Monitoring the implementation of the IMF programme and EU assistance (December 2024)
Successful cooperation with international partners is critically important for Ukraine. The financing of priority state budget expenditures depends on this (internal revenues are directed to security and defence). That is why the RRR4U Consortium continues to regularly monitor Ukraine’s fulfillment of the terms of the IMF financing program and and implementation of the Ukraine Plan, the fulfillment of which is the basis for providing assistance from the EU within the Ukraine Facility.
Fulfillment of obligations under financial support programs is not needed by donors – they are needed by Ukraine to achieve economic stability and transition to growth and increase the welfare of Ukrainians. And it is also a way to gain trust from all international partners and foreign businesses.
On November 19, Ukraine reached a staff-level agreement with the IMF on the sixth review of the EFF program. Ukrainian authorities met all quantitative performance criteria and structural benchmarks set at the end of September. The revision should be approved by the IMF Executive Board approximately in the second half of December. If so, Ukraine will receive another tranche of financing from the Fund in the amount of about USD 1.1 bn, and the total amount of payments under the program will reach about USD 9.8 bn.
ERA mechanism
In June 2024, G7 leaders agreed to provide Ukraine with a $50 billion loan through the ERA mechanism (Extraordinary Revenue Acceleration Loans for Ukraine). The loan will be repaid with future profits from frozen Russian assets.
In order to obtain a loan within the framework of the ERA mechanism, on December 3 the Verkhovna Rada adopted draft law No.12232, which amends the Budget Code, to introduce the concept of “conditional debt obligations”.
Thanks to the adopted changes, Ukraine will be able not to return USD 50 bn to the G7 if it does not receive reparations from Russia. This money will also not be counted as the state debt of Ukraine.
IMF
On November 19, Ukraine reached a staff-level agreement with the IMF on the sixth review of the cooperation program. The Fund assessed our progress against quantitative indicators and structural benchmarks with a deadline of the end of September 2024. The sixth review must be approved by the Board of Directors of the IMF — this is scheduled for the second half of December.
If the IMF Board approves the review, Ukraine will receive another tranche of funding from the Fund in the amount of $1.1 bn.
The next, seventh, review of the IMF program will take place in March. Our progress will then be assessed against quantitative indicators and structural benchmarks with deadlines in late October and December 2024. Ukraine fulfilled the October benchmarks: the government developed the ownership policy of state-owned enterprises and conducted an audit of heat supply companies, and the NBU assessed key risks for financial stability.
Some of the benchmarks — in particular, the repeal of the “Lozovyi amendments” and the creation of the Supreme Administrative Court — are problematic. There is little time left to implement them, and the political will to implement them honestly is also limited.
As of December 10, Ukraine had received 55% of the program’s funding ($8.65 bn out of the planned $15.5 bn).
EU
The implementation of the Ukraine Plan under the Ukraine Facility programme continues.
On 14 November, the European Commission approved the disbursement of the next tranche to Ukraine for meeting the indicators of the Ukraine Plan, which were due to be implemented by the third quarter of 2024. On 9 December, the EU Council approved the allocation of EUR 4.1 billion to Ukraine, so Ukraine will soon receive the second regular payment for meeting the indicators. This payment will bring the total amount of support under the 2024 Ukraine Plan to €16.1 billion.
What to expect in December 2024?
- Receiving a tranche in the amount of EUR 4.1 billion for the fulfillment of the indicators of Q3 (approximately in mid-December; there is the approval of the European Commission and a positive decision of EU Council);
- Planned implementation of 13 indicators of Q4 by the end of December;
- The launch of European Commission’s dashboard on the implementation of the Ukraine Plan (Scoreboard), which will be operational by January 2025 and will be updated twice a year.
Special topic — “Corporate government reform at state-owned enterprises”
Goals of the corporate governance reform
For years, state-owned enterprises have been mentioned as one of the signs of state capture, because management was not effective, companies were sometimes used for the personal enrichment of company managers, and often performed quasi-fiscal functions
The corporate governance reform must comply with the OECD principles in order for Ukraine to become a member of the OECD
Reform has been the focus of most IMF programs, as well as often in EU macro-financial assistance programs. Today’s support programs are no exception
Goals of the reform:
- Increase efficiency and productivity of state-owned companies
- Reduce fiscal risks
- Reduce corruption
- Reduce the share of the public sector
Basic steps:
➔ Triage of companies: ownership, privatization, liquidation
➔ Corporatization and restructuring
➔ Ownership policy and consolidation of management of state-owned companies
➔ Strengthening the independence of companies in particular thanks to the appointment of supervisory boards
You can view the previous monitors on the website RRR4U
RRR4U (Resilience, Reconstruction and Relief for Ukraine) consortium is a partnership of four Ukrainian civil society organizations with financial support from the Open Society Foundations and the International Renaissance Foundation. The consortium members are the Center for Economic Strategy, the Institute for Economic Research and Political Consultations, the Institute for Analytics and Advocacy, and the DiXi Group.
