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12 September 1998
For immediate release
[Press Releases Home]

IMF Approves A $ 2.2 Billion Loan For Ukraine

The International Monetary Fund's Board of Directors approved a three-year Extended Fund Facility loan of $ 2.2 billion for Ukraine on September 4. According to the information circulated by the IMF, the National Bank of Ukraine is receive the first tranche of about $ 260 million. The loan was expected to be approved for Ukraine in late August but the IMF demanded additional information from the Ukrainian government concerning the deep financial crisis in Russia and the deterioration of the Ukrainian market. IMF representatives led by Mohammed Shadman-Walawi negotiated with Ukrainian officials on September 2-3. Prime Minister Valeriy Pustovoitenko said at a September 4 Cabinet of Ministers meeting that he had been informed of the World Bank's readiness to grant Ukraine a loan of $ 800 million, a large portion of which may be provided before the end of 1998. The IMF stopped financing Ukraine in January 1998, due to the Ukrainian government's failure to meet the terms of the IMF's stand-by loan program.

Prime Minister Pustovoitenko To Lead Ukrainian Delegation To Annual Meeting Of IMF And WB Governors

President Leonid Kuchma held a telephone conversation with IMF Executive Director Michel Camdessus. Ukrainian leader thanked Mr. Camdessus for the International Monetary Fund's financial support of Ukraine, currently experiencing developmental difficulties. The IMF Executive Director noted that the IMF, as well as the World Bank, will continue aiding Ukraine, provided the nation sticks to its economic reformation course. As President Kuchma noted, in view of great significance Ukraine attaches to cooperation with the IMF, the Ukrainian delegation to the upcoming annual meeting of IMF and WB boards this fall will be led by Prime Minister Valeriy Pustovoitenko. The Ukrainian President voiced his very high opinion about his personal contacts with the IMF leadership and a hope for Ukraine's further expanded cooperation with this influential international financial organization.

IMF Provides First Tranche Of EFF Loan

The International Monetary Fund has provided to Ukraine the first tranche (about $ 260 million) of its Extended Fund Facility loan, an NBU representative told on September 10. "The money arrived yesterday evening," he said. According to the NBU representative, that money raised the NBU's currency reserves above $ 1 billion. He, however, declined to state the exact sum of the reserves. As stated by the NBU Governor Viktor Yushchenko on September 9, the NBU's currency reserves at that date stood at $ 860-890 million.

President Kuchma Holds Telephone Conversation With World Bank President

President Leonid Kuchma and World Bank President James Wolfensohn held a telephone conversation that focused on the status and prospects of Ukraine's cooperation with the international financial institution. The WB President informed Mr. Kuchma about the World Bank's intention to expedite its credit package meant for Ukraine with the WB Board's session to tackle the issue slated for September 15. In case of the WB Board meeting's favorable decision, the package's early tranche may be immediately available to Ukraine. Mr. Wolfensohn was reported to have favorably appraised the Ukrainian Government's latest anti-crisis moves.

World Bank May Approve $ 800 Million For Ukraine On September 22

The World Bank's board of directors may approve four credits totaling $ 800 million for Ukraine on September 22, Dmytro Derkach, press secretary at the World Bank's office in Ukraine, told Ukrainian News. "The board of directors is expected to meet on September 22 to consider two new projects and two tranches," Derkach said. The World Bank's board of directors may approve for Ukraine a loan of $ 300 million for its financial sector adjustment, $ 300 million for enterprise development adjustment program, a tranche ($ 100 million) of a coal sector adjustment loan, and a tranche ($ 100 million) of an agricultural adjustment loan. The World Bank's director for Ukraine, Paul Siegelbaum, held talks with Ukrainian officials on September 7. After the negotiations, he expressed his satisfaction with Ukraine's anti-crisis measures, and noted that Ukraine is in a more advantageous situation than Russia. Mr. Siegelbaum also said that the final sum of the loans has not yet been agreed. On September 4, the IMF's board of directors approved for Ukraine an EFF loan of $ 2,2 million to be disbursed over three years. This decision has reopened the way for further loans from the World Bank. After his meeting with Ukraine's Prime Minister Valeriy Pustovoitenko, Mr. Siegelbaum said that the World Bank's board of directors would soon consider loans for Ukraine. According to him, the proposed loans will not resolve all Ukraine's problems but it will give it a breathing space and time to take the necessary measures to resolving its current financial problems

