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1/ Ukraine secured another stop gap program,
imf.org/en/News/Articl…

it is good news (helps with fiscal and bop needs) and also

bad news (what happened to the structural-reform-heavy EFF agreed on in December 2019? imf.org/en/News/Articl…).
2/ The IMF program will help @NBUkraine to rebuild reserves and also finance fiscal deficit
3/ In anticipation of the program assets rallied on the back of the more friendly global backdrop and as prior actions on the bank law and watered-down land reform were passed.
4/ Ukraine entered this crisis in a much-improved position, with higher reserves, a flexible exchange rate regime, credible central bank, and stable banking system thanks to @NBUkraine and macro team. Shock to FX was relatively short-lived and CB returned to FX purchase.
5/ Still with widening fiscal deficit to 7.5% and large external debt repayments Ukraine needs external funding support.
6/ To sum up we hope that the second short-term stopgap IMF SBA to Ukraine does not indicate an end to the reform path, started and halted under Petro Poroshenko and now under President Zelensky.
Follow research @IIF with @BHilgenstockIIF iif.com/Research
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Elina Ribakova
@elinaribakova
1/ The “Fortress Russia” strategy has reduced macroeconomic vulnerabilities. Investors are referring to it as “safe heaven” among #EmergingMarkets What can go wrong? #sanctions and lowest popularity since 2013. Economy reopening as infection spreads and stimulus is modest.
2/ Russian assets are performing strongly compared to peers. Inflows into local markets have returned. Foreign ownership of OFZ has stabilized at near 30% with recent auctions more than 40% bought by foreigners. External debt is scarce.
3/ The Bank of Russia is not keen on QE. It will provide long term repos (1m & 1y) floating rate at 7d repo (policy rate) auctions coming end-May and early June. Why Russia is so conservative on QE? Because banks still have liquidity and hold 4% of their assets in OFZ.
Read 6 tweets
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Elina Ribakova
@elinaribakova
1/ #Nigeria is facing significant external pressure. The IMF support of $3.4bn is helpful, but unlikely to be enough to fully close the external financing gap, even assuming other multilateral lenders come through (how likely is large WB support w/o IMF program) @BHilgenstockIIF
2/ Nigeria's current account is likely to be in deficit despite sharp import contraction. Production limits under the OPEC+ agreement plus lower oil prices will reduce goods exports by more than 40% in 2020.
3/ Nigeria is continuing to face portfolio outflows since 2H2019. While estimating with precision foreign investor participation in CB bills can be a challenge, we think that more outflows are to be expected. @BHilgenstockIIF
Read 4 tweets
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Elina Ribakova
@elinaribakova
1/ IMF as lender of last resort @KGeorgieva commented today that "we are discussing a new short-term liquidity line for countries with strong policies." Some of emerging economies already have access to Fed's swap lines including Brazil and Mexico. Most others don't
2/ This leaves room for the IMF to act as a lender of last resort in FX as the Fed might not want to take on more credit risk via swaps ($ for local currency) and for repos need to have USTs (reserves), possibly issue with pricing
3/ What does the @IMFNews have already?

a. Flexible Credit Line, unlimited, but countries need to pre-qualify. So far Mexico, Poland, Colombia (just applied again to re-open) have used it.
Read 10 tweets

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