IMF approves delayed $1bn tranche to Ukraine

A general view shows Independence Square in central Kiev, Ukraine © Valentyn Ogirenko
After a year’s delay the International Monetary Fund (IMF) has approved a $1 billion aid tranche for Ukraine from its $17.2 billion bailout program.

Ukraine’s President Petro Poroshenko has described the IMF decision as “positive.”

The amount is less than the originally planned $1.7 billion because some conditions were not met.

So far, Ukraine has received only the first two tranches from its four-year bailout program. Last year the IMF allocated $5 billion in March and $1.7 billion in August.

Kiev was to receive another three $1.65 billion tranches in 2015 and $600 million each quarter in 2016-2018. However, the IMF has delayed the allocations, criticizing Ukraine for the lack of progress in fighting corruption, slow privatization of state assets and delays in reforms.

The decision on the IMF’s bailout extension to Ukraine comes despite Moscow’s strong opposition. According to the Russian Finance Ministry, the extension would violate IMF rules on providing aid to countries with unresolved sovereign debt.

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The ministry insists Ukraine has not fulfilled all the financing conditions because the country has not repaid its $3 billion debt to Russia due last December. The funds were provided by Russia in 2013 through the purchase of Ukrainian Eurobonds.

In December 2015, the IMF lifted the ban on lending to countries with expired sovereign debt. Now, the debtor is required to be in dire need of financial aid and to hold active talks to reach a settlement with the lender.

Ukrainian Finance Minister Aleksandr Danilyuk told the IMF that Kiev is ready to settle with Moscow, but is also preparing to go to court. Earlier he said that it was a “political loan we were forced to take” and “our position is that we should not return the money.”

Ukraine hasn’t asked to start negotiating the restructuring of the debt to Russia, which is $3 billion plus interest, according to the Russian Finance Minister Anton Siluanov. The Moscow vs. Kiev case will be heard in London in January next year.