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Concorde Capital Research: Rada adopts first draft of pension reform, getting closer to IMF tranche

July 14, 2017 | Cbonds

Ukraine's parliament (Verkhovna Rada) voted on July 13 to approve the first reading of pension reform legislation, with 282 votes in support (with a 226-vote majority needed). The reform is aimed at trimming new pensioners from government rolls by raising official work experience to 25 years from 15 years gradually during the next ten years, with some flexibility for earlier retirees. It also limits the professions eligible for early retirement. To ease the pain, the reform imposes a standard calculation for all pensions that will be based on the current average national salary. That will result in some increase in pensions for most pensioners as of October 2017. The bill can be adopted in full at the next parliamentary session, which starts in September. Adopting pension reform is a key precondition for the IMF to provide Ukraine with its next loan tranche.

Regarding lauching a farmland market, another key IMF requirement from its April memorandum, the Ukrainian News agency confirmed on July 13 that the IMF won’t demand it for its next loan tranche, citing an anonymous source close to the negotiations. That reaffirms our conclusion that the farmland issue won’t be an impediment for receiving the next tranche, anticipated this autumn.

Alexander Paraschiy: Pension reform calls for a new level of pensions as of October, which means it should be adopted in early September to be fully functional. These developments on pensions and farmland will serve to reduce Ukraine’s sovereign risk, as the likelihood of getting a positive review and loan tranche from the IMF’s EFF program this fall (possibly in October) has improved significantly. This will also open a window for the possible placement of sovereign international bonds, as well as enable Ukraine to count on other multilateral borrowing.

Company: Ukraine

Full company nameUkraine
Country of riskUkraine


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