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Press Release

Statement of the Press Service of the National Bank of Ukraine

March 31, 2000

In view of the campaign of allegations organized by foreign mass media about abusing International Monetary Fund loans by Ukraine, the Press service of the National Bank of Ukraine is authorized to declare the following:

The loans received by Ukraine from the International Monetary Fund were used solely for the purposes they had been directed to, namely: to support the balance of payments, to replay external debts of the country and the NBU, for interventions on the domestic market to stabilize the currency exchange rate.

Balance of the receipts from the International Monetary Fund and the expenditures covering only the external debt repayment is evidence of the fact that during the whole period of cooperation: in 1995-1999, Ukraine repaid USD 7,171 million having borrowed from the International Monetary Fund USD 3,101 million. In other words, the IMF loans covered less than a half of Ukraine's expenditures to carry out its external obligations. The difference (USD 4,070 million) was mobilized through currency purchase on the domestic market and external private borrowings.

In particular, in 1997 the IMF granted loans to Ukraine in the amount of USD 282 million while Ukraine paid USD 1,188 million as total external debt service payments. Hence, USD 906 million were attracted due to the interventions on the domestic market and placement of external private loans.

Thus, both during the whole period and each year, in particular in December of 1997, expenditures to service the external debt of Ukraine exceeded considerably the loans received by Ukraine from the IMF which is evidence of the stipulated use of these loans by Ukraine.

Moreover, the IMF funds were channeled to Ukraine through the NBU account with the US Federal Reserve System which also rules out the possibility of abuses and ensures the complete transparency of the money flows.

Transactions on the management of foreign exchange reserves have been and are carried out by the National Bank of Ukraine according to the scheme universally accepted in the world and in the operative mode using international specialized banking systems and they were not connected with getting any private or political benefits.

In 1997, when due to the inflow of foreign capital the Ukrainian reserves had considerably increased, some long-term deposits were placed with foreign banks under separate agreements, secured by the pledge of the 1995 Foreign Currency Government Bonds. These bonds were not repurchased by Ukraine but just accepted as a collateral from non-resident banks in order to secure the return of the deposits. All the transactions were completed in full-scale; the deposits and income thereon were returned to Ukraine, and the bonds to their owners. Such transactions were recorded in books, they were transparent and exposed to international audit.

It is essential to point out that one of the reasons of misunderstanding was the fact that up to the early 1998, the banking system of Ukraine had been using the accounting standards of the former Soviet Union which considerably differed from those applied by the International Monetary Fund. Starting from 1998, the NBU implemented the international accounting standards and quarterly international audit and thus the possibility for the illegal use of funds is absolutely excluded.

In response to the allegations published in some foreign mass media, the National Bank of Ukraine asked Price Waterhouse Coopers, the famous international auditing company, to check the NBU's transactions with its foreign exchange reserves carried out in December 1997. This audit confirmed that in December 1997, the NBU did not conduct the transactions, which by their volume or nature resembled those mentioned in the publications and therefore the allegations appeared to have no ground.

At the same time, going beyond the transactions of December 1997, the NBU with the consent of the IMF decided to conduct more comprehensive of audit more widely the transactions with foreign exchange reserves. The first stage of auditing will include the period from July 1997 to January 1998. It is to be completed by the end of March or in early April. Its results will be made public. The second stage will cover a longer interval and will be executed upon the completion of the first stage. In order to ensure the reliable audit, the National Bank of Ukraine has forwarded permissions for its 27 bank partners to disclose for auditors any information concerning their relations with the NBU for the period under review.

Therefore, the National Bank of Ukraine confirms its disposition to an overt and transparent policy in financial and monetary relations with its creditors.

For more information, please contact:
Taras Malyshevskyi, Press Secretary of the Embassy of Ukraine
310 Somerset Street West, Ottawa, ON K2P 0J9
Tel. (613) 230-2961, fax (613) 230-2400,