According to the results of the IMF mission, which completed its work in Warsaw on February 17, 2023, a Staff-Level Agreement (SLA) was reached on the first and final review of the Monitoring Program for Ukraine with the involvement of the IMF Board of Directors (Program Monitoring with Board Involvement, PMB ).
This agreement, which is subject to approval by the IMF leadership, paves the way for the start of discussions on a possible full-scale program that would involve financing Ukraine.
During the final meeting with the Chairman of the National Bank of Ukraine Andriy Pyshny and the Minister of Finance Serhii Marchenko, the head of the IMF mission Gavin Gray noted the high efficiency of the Ukrainian authorities in fulfilling the conditions of the PMB. Ukraine has achieved all quantitative and indicative targets, as well as fulfilled all structural benchmarks.
According to the National Bank, one structural beacon has been fixed in the monitoring program – this is the development of a technical task for the diagnostic survey of banks, which was completed on January 26. Among the important quantitative goals of the PMB, established by the NBU: ensuring the appropriate level of international reserves, as well as limiting the amount of direct financing of the budget deficit by the National Bank in 2022 and completely abandoning this instrument in 2023. The corresponding goals were also achieved, including thanks to work aimed at attracting international aid and the measures taken by the NBU and the government to activate the domestic debt market.
In addition, within the framework of the IMF Mission, the measures of the National Bank to increase the attractiveness of assets in the national currency and to reduce the risks of a significant liquidity surplus of the banking system for price and macro-financial stability were discussed. It was emphasized, in particular, that the reaction of the National Bank, including the increase of mandatory reserve standards, is balanced.
“The National Bank of Ukraine reacts in a balanced way to excess liquidity in the banking system, including by increasing the standards of required reserves, and to the need to increase the attractiveness of assets in the national currency in order to preserve price and external stability. Since the beginning of the war, large-scale emergency measures imposed under martial law have helped to maintain financial stability. Currently, preparations are underway for the gradual cancellation of emergency measures in order to bring domestic regulations in line with international standards. The NBU’s priority is to update the strategy of the financial sector, the key element of which will be, under favorable conditions, an independent assessment of bank assets,” Gavin Gray commented on the work of the NBU.
The head of the IMF mission noted Ukraine’s progress in reforms aimed at strengthening public administration, the fight against corruption and ensuring the rule of law, as well as the efforts of the Ukrainian authorities to lay the foundations for post-war growth. He emphasized that measures to improve the efficiency and transparency of public finances and management will be critically important.
“We are grateful to our colleagues from the International Monetary Fund for their thorough analysis and high assessment of the steps taken by the Ukrainian side within the framework of the Monitoring Program. And also for comprehensive support of Ukraine in the conditions of full-scale Russian military aggression. In the coming weeks, we will actively work on the extended financing program with the IMF in order to conclude it as soon as possible, – emphasized the Chairman of the National Bank of Ukraine, Andrii Pyshnyi. – Today, everyone understands that the issue of time for Ukraine is much more important than ever before, both for preserving the stability of our state and for its further reconstruction. Therefore, we cannot delay decisions. We are ready for reforms, we are ready to implement long-term plans today, we have a sufficient expert resource, an internal foundation of responsibility for our work before the state, before the people of Ukraine.”
The IMF mission headed by Mr. Gavin Gray worked on February 13-17 in Warsaw to assess Ukraine’s implementation of the PMB conditions. On behalf of the National Bank, the head of the NBU Andriy Pishniy, his deputies Serhiy Nikolaychuk and Yuriy Geletiy, as well as directors and specialists of departments responsible for ensuring price and financial stability and representatives of the European Integration and International Programs Department took part in the mission. Other members of the Board and NBU experts participated in the work of the mission in an online format.