Government Unveils Bond Conversion Terms For Non-Residents

The Ukrainian government on September 9 unveiled the terms of the medium-term bonds, into which government internal loan bonds (OVDPs) held by non-residents are to be converted in accordance with an August 28 Cabinet of Ministers resolution. Auctions will be held on September 22 to issue series A and B bonds. Under the issuance terms, the series A bonds are to be issued on September 22 this year and redeemed on September 22, 2000. The bonds will have a face value of HR 5,000 and will be sold to investors at a price not less than 47.514% of its nominal value. The series B bonds are to be issued on September 22, 1998, and redeemed on September 22, 2000. They will have a face value of HR 5,000 and will be sold to investors at a price equal to 43.310% of face value. The coupon yields on both series will be calculated using special formulas. According to an August 28 Cabinet of Ministers resolution, bond conversion will be voluntary. The bonds are to be converted on September 9-16. The above-stated formulas are expected to guarantee investors a minimum annual yield of 45% in hryvnia terms and 22% in dollar terms. However, the government must still redeem HR 1.8 billion ($711 million) of OVDP bills from non-residents, with HR1.3 billion due for repayment by the end of the year. The volume of bills to be converted would not exceed HR 4 billion, the government said at the time. The new paper would be repaid in hard currency. The old OVDP bonds are denominated in the national currency, which was effectively devalued last week when the dollar trading band was cut to 2.50-3.50 from 1.80-2.25 hryvnia to the dollar. According to the Finance Ministry, 80 percent of foreign holdings would have to be offered for exchange for the conversion to take place although the swap would be voluntary. Non-residents' share of the market has slumped to under 20 percent of all outstanding treasury bills from 50 percent at the start of the year. Domestic banks were offered new bonds with maturities of between 3-5.5 years, yielding 40 percent for the first 12 months in exchange for shorter-term bills.

Hryvnia's Rate Will Be Dictated By Market, Says NBU Governor

The hryvnia's exchange rate will henceforth be dictated by the market, where demand for the dollar is presently too high, NBU Chairman Viktor Yushchenko told a press conference on September 9. "Everything depends on ... psychological factor. We want the market to be regulated by demand and supply. Protecting the hryvnia is the moral obligation not only of the National Bank but of every citizen," Mr. Yushchenko said. the NBU would not make massive interventions to support the hryvnia because it wanted to protect its reserves, the NBU Governor stressed. "The hryvnia's exchange rate currently responds to market participants' demand for the dollar. No bank in the world can meet such demand with its own instruments," Mr. Yushchenko went on. He disclosed that the NBU's reserves have remained practically unchanged since the beginning of the month, and totaled about $ 860-890 million as of September 9. Mr. Yushchenko declined to state the hryvnia exchange rate at which the NBU will stop devaluing the hryvnia. The hryvnia's exchange rate dropped to 2.5700 hryvnia/dollar on September 12.

Parliamentary Speaker: Cabinet Of Ministers Is To Implement Anti-Crisis Measures

Parliamentary Speaker Oleksandr Tkachenko told on September 8, that the Verkhovna Rada adopted the documents containing measures aimed at overcoming the economic crisis, and granted the Cabinet of Ministers the right to implement them. "We considered them (anti-crisis measures) at a Conference Committee. They have been adopted, and the Cabinet of Ministers has been granted the right to work on them," Mr. Tkachenko said. According to him, the Cabinet of Ministers has drafted 35 laws. 22 of them have been sent to the parliament for consideration. Out of the 22, 6 are to be debated by parliament before September 18, while 16 will be discussed in parliamentary committees and debated by parliament in September-October. The remaining 13 draft laws will be redrafted by the government and sent to parliament in November-December. "Anti-crisis measures have thus been adopted; the relevant draft legislation have been sent in, and we have agreed to work on the issue," Mr. Tkachenko said.

Ukrainian Parliamentarians Object To Privatization Of Distilleries

Ukrainian distilleries, as a major source of budgetary revenues, shell not be allowed to go private, many members of the parliament insisted during the Verkhovna Rada's plenary session on September 11. MP Yuriy Yekhanurov, Deputy Chairperson of the VR Standing Committee for Economic Policies, Economic Management, Property and Investments, commented on the parliament's decision to turn down the Cabinet's draft act on privatization of distilleries, as a correct one saying the Government's plan to privatize distilleries, if implemented right away, would likely result in enriching just a handful of persons, making the Ukrainian State the loser.

