an action plan for the IMF to preserve funding if US aid is suspended - Bloomberg
Kyiv • UNN
Ukraine plans to propose to the IMF to expand sales of domestic bonds, raise taxes, and cut spending to secure IMF funds if US aid remains blocked.
Ukraine is considering a plan that includes expanding domestic bond sales, raising taxes and cutting spending to close a budget gap to ensure it receives money from the International Monetary Fund if vital U.S. aid remains blocked, Bloomberg reports, UNN writes.
Details
"Ukrainian officials intend to propose this plan to the IMF during a staff visit to Kyiv next week," the newspaper writes, citing people familiar with the matter.
As indicated, these measures are necessary to assure the IMF that Ukraine can service its debts if its allies fail to provide assistance, a condition for its $15.6 billion loan program.
According to the newspaper's sources, IMF staff, led by Gavin Gray, the fund's chief mission to Ukraine, will pay a three-day visit to Kyiv starting February 12, before Ukraine's official talks in neighboring Poland. The visit comes ahead of a review of the IMF loan program, which will begin later this month and will allow for a $900 million tranche of aid.
Ukraine has offered to discuss with the IMF a "contingency plan" in case foreign aid is cut off, the central bank told Bloomberg News in an emailed comment. According to the statement, it still expects aid to resume "in the coming months," and the IMF shares this view.
"Measures under 'plan B' are currently being discussed and could potentially include activation of the domestic debt market, fiscal optimization, and consolidation," the central bank said.
The IMF declined to comment.
While Ukraine is fulfilling its obligations, the Finance Ministry and central bank believe there is a risk that the IMF board will not approve the next disbursement without a budget plan if US funds continue to be blocked, a Ukrainian official said. This year, Kyiv was to receive $5.3 billion under the IMF program.
According to the official, the key source of funds to replace the US funds will be the expansion of domestic government borrowing. Ukrainian banks are highly liquid, and the government expects them to continue to invest the funds they are withholding from lending due to military risks in high-yielding government bonds.
According to the official, this could bring in at least $5 billion in revenue this year. The official said the government could also raise taxes or cut spending if necessary.
