IMF urges Ukraine to stick to reforms as COVID, conflict risks weigh

  • 11/24/2021
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KYIV, Nov 24 (Reuters) - Ukraine can secure loans worth $2.3 billion next year by sticking to reforms, protecting the central bank"s independence and maintaining fiscal discipline, the International Monetary Fund said in a report released on Wednesday. Ukraine finally secured nearly $700 million in new IMF financing this week and an extension of its $5 billion programme until next June. Loan disbursals had effectively been frozen due to concerns over reforms. read more The IMF also warned that the coronavirus pandemic and the intensification of the conflict in eastern Ukraine posed near-term growth risks. Weeks of tensions between Ukraine and Russia have heightened fears of a military escalation between the two neighbours. read more It said President Volodymyr Zelenskiy"s government had delivered a "strong policy response" to cushion Ukraine from the impact of the pandemic, but warned that "risks to the program remain high". One of Europe"s poorest countries, Ukraine secured an IMF deal last year as it was dragged into recession by the pandemic. But the surprise resignation of its central bank governor, who complained of political meddling, and other management changes at the central bank raised concerns. The government has denied trying to exercise undue influence over the central bank, which raised interest rates four times this year as inflation spiked to its highest level since 2018. The IMF board could approve two more loan tranches in March and June next year provided Ukraine sticks to a reform path, said an IMF official who declined to be named. Coronavirus cases and deaths hit records in the country in November, prompting the government to restrict access to shops, restaurants and public transport. Ukraine"s vaccine rollout has lagged other European countries, with only around 10 million in a population of 41 million receiving two doses. Ukraine and NATO countries have sounded the alarm over Russian troop movements near Ukraine"s borders, fearing a sharp military escalation. Ukraine has fought Russian-backed separatists in its eastern Donbass region since 2014 in a conflict that Kyiv says has killed 14,000 people. Russia denies aggressive intent. "Ukraine is currently amidst a Delta variant outbreak with increasing, but still low, vaccination rates, which poses a risk to the near-term growth outlook from a tightening of containment measures," the IMF said in a report. "Intensification of the conflict in the eastern part of Ukraine and a tightening in global financial conditions also constitute risks to growth and macro-financial stability, while unfinished structural reforms and risks of reform reversals weigh on medium-term growth." Writing by Matthias Wiliams; Editing by Emelia Sithole-Matarise

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