Ukraine - First Review Under the Stand-By Arrangement, Requests for Waivers of Nonobservance of Performance Criteria, and Rephasing of Purchases Under the Arrangement - Staff Report; Staff Supplement; Press Release on the Executive Board Discussion (Electronic book text)

1. 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 gas dispute between Gazprom and Naftogaz in January intensified tensions between the political leaders in Ukraine, and disagreements on policy adjustments led to delays in the completion of the review.