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INTERVIEW-Ukraine committed to IMF, still expects aid tranche this year - finance minister
October 9, 2017 / 1:14 PM / 11 days ago

INTERVIEW-Ukraine committed to IMF, still expects aid tranche this year - finance minister

* Ukraine expects another IMF aid tranche this year

* Can tweak pension reform plan if IMF still has issues

* Says Naftogaz needs to reinstate supervisory board (Adds quotes, detail, background)

By Marc Jones

LONDON, Oct 9 (Reuters) - Ukraine is committed to its aid programme with the International Monetary Fund and still expects to receive a further tranche of support money this year, Finance Minister Oleksandr Danylyuk told Reuters on Monday.

Danylyuk is due to travel to Washington this week for talks with the IMF on the $17.5-billion bailout amid concerns that progress on the economic reforms stipulated in the programme has slowed.

Fund officials will be looking closely at a pension system plan signed off on Sunday, having voiced “significant” reservations after thousands of modifications were proposed to an earlier version of the legislation.

There are also likely to be questions about tackling another of its key costs, the gas subsidies it provides to its population and companies, as well as the running of state-owned giant Naftogaz.

“I can say we value our cooperation, we value our commitment within the (IMF) programme. This is the position of the government and of the prime minister,” Danylyuk said in an interview in London.

Since its pro-European uprising of 2013-14, Ukraine has received $8.4 billion from the IMF and more then $5 billion from the World Bank among other backers, helping it to return to economic growth of more than 2 percent in 2016.

In September, the government found an additional source of external financing with a $3-billion Eurobond. It marked an important step in its reintegration into world markets but has also, critics argue, removed some of the pressure to reform.

Danylyuk said Ukraine was willing to discuss any issues the IMF might have on pension reforms. “They were concerned about the amendments, they haven’t seen the final bill,” he said.

“I don’t think there are any outstanding issues left but if there are, that could be easily addressed... You just revise, but you just revise one point, it is not like you open the Pandora’s box.”

The level of gas pricing is also set to be discussed in Washington. A source told Reuters last week that Kiev will make new proposals that would effectively put off price hikes recommended as part of its bailout programme.

Danylyuk was visibly uncomfortable about the story, especially about the signal it could ahead of his IMF trip this week.

“There are some solutions we need to find, including on the gas price,” he said. “Here we have a clear commitment within the programme that we need to make it match import parity.”

One of the central issues of a broader liberalisation of the market remains state-owned firm Naftogaz.

In September, Paul Warwick and Marcus Richards, the last remaining members of its independent supervisory board, resigned alleging government obstruction of efforts to modernise Naftogaz and put its finances on a sustainable footing.

“There is only one solution. Reinstate the supervisory board as soon as possible,” Danylyuk said, adding he hoped the IMF, World Bank and European Bank for Reconstruction and Development would help come up with replacements within a couple of weeks.

Despite all the wrangling, he does expect the IMF to deliver its next installment of financing which is expected to be around $1.9 billion, even if earlier in the year there was talk of getting two.

“I expect this year we will get one tranche. It is understood now that there is no time for a second tranche,” Danylyuk said.

On the just-adopted pension reform: “That was the key element of the whole programme not only this tranche,” he added.

Writing by Alessandra Prentice; Editing by John Stonestreet and Andrew Heavens

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