Ukraine expecting $5 billion IMF loan approval and initial payout next week: PM

By Natalia Zinets and Matthias Williams (NYSE:WMB)

KIEV (Reuters) - Ukraine is expecting the International Monetary Fund (IMF) to approve a $5 billion loan package on June 5 and to disburse the first tranche of $1.9 billion the next day, Prime Minister Denys Shmygal told Reuters on Friday.

Ukraine has said it risked defaulting without the money, which Shmygal said he expected to be approved at an IMF board meeting, and Kiev struggled for months to pass the reforms the fund was asking for amid concerns over corruption and influence-peddling.

Its precarious financial position and horse-trading over reform comes at a time when President Volodymyr Zelenskiy is trying to negotiate with Russia, which annexed Ukraine's Crimea region in 2014 and backed a pro-Russian uprising in eastern Ukraine.

The IMF declined to comment on Shmygal's statement, which offers the most precise timing the government has yet given for when it expects the disbursement of the IMF loan tranches, money the government sorely needs to weather an economic shock caused by the coronavirus pandemic.

The second tranche, worth $1.6 billion, is expected from September onwards and the third tranche, of $1.5 billion, would come next year, Shmygal said.

Shmygal also disclosed a preliminary estimate for economic growth in the second quarter of this year, saying gross domestic product could fall by 12%.

The government has previously said the economy would shrink by nearly 5% for the full year. It expects the second quarter to be the worst affected.

The prime minister also said that the government would not restrict wheat exports for the next two months, even though the quota the government previously agreed with traders has been exhausted.

The sharp economic downtown caused by the coronavirus pandemic had also focused attention on Ukraine's ability to service its debts this year.

Shmygal said the government had repaid a $1 billion Eurobond this week, which he said "shows that we can and are able to service external and internal debt absolutely calmly."

"The support of our creditor partners is necessary for Ukraine for economic development," he said.

(This story fixes first name of President Volodymyr Zelenskiy)