23:37 PM Saturday, November 17, 2018
Ukraine PM Signals IMF Delay as Key Reforms Not Ready
$2 billion tranche slips from summer to fall; land market would ban foreigners
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By Daryna Krasnolutska and Andrew Langley

(Bloomberg) -- The next transfer of Ukraine’s $17.5 billion
international bailout will be delayed until later this year
because parliament won’t pass all of the required reforms before
its summer recess.
While a pension overhaul is on schedule and steps are being
taken to create an anti-corruption court, a bill on land reform
won’t be submitted in time, Prime Minister Volodymyr Hroisman
said in an interview. The delay will hold up the $2 billion
fifth tranche of the nation’s International Monetary Fund
rescue, though the government remains committed to the program,
he said.
“We won’t make it by the recess,” Hroisman said Monday in
the capital, Kiev, referring to the land bill, which may instead
pass by year-end. “We’re working on the reforms and the fifth
tranche will arrive.”

Prime Minister Groisman speaks last winter at an agricultural machinery show in Kyiv. A land market would allow farmers to use their land as collateral for bank loans to buy farm machinery. (UNIAN/Vladislav Musienko)

IMF aid has been the bedrock of Ukraine’s economic revival
in the wake of a second pro-European revolution in a decade, the
annexation of Crimea and a Russian-backed insurgency that’s now
in its fourth year. But the program has been dogged by delays as
controversial reforms to reshape the former Soviet republic meet
opposition. The latest disbursement had been planned for June or
July. Parliament breaks for summer on July 14 and reconvenes in
Ukraine is set to meet some IMF requirements for this
latest tranche, namely a revamp of its pension system. The
Washington-based lender has backed a plan under which citizens
must contribute to the state fund for 25 years rather than 15 at
present to be eligible for benefits. The retirement age wouldn’t
Other reforms are trickier. Lifting a ban on farmland sales
is opposed by populists in the parliament, who say the
authorities and businessmen will cheat farmers and snatch
territory. Sunflower oil-maker Kernel Holding SA said in April
that the moratorium should remain in place until the authorities
come up with a “balanced consolidated position.” The agriculture
minister resigned the following month.

Nearly Ready

Hroisman, whose government is in talks with farmers’
groups, said the matter is more complicated than simply removing
the restriction on sales. The cabinet wants to exclude big
companies and foreigners from buying farmland and proposes
allowing individual purchases by Ukrainians of as much as 200
hectares, he said.
“We understand now which model we want, in whose interest it
should be,” Hroisman said. “We’ll prepare the draft law in full
as soon as possible. It’s 99 percent ready. One element is
lacking: access to long-term funds for Ukrainian farmers” at a
reasonable price.
The IMF holdup could also push back plans by Ukraine to
return to international bond markets. It’s been considering a
small sale in September or October in preparation for larger
deals later on, according to Finance Minister Oleksandr

To contact the reporters on this story:
Daryna Krasnolutska in Kiev at;
Andrew Langley in London at

Timothy Ash Comment:

What's the point if foreigners and big business are excluded?

The objective should be creating an efficient market where the price to the seller (the small farmer) is maximized. Then land can be used as collateral for borrowing from banks. If some of the potentially largest bidders are excluded, the price will not reflect real demand, and the small farmer will be screwed via an artificially low price.

Are banks going to be allowed to foreclose on land? Ukraine seems to be looking to rediscover the wheel again.

If you are worried about Russian buyers, you can do what the Turks used to do and let the military or security services have a role in vetting buyers. Given Ukraine's culture of graft that needs to be managed correctly.

Timothy Ash is senior sovereign strategist for Blue Bay Assets Management in London

From Concorde Capital:

IMF won’t insist on farmland reform for next Ukraine tranche, site says

IMF Managing Director Christine Lagarde agreed to exclude farmland reform from its agenda with Ukraine, at the request of Ukrainian President Petro Poroshenko, news site reported on July 3, citing an anonymous source familiar with the negotiations in the U.S. The source reported that the requirement of introducing free trade of farmland will be excluded from the IMF memorandum.

Recall, the approval of legislation that allows the free circulation of farmland by the end of May was among the structural benchmarks of Ukraine's latest memorandum with the IMF, i.e. among the preconditions for Ukraine to receive the next IMF tranche.

Alexander Paraschiy:

If this development proves true, it significantly raises the chance for Ukraine to get the next IMF tranche already this autumn, which is very good for Ukraine’s sovereign risk. As we noticed in our June 21 comment, Poroshenko did not list farmland reform as a priority in his press release after meeting with Lagarde last month (while the IMF’s press release mentioned that reform). Ukraine is among only a handful of countries in the world that doesn't allow farmland sales.

Launching the farmland market is indeed not popular in Ukraine with 78% of citizens opposed, according to a poll of the Reytynh polling firm released in mid-June. It is also being opposed by Ukraine's large farming holdings, which enjoy generous rents on farmland and have strong representation in parliament. Therefore, even if this report remains unproven, this reform is the least likely to be implemented among the key IMF requirements. If the president does decide to press ahead, we see even chances, despite the widespread opposition.

Slider photo: Prime Minister Groysman speaks Monday in Kyiv at a meeting dedicated to improving air transportation. (UNIAN/Vladislav Musienko)

Posted July 4, 2017

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