The IMF reports Staff-Level Agreement, conditionality is not clear

UKRAINE - In Brief 18 Oct 2021 by Dmytro Boyarchuk

---

A month of online negotiations and the IMF mission finally gives an encouraging signal: a staff-level agreement and an extension of ongoing SBA Program till June 2022. However, the press-release mentions that only “Continued steadfast implementation of strong policies in these areas, consistent with objectives under the program and agreed commitments, will pave the way for the IMF Executive Board’s consideration of the review, expected in November.” We read these words as an indication that the staff-level agreement is under serious conditionality. From the official message it’s unclear what the final agreement looks like and what this list of conditionalities consists of. To tell the truth, many points from the official press release look really strange against the backdrop of all the developments we are seeing locally. First, the IMF mentions “reducing fiscal risks from quasi-fiscal operations, including in the energy sector”. It would be good to understand what the IMF means here because the authorities promised to restrict a heating tariff increase for the ongoing heating season, which inevitably means “risks from quasi-fiscal operations” and hefty losses for Naftogaz. Second, the IMF mentions “safeguarding central bank independence” while rumors about the potential removals of NBU Governor Kyrylo Shevchenko are circulating. Thirdly, the point to “strengthen corporate governance” sounds like a mockery after the Cabinet took Naftogaz under direct control recently. The likely focus of the deal is judicial reform and anti-corruption vertical, I assume. Other storylines might have been muted against the backdrop of those two priorities, which were clearly outlined at t...