Ukraine inches towards IMF disbursements

Last year, Ukraine’s IMF programme seemed in jeopardy. Roger Mark explains how recent developments have nudged things back on course and why investors should care.

15 Sept 2021

6 Minutes

Roger Mark

The fast view

  • Last year’s announcement of a US$5 billion IMF programme was a key driver of Ukrainian eurobond outperformance. But a reversal in reform momentum in the second half of the year threatened to derail the programme.
  • The set-back raised doubts over Ukraine’s ability to secure funding from other international financial institutions; increased the likelihood of international flows to the country’s local debt markets drying up; and threatened to drive up the cost of funding in the eurobond market.
  • Since then, stronger leadership from President Zelensky and a change at the top in the White House seems to have nudged things back in the right direction, and the recent passing of some key legislation has helped put the IMF programme back on track.
  • Ukraine remains a work in progress. Structural reforms are still needed, and some serious governance weak spots remain. But we think the government will realise that delivering what is necessary for the IMF programme to continue is in its best interests.
  • Ukraine’s ongoing participation in an IMF programme would be a clear positive for the country’s credit strength and has the potential to lead to rating upgrades. This, combined with attractive valuations, make it an interesting market for EM debt investors.

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