According to a review of Ukraine's current International Monetary Fund (IMF) stand-by arrangement, the Fund has criticised Ukraine's authorities for the delayed floatation of the hryvnia, which had been, in contrast to the agreement of the IMF-sponsored reform package, re-pegged at first during November 2008 and only later floated as the central bank interventions turned out to be too costly. The document, which was prepared on 11 December but published only at the end of last week, also notes that progress in banking sector restructuring has been made albeit slowly, and reiterates commitments to fiscal targets, namely a balanced budget in 2009. It explicitly condemns Ukrainian plans to introduce import restrictions to protect local industries. Meanwhile, an IMF mission is currently visiting Ukraine to prepare the IMF's review for the next tranche of current stand-by arrangement, which is due in March.

Significance: The IMF paper concluded that policy implementation is in line with the programme, but pointed out exchange-rate policies as a policy field where progress has been slow, causing additional costs and losses in terms of foreign currency reserves. Moreover, the current fiscal budget plan, which includes a deficit for 2009 and was adopted in the last days of 2008, has hardly found the approval of the Fund, but the budget's resolution came after the December review was concluded. It thus remains to be seen how the IMF evaluates Ukraine's reform progress to date. There are certainly a couple pointed issues, including fiscal and exchange policy, and also the desire among many local politicians to protect Ukraine's industry. Finding a compromise here will be crucial for the IMF to give the nod for the next instalment of the loan.