On track with the IMF but concerns elsewhere
Overview:
The economic recovery in Ukraine continues and broadens despite a significant drop in agricultural production. The current account deficit is small and FX reserves high after both a loan from Russia and two disbursements from the IMF under its new program. Indeed, the currency would probably have strengthened further against the US$ (rather than remained stable) given the current balance of payments surplus had the authorities not intervened. They are concerned that a resumption of capital inflows could push the currency too strong at the expense of growth. However, monetary policy needs to be tightened at some stage soon to help contain rising inflation. Fiscal tightening and the implementation of key reforms such as raising domestic gas prices have won approval from the IMF.