The International Monetary Fund will assess the progress of Ukraine's talks with creditors, but does not have to make any decisions in June, when its next review of the country's $17.5-billion bailout is due, the Fund's No. 2 official said on Tuesday.
Ukraine's officials have set themselves a June deadline to complete debt restructuring needed to plug a $15-billion funding gap in the IMF program. Many analysts are skeptical that deadline can be met.
“We have a fair amount of leeway in how we judge the progress at that point,” David Lipton, the IMF's first deputy managing director, said at an event at the Washington-based Peterson Institute.
“It would be best if Ukraine and its creditors could reach agreement by that point,” he said. “But if we can't make [a decision] in June, we will figure out how to go forward.”
As part of its IMF bailout, Ukraine must comply with a slew of conditions to get its economy in better shape, including strengthening public finances, repairing bank balance sheets and shaking up its energy sector.
It must do so amid continued uncertainty over its territorial integrity. The government in Kiev struck a ceasefire with pro-Russia separatist rebels eastern Ukraine two months ago, but fighting has continued almost daily.
The IMF itself has admitted that efforts to restore Ukraine's financial stability face “exceptionally high” risks, including from creditors balking at the terms of the debt restructuring.
Russia holds a $3 billion Eurobond of Ukrainian debt coming due in December, and has said it would not be part of the private sector restructuring. And Kiev may have difficulties persuading all bondholders to agree to write off some debt and accept reduced interest rates or a longer repayment period.
“Those discussions are ... going to be complex,” Lipton said, referring to the debt talks. “This will take time.”
