Why the agreement with IMF cannot be reached

Oleg Gavrysh

Deputy Chief Editor, The Page

The International Monetary Fund mission began work in Ukraine to revise the stand-by cooperation agreement. This was announced by the Chairman of the National Bank Kyrylo Shevchenko.

Shevchenko expressed confidence that it would be possible to come to an agreement with the IMF. 's source at the Ministry of Finance also says that the chances during negotiations are high.

But actually, it will be almost impossible to agree on the extension of financing. A source in the Office of the President who is fully familiar with the negotiations picture told the Page about this.

The IMF still considers the 2021 state budget unbalanced.

The key goal pursued by the Ukrainian side as the result of the IMF mission is a staff level agreement between the IMF and the leadership of Ukraine.

Ukraine is only interested in SLA because it will open the way to financial markets for borrowing.

But the IMF is not ready to conclude any SLA because Ukraine has not fulfilled almost anything from the past SLA and has deliberately violated a lot.

Therefore, the IMF is very intensely discussing the budget for 2021 and 2022 with the Ukrainian side. It is still considered unbalanced in the fund.

What exactly is the mission's concern? According to an interlocutor in the Office of the President, there are three main issues.

The first one is anti-corruption policy. Here we have bashing on the head of the National Anti-Corruption Bureau Artem Sytnyk, and the Constitutional Court of Ukraine decision on a number of anti-corruption legislation provisions abolition.

It turns out that a number of key decisions made under President Petro Poroshenko under pressure from the international community have been canceled recently.

The second issue is Ukrposhta financial stability that raises questions. It should be reminded that the company wants to become the largest bank in the country without having the appropriate resources for this.

In case of a crisis, such a decision can turn into significant problems for the budget. To save the clients of Ukrposhta, it will be necessary to spend public money. And that does not suit the fund.

Finally, one of the most important issues is the IMF's claims to the National Bank of Ukraine independence.

To justify Shevchenko's hopes for IMF approval, he should start with himself.

This year, President Volodymyr Zelensky has dealt a severe blow to this independence, first bringing the matter to Yakiv Smolii (the institution's ex-head) resignation, and then making his loyal Kyrylo Shevchenko the Chairman of the NBU.

Shevchenko himself acted even more dubious, completely redrawing the powers of the National Bank's board, pushing aside all people who were not loyal to him and Zelensky.

In short, in order to justify the Chairman’s of NBU hopes to reach an agreement with the IMF, he should start with himself. Or rather, with how he runs a financial institution.