Economic Analysis - Pension Reform Calms Political Uncertainty As IMF Loan Disbursal Nears - 24 JULY 2017

BMI View: Having passed the crucial pension reform , political uncertainty regarding Ukraine ' s structural reform commitment and potential early elections will subside over the coming quarters. Additionally, the reform paves the way for the next IMF bailout loan disbursal , which will boost investor sentiment and enhance the country's ability to tap international bond markets by end-2017.

The Rada's (parliament) preliminary approval of Ukrainian pension reforms on July 13 underscores our core view that the government of President Petro Poroshenko remains committed to implementing the country's IMF mandated structural reform programme. While the proposed reform will not raise the retirement age, eligible pensioners must now have a record of paying into the pension fund for a period of at least 25 years, instead of the 15 years required previously. In our view, and apart from improving the long-term sustainability of the country's pension system (the pension fund ran a deficit of 6.0% of GDP in 2016), the reform will reduce political uncertainty and set the stage for the disbursal of the next IMF bailout tranche in the autumn.

Political Uncertainty And Risks Of Early Elections Fade

Sentiment Improves As Pension Reform Takes First Hurdle
Ukraine - Government USD Eurobond Yields, %
Source: Bloomberg, BMI

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