The $27 billion estimated financing needs does not include the $5.2 billion of scheduled repurchases to the Fund over the program horizon. In net terms, the Fund’s share of overall support over the program was 44 percent given these scheduled repurchases.
Staff cautioned that a further depreciation (to UAH/USD 12.5) would increase capitalization needs in large domestic banks from 1½ to 3½ percent of GDP and, perhaps, as high as 5 percent of GDP if the exchange rate depreciated by 50 percent relative to end-2013.
The existing Board guidance on adjusters for NIR and NDA performance criteria speaks only of allowing for small deviations from program financing assumptions that could be accommodated within the program without affecting the program’s main objectives. Since adjusters can defer policy adjustment, it is recommended that programs rely on reviews and waivers from the Board if adjustments are needed.
Among the steps taken by NBU under the 2015 EFF were the creation of a special unit in charge of monitoring connected lending, and the granting of legal powers to that office to presume connected lending whenever the documentation and guarantees of a loan are substandard. Banks do have the recourse to complete the documentation or upgrade the guarantees.
Ukraine’s credit outstanding at the time of approval was SDR 2.58 billion (187.9 percent of quota), leaving up to SDR 2.91 billion that could have been requested without triggering exceptional access procedures over the 24-month period.
At program approval and completion of each review, the Fund’s financing assurances policy calls for (i) firm financing commitments to be in place for the next 12 months and (ii) good prospects for adequate financing for the remainder of the program.
Under the modified EA policy, an assessment at the time of the SBA’s approval that Ukraine’s debt was sustainable, but with uncertainty as to whether it was sustainable with high probability, could have categorized Ukraine as a “gray case”. This could have enabled a re-profiling (i.e., an extension of maturities during the program period), assuming that all other elements of the modified EA policy were also met.
See “The Liberalization and Management of Capital Flows: An Institutional View” (November 4, 2012) and “Managing Capital Outflows—Further Operational Considerations” (December 2015).
Based on views expressed during the EPE team’s staff visit to Kiev in March, by the authorities in office then and earlier, including in the Prime Ministry, the NBU, Ministry of Finance and Ministry of Economy, as well as by counterparts in Naftogaz and the private sector.