IMF warns Ukrainian authorities about the loan conversion bill

Representatives of the International Monetary Fund in Ukraine expressed concern about the possibility of adoption by MPs of seven "fiscal" bills, including the loan conversion bill.

The statement was made by Director of the IMF European Department Poul Thomsen, Ukrinform reports.

"Legislative initiatives – like bill 1558-1 on the conversion of FX loans into hryvnia – would impose a significant cost on banks, and through them on most banks’ depositors and borrowers, for the benefit of the few," Thomsen said.

Thomsen, however, emphasized that "reversing economic reforms for the sake of short term gains has been detrimental to Ukraine’s economy in the past," so the country "needs to stay on the course of reforms, economic modernization and responsible macroeconomic policies."

"Ukrainian authorities are taking decisive progressive steps in response to the long-term economic imbalances, despite the difficult economic and financial situation. However, we observe with concern over the recent legislative initiatives, which aim to expand this progress. We are talking about the last package of seven bills in the fiscal area, which will be considered by MPs next week. These laws make impossible measures that were carried out in the context of the IMF supported program concerning reforms in the pension and energy fields and rationalization of expenditure," the statement said.

The IMF warned that the fiscal cost of these bills could reach about two percent of GDP this year and three percent of GDP in 2016. "If these bills are adopted, they will significantly weaken the ongoing efforts in order to resume fiscal resilience and macroeconomic stability in Ukraine," it noted.

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