Monitoring of implementation of the IMF program and the Ukraine Plan
Cooperation with international partners is critically important for Ukraine. The success of such cooperation depends on the financing of priority state budget expenditures (domestic revenues are directed to security and defense).
Fulfillment of obligations under financial support programs is not necessary for donors – Ukraine needs them to achieve macro stability and transition to economic growth and increase the welfare of Ukrainians. It is also a way to gain the trust of all international partners and foreign businesses.
Our monitoring takes into account the results of the implementation of commitments as of June 2024.
The RRR4U consortium continues to regularly monitor Ukraine’s compliance with the IMF financing program. As Ukraine has fulfilled all structural benchmarks required for a successful fourth review of the Program, an agreement on a successful review was reached at the expert level on May 31. The decision of the IMF Executive Board on the review is expected on June 28.
IMF
The next programme review (the fourth) is due in June. With the adoption of the law on one-on-one review of cases in the HACC (Beacon 32, deadline – end of April), Ukraine has met all IMF benchmarks for the next program review.
At the same time, the program’s progress is assessed not only by structural benchmarks. Quantitative performance criteria and indicative targets are also taken into account.
So far, there is little information about the review, but it is likely that Ukraine will receive several new structural benchmarks for the next reviews.
The fifth review will be difficult as the IMF is likely to revise the macroeconomic forecast, which is the core of the program. In particular, the reason for this is a longer active phase of the war than originally assumed in the program. This will increase the need for financing.
Additional funding will hopefully be obtained through the decision of the G7 to lend Ukraine $50 billion from the proceed from the frozen Russian assets.
It is important that, for the fifth review of the program to be successful, the Verkhovna Rada passed the draft law on rebooting the ESB (Benchmark 23) in time. At the same time, we did not find any evidence that Benchmark 31 on the audit of district heating companies had been implemented.
EU
The implementation of the Ukraine Plan under the €50 bn Ukraine Facility program is ongoing. Budget funding will continue to be provided only if indicators are met. However, the signing of the Framework Agreement between Ukraine and the EU on the financial program and its ratification by the Verkhovna Rada allows Ukraine to receive €1.9 billion in unconditional financing.
Special topic: Financial condition of district heating companies (DHCs)
Benchmark 31: Audit of the financial condition of district heating companies (DHCs) before and after February 2022
Objective: Determine the stock of arrears and assess financial conditions of District Heating Companies (DHCs) through a desk review by a reputable audit firm, including by separating arrears until and after February 2022
Target indicator: a desk review by a reputable audit firm conducted to determine the amount of debt and assess the financial condition of DHCs
Responsible authority: Ministry for Communities, Territories and Infrastructure Development of Ukraine
Deadline: end of June 2024
Conclusions:
- DHCs survive due to financial support from local budgets
- Resource for debts repayment from the state budget – after the war or at the expense of revenues to the special fund under international assistance programs
- Anything that exceeds the amount of the difference in tariffs is subject to settlement under restructuring agreements
- The problem of the difference in tariffs will exist until the moratorium is lifted (Indicator 10.12 of the Ukraine Plan, Q4 2025)
- In addition, other measures are needed to reform the district heating sector
RRR4U (Resilience, Reconstruction and Relief for Ukraine) is a consortium of four Ukrainian civil society organisations: Centre for Economic Strategy, Institute for Economic Research and Policy Consulting, Institute for Analysis and Advocacy and DiXi Group.
