Ukrainian President Volodymyr Zelensky and IMF chief Kristalina Georgieva Author: Yuriy Doshchatov
Some difficulties have arisen in the course of Ukraine's negotiations with the IMF. Failure to fulfill one of the program's conditions may delay the allocation of the next tranche. In addition, Naftogaz has made an unexpected request to the Fund. The details of the negotiations are in the material by RBC-Ukraine special correspondent Yuriy Doshchatov.
Content:
- One of the program's “beacons” may slow down the new tranche
- Naftogaz wants money for gas imports
- The Trump Factor
The seventh revision of the International Monetary Fund's EFF credit program, which began on February 20, may not end as successfully as the previous six. According to RBC-Ukraine, as a result of the mission's work, a prior action may appear for Ukraine. And only after its implementation will the issue of allocating the next – eighth – tranche be submitted for approval to a meeting of the IMF Board of Directors.
By the time the memorandum with the IMF was revised, Ukraine had not fulfilled two “structural benchmarks,” that is, conditions for continued financing.
One of the program's “beacons” may slow down the new tranche
The first “beacon” is the abolition of the so-called “Lozovoy amendments” . We are talking about changes to a number of codes adopted by the Rada back in 2017. Among other things, they limit the period of pre-trial investigations of crimes. At that time, it was envisaged that if a case is not solved within the established time frame, the criminal proceedings must be closed. The effect of such restrictions creates conditions under which corrupt officials can avoid punishment.
In the memorandum with the IMF, the condition for canceling the “Lozovoy amendments” appeared last summer. And the deadline for fulfilling this “beacon” has already been postponed twice. According to the latest version of the memorandum, it had to be fulfilled by the end of December 2024. But the Rada cannot make a decision. The last attempt to amend the legislation on this issue was in mid-January, but the bill was never included in the agenda.
Business is against the cancellation of these “amendments”, fearing that criminal investigations could become endless. A source familiar with the negotiations reported that the discussion on this issue with the IMF is continuing and it is possible that the deadline for fulfilling this condition could be postponed again.
Negotiations between the IMF mission and representatives of the Ukrainian government (photo: t.me/Denys_Smyhal)
The second unfulfilled “beacon” is the creation of a new Supreme Administrative Court (SAC) . This condition appeared in the memorandum with the IMF at the end of 2023. The Administrative Court should replace the liquidated District Administrative Court (OAC).
The new court will hear cases against national government bodies (for example, the NBU, NABU, NAPC). The deadline for this “beacon” has also been postponed several times. But now, according to the publication, the IMF mission has taken a tougher stance on this issue and is not inclined to extend the deadlines any further.
Deputy head of the Verkhovna Rada's financial committee Yaroslav Zheleznyak also believes that the IMF will not be able to delay the fulfillment of this condition. And the failure to adopt the law on administrative court creates a risk for receiving the next tranche from the IMF within the expected timeframe.
According to sources of RBC-Ukraine familiar with the progress of negotiations with the IMF, the creation of the Supreme Arbitration Court, if a decision is not made in the coming days, will most likely become a prior action for continued financing.
“If there is a discussion on the issue of “Lozovoy's amendments”, then regarding the trial, “the lighthouse” will most likely become a preliminary condition,” said the source familiar with the progress of negotiations with the IMF. Thus, the allocation of the next tranche, which is expected to be $917.5 million, will become possible only after the adoption of the relevant law.
Naftogaz wants money for gas imports
As part of the program review, the management of NAK Naftogaz of Ukraine met with representatives of the IMF mission. This usually does not happen very often – only in cases where the program contains some conditions concerning the gas sector. There are no such conditions now.
However, on February 21, the acting head of NAK Roman Chumak nevertheless held a meeting with the mission, where he spoke about the difficulties of the heating season and providing consumers with gas. He called the situation “difficult.” “Yes, it is difficult, but not critical. Naftogaz imports gas in the volumes necessary to balance the system and meet the needs of all consumer groups,” the press service of NAK quoted Chumak as saying.
Acting Head of NAK Naftogaz of Ukraine Roman Chumak
The publication's sources reported that the meeting was caused by Naftogaz wanting to agree on the allocation of funds to the company for gas imports. Specific amounts, but gas volumes, are not being discussed. “At the first stage, we are talking about 1 billion cubic meters of gas,” said the publication's source familiar with the negotiation process.
Let us recall that it is not only NAK that is searching for funds to import gas, but also the leadership of the Ministry of Energy. German Galushchenko recently stated that Ukraine needs to import 1 billion cubic meters of gas. Last week, he visited Brussels, where he held talks on the possibility of financing imports or receiving gas as a grant. However, the Ministry of Energy has not reported the results of such talks.
According to Reuters, Ukraine plans to import up to 800 million cubic meters of gas from Europe in February and March.
The IMF, according to the publication's sources, has not yet responded to NAC's request. However, the mission's representatives were surprised by such a request, since the issue of the need to increase gas imports was not raised during the last revision of the program in December 2024.
The Trump Factor
Despite the fact that the current revision of the IMF program may be more difficult than the previous ones, the influence of the new White House administration on the Fund's work has not yet been seen. Although experts noted back in November last year that if Trump wins, the level of IMF loyalty to Ukraine may decrease.
The United States has the largest share in the IMF's capital – 17.4% – and the largest number of votes – 16.5%, which allows the country to influence decision-making.
“There are no complications so far, the IMF team is positive, despite Ukraine's weak fulfillment of its obligations,” a source involved in the negotiation process told the publication.
However, the risks of a change in the IMF's approach to Ukraine in the future still remain, believes Oleksandr Parashchy, head of the analytical department at Concorde Capital. “There are risks that Trump will get to the relations between the IMF and Ukraine… But our situation here is such that even if the program goes according to plan, this year we will pay the IMF $380 million more than we receive, and $1.7 billion more in 2025-2027. Therefore, fruitful cooperation with Ukraine is (somehow) a guarantee of timely repayments from Ukraine to the IMF,” he said in a commentary to RBC-Ukraine.
The analytical company ICU believes that it is highly likely that the review of the program will now take place without any negative surprises. “Delays in the implementation of structural benchmarks are unlikely to be critical for this review. The experience of Ukraine’s cooperation with the IMF within the framework of the current program shows the fund’s readiness to remain flexible as long as there is confidence that the structural benchmarks will be implemented over time,” the company’s analytical department stated.
At the same time, the ICU also admits that the IMF's approach to working with Ukraine may change in the future. “There are risks that the IMF's position in further program revisions will be tougher in terms of compliance with the deadlines for structural beacons. However, this should not become a significant obstacle to cooperation,” the ICU noted.
If positive expectations are confirmed, IMF financing this year will amount to $2.712 billion. The funds will be allocated in four tranches: $917.5 million in March, $809.6 million in June, $539.8 million in August, and $445.3 million in December.
