Azarov: Talks With IMF Difficult Due To Loss Of Its Confidence In Ukrainian Authorities

KIEV, Ukraine -- Ukraine's talks with the International Monetary Fund (IMF) about the start of a new cooperation program are being delayed due to a loss of the fund's confidence in Kyiv, caused by the failure of the country's former leadership to fulfill their promises, Prime Minister Mykola Azarov has said
"None of the conditions of the previous program, which was signed by the previous government and [former] President [Viktor Yuschenko], have been implemented. But the money was coming... And the IMF has lost confidence in the Ukrainian authorities and the government, and the main difficulty of the talks lies in this," he said in the Exam for the Authorities program on the First National TV Channel on Monday.

Azarov said that the government was trying to prove that the deficit of 5.3% of GDP foreseen in the 2010 state budget is realistic and to confirm its desire to keep the deficit within these limits, noting that the deficit totaled 1.4% GDP in the first five months of 2010.

He said that the previous government had not tried to fulfill their promises to the IMF, in particular, to raise tariffs for the population.

"She was very trusting," Azarov said, while speaking about Ceyla Pazarbasioglu, the former IMF mission chief for Ukraine who served at this post until January 2010.

He noted that the program of cooperation with the IMF, under which Ukraine received about $11 billion in 2008-2009, was terminated last autumn, and that a new program with new conditions was currently being drafted.

"We'll not act as irresponsibly as our predecessors did," Azarov said.

He said that the IMF's demands were reasonable and that the government shared these positions, in particular, to limit the deficit of the budget and the Pension Fund, switch Naftogaz Ukrainy to profitable work and bring tariffs in line with the prime cost.

Azarov said he was optimistic about the prospects for approval of a new program, despite the complexity of negotiations with the IMF.

The IMF in autumn 2008 decided to disburse about $17 billion under the Stand-By Arrangement (SBA). Since then, Ukraine has already received three tranches worth almost $11 billion.

The first $4.5 billion tranche was given to the National Bank of Ukraine (NBU) in November 2008. The IMF's second tranche - worth about $3 billion - was extended in May 2009, with those funds being split between the NBU and the government of then Prime Minister Yulia Tymoshenko.

The third tranche (worth $3.5 billion) was provided in August 2009 and was at the disposal of the Tymoshenko government alone.

The allocation of the fourth tranche, worth $3.8 billion, was scheduled for November 2009 following the third review of the IMF's cooperation program with Ukraine. The IMF mission ended its work in Kyiv late in October 2009, but did not issue a positive statement on the completion of the review.

The new Ukrainian government plans to receive $19-20 billion from the IMF in the next two-and-a-half years under a new cooperation program. According to Ukraine's national budget for 2010, $2 billion is to be raised for direct financing of the budget this year.

Deputy Director of the IMF's European Department Poul Thomsen and IMF Mission Chief for Ukraine Thanos Arvanitis agreed during their visit to Kyiv last week that the IMF mission would start working in Ukraine on June 21 to work out the draft of the new program of cooperation.