Ukraine’s stalled $17.5
billion bailout will probably be unlocked at the end of next month, though the
national currency is unlikely to benefit as capital controls will also be
relaxed, according to the deputy central bank governor in charge of
foreign-exchange policy.
A third $1.7 billion
disbursement, held up for eight months because of wrangling over the budget and political turmoil that ushered in a new prime minister, is possible days
after approval from the International Monetary Fund, Oleg Churiy said in
an interview. Ukraine hasn’t discussed combining the third and fourth payments
of the rescue loan, he said.
“If all issues are resolved,
the IMF board decision could come in late June,” Churiy said Monday in his
office in Kiev. “The tranche could then arrive within a few days.”
Faced with a fragile economic
recovery and anger over the slow pace of reforms, Prime Minister Volodymyr
Hroisman has made resuming cooperation with the Washington-based lender a
priority. Parliament is starting this week to debate 19 laws required by
the IMF, including bills on privatization and regulation. Restarting the loan
will help release billions of dollars more in aid from allies such as the U.S.
and the European Union.
Investor
Optimism
Having fretted at
bailout delays, April’s government revamp renewed optimism among investors
that Ukraine can smooth ties with the IMF. The hryvnia has advanced 1.3 percent
against the dollar since Hroisman’s appointment, while yields on
government dollar debt due 2019 have fallen 26 basis points, data compiled
by Bloomberg show.
The hryvnia probably won’t
strengthen as a result of the IMF cash, according to Churiy. Price
volatility for commodities such as steel, one of Ukraine’s biggest exports, as
well as the continued, gradual rollback of capital controls will prevent gains,
he said.
“Lifting restrictions will
push demand for foreign currency in Ukraine up and supply down,” Churiy said.
“That’s why one can’t say that if everything’s alright with funds from
international donors, there’ll be a certain hryvnia-appreciation trend.”
Rate Cuts
The strictest capital controls
were imposed last year at the height of Ukraine’s currency crisis. The
next measures to be rescinded include allowing foreign investors to repatriate
dividends, and possibly direct investments, according to Churiy.
“We’ve already agreed on
that with the fund,” he said. “We’ll lift restrictions carefully, taking
into account the market effect of the previous measures.”
Macroeconomic stabilization
and fluctuations in the balance of payments will also dictate the pace capital
controls can be unwound, Churiy said. He reiterated central bank plans to
continue trimming the benchmark interest rate from 19 percent as long as
inflation eases and this year’s 12 percent target is met. The bank’s
monetary-policy committee decides on rates next week.
“At our meetings with banks,
we speak without disguise about cutting the discount rate as inflation
slows,” Churiy said.
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