IMF not satisfied with pension reform in Ukraine

The International Monetary Fund (IMF) has been dissatisfied with the pension reform adopted by the Verkhovna Rada of Ukraine on October 3rd, Acting Chairperson of the National Bank of Ukraine Yakiv Smoliy said at a meeting with business representatives.

Smoliy said the IMF had five main grievances with Ukraine.

“Ukraine has certain responsibilities before the IMF that must be fulfilled. The pension reform was adopted but not in the proper way. A draft law on privatization so far has been passed only in first reading, and the Anti-Corruption Court still has not been formed. The state budget was adopted but the IMF’s mission has questions about it. There is also a question of a land reform that has been pushed off the radar recently but still remains on the agenda,” Smoliy said.

According to Smoliy, the IMF mission will plan a visit to Ukraine if the aforesaid pending questions are addressed.

The National Bank of Ukraine plans to receive two tranches from the IMF next year.

The pension reform passed by the Ukrainian Parliament on October 11th envisaged an increase in the required pensionable service to 25 years in 2018 with further incremental annual increases until it reaches 35 years in 2028. In addition, the law envisaged payment of pensions irrespective of the age to a person with minimum 40 years of pensionable service starting January 1, 2028, capped the withheld amount of a single social tax at 15 minimum wages (currently equivalent to UAH 48,000) and introduced a compulsory pension saving system starting January 1, 2019.

The IMF started its Extended Fund Facility (EFF) lending program in Ukraine in March 2015, which was designed until March 2019.

The EFF overall volume set aside for Ukraine amounted to USD 17.5 billion of which Ukraine so far drew only USD 8.7 billion (the first tranche worth USD 5 billion came in March 2015, the second worth USD 1.7 billion was received in August 2015, the third worth USD 1 billion - in September 2016, and the fourth worth USD 1 billion - in April 2017).

  pension reform, IMF, Ukraine