11/03/2015 Ukraine: Daily Highlights - The IMF approved a new extended credit program for Ukraine

03/11/2015 Daily Highlights by the "Digests & Analytics - Ukraine" News Agency

Topics of the Day

The IMF approved a new extended credit program for Ukraine. Instead of Javelins Ukraine will receive from the US SUVs and drones.

Key Events in Ukraine

• The IMF approved an extended credit program for the Ukraine’s economy to the value of $17.5 billion for a term of four years. The first tranche in the amount of $5 billion is expected in the near future, $2.7 billion of this amount will be directed to support the country's budget. Terms of granting and amount of the following tranches will be defined as the implementation of the reforms program proceeds.
  In the IMF opinion, the program should aim at ensuring of financial stability; persuing of strong monetary policy; restoring confidence in banking system; strengthening of public finances; supporting of the most vulnerable population groups; conducting of structural reforms of the state apparatus; deregulation; tax, judicial, anti-corruption reforms; restructuring of Naftogaz.
• The IMF updated the macroeconomic forecast for Ukraine: the drop in the GDP wil be 5.5%, inflation rate will rise up to 27%. Due to the hryvnia devaluation and increased borrowing the government debt will rise to 94% of the GDP and total external debt will rise  up to 158% of the GDP. Slight growth of the GDP is possible in 2016.
• National Bank of Ukraine strengthened the official exchange rate of hryvnia again: 21.55 UAH/USD (-0.18 UAH), 23.14 UAH/EUR (-0,44 UAH), 3.55 UAH/ 10 RUR (-0.07 UAH).

Ukraine at War

• Militants continue preparations for an offensive - equipment and reinforcement is being secretly moved to the front line, militants conduct reconnaissance on the possible direction of attack. As a result of militants shelling and attacks one Ukrainian soldier is killed and several are wounded.
• The process of creating of the "Army of Novorossia" is virtually completed. It consists of more than 30 thousand people, more than 80% of whom are Russian soldiers and contractors.
• According to the UN, the number of temporary migrants and refugees from the Eastern Ukraine and Crimea has reached 1.8 million people.

Ukraine and the World

• Turkey is concerned about the growing dependence on natural gas supplies from Russia, which has already led to the delay in realization of the "Turkish stream" project. Turkey demands from Russian Federation which abandoned “South stream” project additional discounts on gas.
• The US imposed sanctions against a number of head executives of the former President Yanukovych regime and persons involved in the aggression of Russia in Ukraine, as well as against the Eurasian Youth Union and the Russian National Commercial Bank.
• According to President Obama, supplying of lethal weapons to Ukraine could cause a backlash from Russia, supporting Donbass militants, and increase the confrontation. The White House Press Secretary Josh Earnest announced that current sanctions against Russia didn’t have any significant effect and in case of conflict escalation they will be expanded.
• Ministry of Foreign Affairs of the Russian Federation doesn’t deny the possibility of placement of Russian nuclear weapons in the Crimea.
• The French Government has taken responsibility for the failure to deliver Mistral-class helicopter carriers to Russia.

Trends

• More than half of Ukrainian companies did not respond to the sudden devaluation of the national currency hryvnia and rising of prices with wages growth. Most business owners are considering the option of downsizing. Companies which intend to increase salaries will do it selectively, only for particularly valuable employees.