The International Monetary Fund (IMF) has published an updated Memorandum on Economic and Financial Policy following the fifth review of the Extended Fund Facility (EFF) program with Ukraine, which includes three new structural benchmarks with deadlines ranging from the end of January to the end of October next year.
As noted in the Fund's materials, a comprehensive operational strategy for the National Securities and Stock Market Commission (NSSMC) must be prepared by the end of January, including an independent assessment of the performance of the head and members of the commission.
By the end of May, a draft law on critical third-party risks in the financial sector should be submitted to the Verkhovna Rada, and by the end of October, an external evaluation of the National Commission for State Regulation in the Spheres of Energy and Public Utilities (NERC) should be completed and published, with the involvement of the Energy Community Secretariat.
It is specified that the NSSMC is taking immediate steps to implement the key principles of the International Organization of Securities Commissions (IOSCO) and measures to manage capital flows. To expedite the implementation of essential reforms, the Commission will propose a reorganization and operational strategy in consultation with international financial institutions (IFIs); it will update and implement a Code of Ethics for employees and, in consultation with the National Bank of Ukraine (NBU), take measures by the end of December 2024 to harmonize regulations and restrictions on capital movement related to securities transactions with those applicable to banking operations.
Regarding the second new structural benchmark, the National Bank will prepare a conceptual note on oversight of critical third-party risks and operational resilience of digital technologies by the end of February 2025, after which it will develop and present a draft law to parliament in consultation with IFIs. It is anticipated that organizations identified as critical third parties will be subject to NBU rules on compliance and proper conduct.
In the case of NERC, the focus is on developing and enshrining in law an accountability system that will allow for regular external evaluations of the commission's independence and governance system by the Energy Community Secretariat upon request every 2-3 years. The first such external evaluation of NERC will be completed and published by October 2025, which will help strengthen the independence and accountability of Ukraine's energy regulator. Additionally, the selection process for the remaining vacancy on the NERC should be completed in a transparent and merit-based manner in accordance with the law, as stated in the updated memorandum.
The other benchmarks remain unchanged, particularly, at the end of December, the deadlines for six benchmarks will expire, of which Ukraine has already fulfilled two: it has formed a supervisory board for "Ukrenergo" with independent members and adopted a law for the reform of the Accounting Chamber.
By the end of the year, it is also necessary to prepare the foundations for bank recovery and introduce a risk assessment methodology in the banking sector. As reported by NBU head Andriy Pyshnyy on Saturday night, the implementation of these benchmarks is proceeding according to schedule, and deadlines will not be violated.
At the same time, the situation with two other benchmarks due by the end of the year appears less favorable, as they require the adoption of laws in the Verkhovna Rada: amendments to the Criminal Procedure Code to provide the Specialized Anti-Corruption Prosecutor's Office (SAP) with the power to request extradition and the repeal of the so-called "Lozovoy amendments," as well as the establishment of a new Supreme Administrative Court to replace the OASC.
As reported, the IMF Board of Directors approved the 6th review of the EFF program launched in March 2023 on Saturday night and allocated the 7th tranche of $1.1 billion, increasing total disbursements to $9.8 billion out of a total program size of $15.6 billion.
Earlier, at Ukraine's request, changes were made to the schedule of program reviews and disbursements following the 5th review. Previously, it included only two reviews in 2025 – in early March and late August, with disbursements of $917.5 million each. Now, the schedule for next year includes four quarterly reviews, as it did this year. The size of the 8th tranche following the 7th review in March remains unchanged at $917.5 million, while the amounts for the subsequent three tranches next year are $809.6 million, $539.8 million, and $445.3 million, respectively.