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New Program of Cooperation with IMF: NBU Should Remain Independent and Press Forward with Financial Sector Reform

19 December 2018

Press Release


The IMF's support for Ukraine is a very important signal for both Ukrainians and international investors – especially now that the new political cycle is unfolding – that reforms are making headway in Ukraine, particularly in the financial sector," emphasized NBU Governor Yakiv Smolii in a comment following the approval by the IMF Executive Board of a new program of cooperation with Ukraine under a Stand-By Arrangement (SBA).


The 14-month program of cooperation between Ukraine and the IMF, which received the green light yesterday, focuses on the continuation of the reforms whose implementation has maintained macroeconomic and financial stability in the country in recent years. More specifically, the reforms include inflation targeting and flexible hryvnia exchange rate regimes, which became an effective tool for decreasing inflation in Ukraine from more than 60% in April 2015 to the current 10% and to 5% in the medium term.


“For the first time in Ukraine's history, reaching the inflation target established by the NBU has become one of the targets of an IMF program. This confirms that low and stable inflation is a prerequisite for sustainable economic growth and that the inflation targeting regime is the most effective way to achieve it. Having common goals in this area means that the IMF believes that the NBU is able to reduce inflation to 5% and keep it at this level during a long period of time," said Yakiv Smolii.


However, preserving the NBU’s independence will be critical to meeting that objective, the IMF said in an official statement.


Strengthening the financial sector and continuing to restore bank lending are another priority of the new program.


One of the structural benchmarks of the program was the adoption by the Verkhovna Rada of Draft Law No. 2413-A on the split, which will make it possible to implement the reform of the nonbank financial sector via splitting the functions of financial services markets regulation that are currently performed by the National Commission for the State Regulation of Financial Services Markets between the NBU and the National Securities and Stock Market Commission. The adoption of the draft law will help bring the nonbank financial sector in line with European standards, increase the performance of financial companies and protection of financial services consumers, and create conditions for the entry of new players into this market.


“Meanwhile, the new program of cooperation between Ukraine and the IMF is a safety cushion that will help maintain macroeconomic stability in the country as it approaches a sizable USD 6 billion in external debt payments coming due next year,” said the NBU Governor.


Given the new SBA program amounting to SDR 2.8 billion (about USD 3.9 billion), borrowings in international capital markets against security of USD 750 million approved yesterday by the World Bank’s Board of Executive Directors, and financing from the European Commission in the amount of EUR 1 billion, Ukraine can increase its international reserves to approximately USD 20 billion by the end of 2018, which exceeds the last NBU forecast, and maintain them at the proper level in 2019.



For reference


Detailed information about commitments undertaken by Ukraine in the context of the new program of cooperation with the IMF and its structural benchmarks and quantitative criteria to be achieved will be release to the public in the Memorandum on economic and financial policy.

Last modification   19.12.2018