It appears that the Fund has relaxed its conditions and increased assistance to Ukraine, in view of the enormous difficulties that the economy faces and given the problematic domestic political situation. The IMF board opted to set to one side its concerns over some aspects of budget management, as well as currency controls (that Ukraine insists are temporary in nature) and import restrictions. It has accepted that Ukraine will run a deficit of around 4% of GDP this year, rather than the balanced budget to which the government was initially committed.
The Fund says it is now happy with the budget parameters. Previously the problem was not only that the government wishes to run a deficit, but that its revenue projections were based on an unduly optimistic forecast for GDP growth. The IMF now expects GDP to contract by 8% this year; mission head Ceyla Pazarbasioglu has warned that further downgrades are possible.
[From the Economist]
IMF: Second Tranche for Ukraine
Ukraine and the IMF managed to work out their differences.Ukraine received its second installment from the IMF. Good news for Tymoshenko's government, which had spent several months trying to convince the IMF to release the money. It comes at a bad time for the prime minister as she currently faces an uproar in the Rada over the interior minister's arrest in Frankfurt. This won't get Lutsenko off the hook, but does give the prime minister something positive to talk about.
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