Blue &Yellow: Politics and Economics in Ukraine

The IMF mission in Ukraine is negotiating with the government on how much he 2010 budget deficit will be.  Also, Ukraine requested $5 billion in the fourth tranche from the IMF. Bloomberg points out that credit-default swaps on Ukrainian debt has fallen substantially this year, part of a broader rally in the equity and bond markets in Ukraine.

The benchmark PFTS Index of stocks surged 64 percent and JPMorgan Chase & Co.’s EMBI+ Index of Ukraine government bonds gained 21 percent in the first quarter, topping 267 equity and bond gauges tracked by Bloomberg, as newly elected President Viktor Yanukovych pledged to resume cooperation with theInternational Monetary Fund on a stalled $16.4 billion bailout. The Washington-based lender froze its loan program last November as political infighting prevented parliament agreeing a budget.

I figure the drop in cds is partly due to reduced political turbulence since the presidential election in January.  While there is a nice rally going on, that doesn't mean that the country doesn't need the IMF to shore up its finances. In that vein, Tymoshenko thinks the budget deficit should be 4% of GDP and 10% inflation. The Yanukovych government wants a budget deficit of 10%.