The third audit of National Bank of Ukraine’s operations with its hard currency reserves during the period from January 31 to September 30, 1998, conducted by PricewaterhouseCoopers (PWC), contains no new data about violations, concludes an International Monetary Fund (IMF) official press release.
Meanwhile, the fact established at the audit’s first stage that the National Bank (NBU) did overrate hard currency reserves still hangs like a sword of Damocles over the program of new loans for Ukraine. The document notes that the IMF Board of Governors must finally decide whether Ukraine reneged on its obligations to the fund and received any unauthorized credit installments. Depending on the outcome of this discussion, the Board of Governors will decide on the appropriate immediate actions. The document also stresses that the IMF regards as “very serious” any incorrect information that overrates the level of reserves.
The IMF has not yet shown any reaction to Ukraine having returned installments received earlier totaling $94.6 million. “Let us think this means Ukraine is beginning to return the loans ahead of schedule,” NBU Governor Volodymyr Stelmakh commented on this step. He also pointed out that this had had no influence on NBU hard currency reserves, which have not decreased since the beginning of this year. Mr. Stelmakh believes the National Bank audit is not the problem, which can influence the IMF decision on whether to continue or fold up the EFF scheme. He also claims this is the viewpoint the IMF leadership expressed during the latest round of talks.
However, apart from the NBU audit, Ukraine still faces more than enough problems to be solved with the IMF: free economic zones, the 23% export duty on sunflower oil, relationship between the NBU and the Ministry of Finance, and the Ukrayina Bank situation. As for the latter, Mr. Stelmakh thinks most of the problems here were created by the previous government, though the current one has also played its role. According to the NBU chief, the National Bank has so far failed to coordinate its actions with the government commission set up in connection with the Ukrayina Bank affair and discuss the two sides’ positions. Thus the complex knot of problems will be far from loosening by September 12 when a new IMF mission is expected in Kyiv. For this reason the government, in addition to making its traditional upbeat statements about the probable resumption of credit as early as October, does not rule out the worst outcome. “If we get the loans, this will mean a calm year end. If not, the government will have to take steps,” First Vice Premier Yuri Yekhanurov said. He says one of such measures is budget spending cuts: “There is no need to do so right now. But we are prepared for this if there is no foreign credit and additional earnings related to economic growth,” reports Interfax- Ukraine. Mr. Stelmakh also does not rule out an unfavorable outcome of talks with the IMF: “We can do without IMF loans, but in that case the pace of certain economic reforms will undoubtedly be different. This will in turn impact on the living standards of the broad strata of population.”