USA Supports Ukraine's Bid For Integrating With European And Transatlantic Institutions

Speaking at a press conference in Kiev on September 11, Mr. Stuart Eizenstat, US Undersecretary of State for Economic, Business and Agricultural Affairs, said that the USA supports Ukraine's bid for integrating with European and trans-Atlantic institutions, such as WTO. The US Undersecretary also expressed the State Department's prevalent mood in favor of constructing a major oil pipe-line to link the Ukrainian seaport city of Odessa to Brody on the Ukrainian-Polish border. According to Mr. Eizenstat, the Ukrainian Government had coped well with budgetary deficit and inflation challenges before the financial crisis began. In his opinion, Ukraine's current problems are largely resultant from the global financial crisis. Mr. Eizenstat referred to the International Monetary Fund's EFF credit to Ukraine as mirroring the global community's favorable vision of the Ukrainian Government's resolute moves to reform the national economy of Ukraine.

US Administration Continues Supporting Sea Launch Project

The US Administration continues supporting the Sea Launch project's implementation, US Undersecretary of State Stuart Eizenstat said speaking at a press conference in Kiev. As Mr. Eizenstat reassured, the Ukrainian missile Zenith-2's failure on September 10 at the Baikonur space center, won't affect the Sea Launch's implementation.

President Kuchma Meets With Argentinian Ex-Minister Of Economics

On September 11, President Leonid Kuchma met with the Argentinean ex-Minister for Economics, an architect of Argentina's "economic miracle," Dominigo Cavallo. According to presidential press secretary Oleksandr Maidannyk, the hour-long meeting was more than just a diplomatic protocol matter, rather an interested professional talk abounding in figures, arguments, concrete examples and trend analyses. Domingo Cavallo's visit to Ukraine reportedly made him convinced that there are no reasons for the Ukrainians to lose their trust in Ukraine’s authorities. The Argentinean ex-minister expressed his very favorable opinion about the Ukrainian Government's anti-crisis program. The host party referred to the nation's public psychology as its biggest destabilizing factor, though the Ukrainian Government's vigorous anti-crisis steps have, so far, kept the situation largely under control. In Domingo Cavallo's opinion, the Russian leadership's biggest blunders were made in privatization of large state-owned enterprises, particularly monopolists. Domingo Cavallo, who arrived in Kiev from Moscow, added that Ukraine's privatization process has not reached Russia's depths, so Ukraine is positioned well enough to avoid replicating its neighbor's errors. Domingo Cavallo was the man who rescued the Argentinean economy amidst its crisis in the 1970s. He sounded willing to share his experience to this effect with Ukrainians, but warned against blindly following Argentina's anti-crisis steps. Domingo Cavallo conveyed a message of greetings to Mr. Kuchma from Argentina’s President Carlos Menem. In turn, the Ukrainian leader reiterated his opinion about relations between Ukraine and Argentina as very good and friendly ones.

Deputy Prime Minister Holubchenko: Odessa Oil Terminal To Be Completed In Two Years

Ukraine plans to complete in two years construction of an oil terminal near the Black Sea port of Odessa, Deputy Prime Minister Anatoliy Holubchenko said on September 9. He told a news conference that the terminal would have annual capacity of nine million tons. Mr. Holubchenko said Ukraine also wanted a new oil pipeline from Odessa to Brody on the Polish border to transport Caspian oil from Azerbaijan to Western Europe. Ukraine hopes Caspian oil will be supplied to Europe from Azerbaijan via Georgia, the Black Sea and its own territory. Ukraine has so far completed 351 km of the pipeline from the total 667 km. The pipeline will connect the terminal to the Druzhba pipeline carrying Russian oil to Europe via Ukraine, Mr.Holubchenko went on. He disclosed that Ukraine is continuing talks with the European Bank for Reconstruction and Development on financing the project.

President Kuchma Dismisses Head Of Khmelnytsky Region Administration

President Leonid Kuchma has signed a decree appointing Viktor Lundishev, 52, head of the Khmelnytsky Region Administration, replacing Yevhen Guselnikov who was dismissed by another presidential decree.

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