IMF in Ukraine: $5bn for $15bn haircut?

31 March 2015

In March the IMF approved a $17.5 billion four-year extended arrangement for Ukraine (see Observer Summer 2014, Spring 2014). This arrangement replaces the April 2014  Stand-By Arrangement that had pledged the same amount but had only disbursed $5 billion. Standard Bank’s Tim Ash told The Economist that “this is NOT a significantly increased IMF programme, and Ms Lagarde should not try and sell it as such”. Although the US and EU suggested that they may provide up to $4 billion additional dollars, it is unclear whether the Ukraine will get the $40 billion-worth of cash Christine Lagarde anticipated. In March, IMF European deputy director Thanos Arvanitis confirmed that payments up to another $5 billion will be made prior to a required debt restructuring, which according to news agency Bloomberg “doesn’t really add up”. Bloomberg argued that the loan presumes Ukraine will successfully “impose a haircut on bondholders”, calculated to be worth $15 billion, but there is no guarantee that Ukraine’s creditors will forgive any of the money they are owed.