O. Kusiy, a III^rd year student, Faculty of Finance.

Donetsk University of Economics and Law, Ukraine

INTERNATIONAL MONETARY FUND AND UKRAINE

Institutional structure of the international monetary market is a set of international banks, currency exchanges, currency funds, government agencies and international organizations, which means the movement of capital in the field of international monetary relations. International financial institutions are elements of monetary and credit relations. One of these international organizations is the IMF.

IMF is the United Nations International Monetary and credit organization, whose objectives are to promote international trade and monetary cooperation through the establishment of regulations in exchange rates and monitor their implementation, provision of member countries of foreign currency funds to equalize the balance of payments.

The global economic and financial crisis has taken a severe toll on Ukraine and policy implementation has been uneven. Economic growth in partner countries and global financial market conditions have turned out worse than anticipated at the time the program was approved. As a result, economic activity has contracted sharply, resulting in budgetary strains. Confidence in the banking system has waned, causing a continuous drain of deposits. At the same time, political tensions and concerns about private sector defaults have kept CDS and bond spreads at distressed levels.

The policy settings under the program have been revised in light of the deterioration in the macroeconomic outlook:

The fiscal target for 2009 has been revised from balance in the original program to a 4 percent of GDP deficit. Given better-than-expected developments in the balance of payments - with sharp current adjustment more than offsetting the deterioration of the financial account - the higher fiscal deficit can be financed without increasing the external financing need, in part by redirecting Fund support to the budget. Nevertheless, to ensure adequate cushion, staff also supports the authorities’ efforts to mobilize additional financing from the donor community. The adequacy of external financing will be reconsidered in the context of the next program review.

A flexible exchange rate policy, supported by base money targets and a transparent intervention strategy remains a key component of the program. Given balance sheet effects associated with unhedged foreign currency borrowing, the central bank stands ready to take action to avoid excessive exchange rate depreciation, including by further tightening of monetary policy.

Measures are urgently needed to restore confidence in the banking system. Insolvent banks should be resolved, and the next steps of the bank recapitalization program should be implemented without delay, based on transparent technical criteria. Legal amendments supporting these policies should be rapidly implemented.

The authorities are committed to implement their revised program, but implementation risks remain. The authorities have publicly announced the program details, and the Ministry of Finance and the National Bank of Ukraine are coordinating effectively to resolve problem banks and to restore financial stability. Going forward the most significant risk is further political tensions that may disrupt the implementation of the program. The political situation in Ukraine remains fragile. Other key risks include a further deterioration in the outlook for trading partners, a further delay in the expected improvement in global financial conditions and implications for the commitment of parent banks, and a sharper-than-projected contraction in domestic demand.

The economic downturn has been sharper than originally envisaged, mostly reflecting the deterioration of the external environment. As a major steel exporter and borrower in international markets, Ukraine’s private sector has been hit hard by the deeper and more protracted slowdown of the world economy, the associated decline in demand for steel products and the sharply reduced access to capital markets. The economic impact of the external shocks was exacerbated by the pre-existing economic and financial vulnerabilities - in particular, widespread dollarization of private sector liabilities, balance sheet mismatches, concentration of exports in a limited number of commodities, and high inflation. Real GDP contracted by some 8 percent in the last quarter of 2008, reducing annual growth for 2008 to 2.1 percent, and there is strong evidence of a further weakening in the first quarter of 2009, as suggested by the decline in industrial production.

The help of IMF to Ukraine is directed on stabilization of functioning of a monetary and credit system, and money of world bank - on financing of critical import, support of the budget and financing of different investment projects. Despite it, in relations from IMF it is necessary for Ukraine to consider not only positive aspects of such help, and a complex of mutual recriminations which actually, are the concentrated negative experience of many countries cooperating with this organization.

The IMF nevertheless plays an important role in development of the international currency system, occupying one of the central places in system international currency-financial institutions. Given IMF credits is used by the countries-borrowers for overcoming of the economic difficulties that plays an important role in development both internal economy of such countries, and world economy as a whole.

Literature:

1. Міжнародні організації: Навчальний посібник/ За редакцією Г.О. Козака, В.В. Ковалевського.- К.: ЦУЛ,2003.- 288с.

2. Международные валютно-кредитные и финансовые отношения/ Под ред. Л.Н. Красавиной. - М.: Финансы и статистика, 2000. - 498с.