REUTERS
According to estimates by the International Monetary Fund, the key creditor of Ukraine, Ukrainian economic decline in 2014 was 6.9%, while in 2015 it is predicted at 5.5%, which corresponds to the forecast the Ukrainian government made when preparing changes to the state budget for 2015.
The estimates were given in a draft memorandum between Ukraine and the IMF signed by the president of Ukraine, the Ukrainian prime minister and finance minister, and the governor of the National Bank of Ukraine, Ukraine’s central bank.
"According to the IMF, economic indicators for December have shown a continuing decline in industrial production, retail trade turnover and construction volumes,” reads the memorandum.
“However, the unresolved conflict in the east of the country also contributes to the uncertainty of the forecast. In this context, economic activity may reach its lowest level in mid-2015. But, as our reform policy is gaining momentum, confidence will be restored, restoration work will start, [and] the decline in economic activity will slow down to 5.5% by the end of 2015."
It is stressed in the memorandum that the IMF and the government are determined to move towards strengthening economic and financial stability in the country through the implementation of large-scale and ambitious structural reforms that should improve the business climate, attract investment and increase competitiveness.
"In the years 2016-2018, as economic and banking stability is restored as the implementation of reforms progresses, we expect the resumption and gradual build-up of economic growth, which in the medium term will reach 4%," the memorandum reads.
As UNIAN reported earlier, in February, the Ukrainian government approved a memorandum of cooperation with the International Monetary Fund on a medium-term program of financial assistance for Ukraine, designed for four years, under the Enhanced Extended Fund Facility (EFF) and worth a total of $17.5 billion. The new program will replace the current two-year Stand-By program with funding of $ 17 billion.
The new program includes a number of key reforms - effective decisions in economic management, combatting corruption, improving the energy sector, the optimization and reduction of public spending, increasing spending on investment to 3% of GDP, a reduction in the number of government officials, and enhancing the effectiveness of pension reform - primarily through reducing and eliminating so-called “special pensions.”
In addition, the new program aims to stabilize the banking system and the exchange rate, so that 2016 can be a year of stabilization and economic growth in Ukraine.
IMF representatives have expressed confidence that the implementation of the reform program will be successful, as the government of Ukraine, according to IMF Director Christine Lagarde, has shown willingness to implement reforms to raise tariffs, restructure banks, cut public spending and carry out judicial and anti-corruption reforms.
In addition, Lagarde said that Ukraine's reform program opens access to a common package of financial assistance of up to $40 billion within the next four years.
The new program of cooperation is expected to be approved by the board of directors of the IMF on March 11. In this case, Ukraine cancould receive the first program tranche within several days of a positive decision from the board, or by the end of March. The Finance Ministry forecasts that the first tranche could consist of up to 60% of the total lending, or around $10 billion. The funds will be used to replenish the gold reserves of the NBU, as well as ensure the repayment of Ukraine’s foreign debts.