Next IMF tranche at risk: Parliament's slackness jeopardize next tranche of IMF bailout for Ukraine

10:27 Nov. 10, 2016

Parliament's slackness jeopardize next tranche of IMF bailout for Ukraine

Pedestrians walk past a large poster of Valeriya Gontareva, governor of the National Bank of Ukraine, as it sits on the wall outside the central bank's headquarters in Kyiv, Ukraine, March 12, 2015 (Vincent Mundy/Bloomberg via Getty Images)

Ukraine's central bank chief blames parliament for reluctance to pass key reforms

Ukraine risks not receiving loans worth USD 1.3 billion that it is awaiting from the International Monetary Fund before the end of 2016, due to parliament's reluctance to pass key reforms, the head of the central bank Valeriya Gontareva told Reuters on Tuesday.

If Ukraine does not receive the IMF cash and an additional USD 700 million from the European Union this year according to the schedule, year-end reserves will stand no higher than the present USD 15.5 billion - USD 2 billion below the latest forecast, she said.

With at least USD 2.5 billion in coupons and debt repayments due in 2017, "we can see how our reserves start to melt before our eyes. Our last 2-1/2 years of work stabilizing the situation, raising reserves, stabilizing the macroeconomy, starts to evaporate," Gontareva said.

Read also Ukraine seeks more IMF cash

Gontareva was appointed by President Petro Poroshenko in 2014 to guide the central bank through an economic crisis that has been aggravated by Russian-fuelled separatist conflict in Ukraine's industrial east.

She said the bank had carried out its promises to the IMF under the aid-for-reforms program, including a clean-up of the banking sector, and that the blame for the current delays lay with parliament.

"The central bank is responsible for its territory, unfortunately we can't do pension and land reform etcetera," she said. "It was the responsibility of parliament to pass these changes and the budget." 

Populist factions in parliament oppose legislative changes, required by the IMF, that would cut the large pension deficit and further liberalize the agricultural sector. They argue that austerity measures under the IMF program have done more harm than good, and say Ukraine would be better off going it alone. Gontareva said this is an "illusion".

"I don't want anyone to doubt that for financial stability it is essential to continue cooperating with the IMF and our other supporters," she said.

In the interview, Gontareva dismissed recent political attacks against her as vendettas by lawmakers and businessmen who have lost out through the banking reforms, but she expressed concern that parliament could disrupt the IMF program by watering down approved reform legislation with amendments.

"What worries us are the laws that could be passed," she said, pointing to draft legislation that would alter an IMF-backed law on the independence of the central bank that parliament passed last year to secure a loan tranche worth USD 1.7 billion.

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