Ukraine thinks it is highly likely to receive its next aid tranche of $1.7 billion from the International Monetary Fund in June but is in a comfortable position to service its existing debt, new Finance Minister Oleksandr Danylyuk said on Thursday. A day after Kiev passed energy tariff reforms demanded by the IMF, Danylyuk said in an interview that parliament would reconvene in May to pass laws that are a further precondition to securing the IMF funds.
In its negotiations with the IMF, he said Ukraine would seek to "fix" aspects of its planned pension reforms but declined to go into specifics regarding what Kiev might want to change. With renewed cooperation there was a "very very high likelihood" of Ukraine receiving a long-delayed third tranche of IMF loans in June, he said. "We are in a good shape now," he said, when asked if Ukraine would be able to service its debt this year.
He stressed that he wanted Ukraine and the IMF to work as equals rather than seeing the IMF as a source for handouts. "We are not looking at the IMF as a chocolate bar that you eat and how much energy and how many kilometers, miles you can run before you get another chocolate bar," he said.
"They need to understand that we are equal partners." Danylyuk joined Prime Minister Volodymyr Groysman's newly formed cabinet in April, which took power after months of political turmoil that stalled reforms and Ukraine's efforts to stamp out endemic corruption.
Ukraine's chief international backers - the IMF, the US government and the European Union, have pressed Kiev to accelerate the pace of reforms, and the EU has publicly warned it not to renege on existing commitments. The economy has been battered by a Russian-backed separatist conflict in its industrial east, although Danylyuk said the economy has bottomed out. He declined to give precise predictions for growth this year.
Danylyuk said he wanted to turn the finance ministry into an "engine that drives reform" to show potential foreign investors that Ukraine aims to make their life easier. A priority is transforming an inefficient tax office by merging it over the next two years with the customs service to create an efficient, combined system that will crack down on corrupt practices.
These include customs offices allowing companies to forge documents to misrepresent goods in order to reduce their tariff burden. "If it's not one system, then some goods that enter Ukraine are just lost or turn out to be something else. What we have is cars coming, but they're sold as teapots. It's a real mess," he said. He also wants to slash the role of regional tax inspectors by minimising the number of times they audit companies and reduce red tape by cutting the amount of documents companies have to file.
More broadly, the new government will not look to ditch a $17.5 billion aid package agreed with the Fund by the previous government, he said, but didn't rule out making changes later. "Finding exactly what are the solutions, that's where we will have discussions with the IMF. On pension reform, because that needs to be fixed, eventually, the vision of it. And many other areas," he said.
Groysman's predecessor Prime Minister Arseny Yatseniuk struggled to pass unpopular reforms in parliament. Danylyuk said the government would smooth the passage of such bills by engaging with lawmakers as opposed to trying to strong-arm them into accepting reforms as a fait accompli. "We just have to be in constant dialogue with them, not blackmailing them. It's the wrong tactic, I hate it This time it will not be like that," he said.