909: Virtue Signalling

Hello Fellas;

I wanted to take advantage of John's LIFO methodology and ask if you could announce the next No Agenda, Michigan chapter, meetup "last minute".

Hot on the heels of our "post inauguration" meetup, we are having a "turn up the clocks" meetup in Chelsea, Michigan (home of Jiffy Cake & Muffin Mixes).

Date: March 12th, 2017

Time: 1:30pm (or 1330 for military personnel)

Place: Smokehouse 52

I'm not sure of the Michigan mailing list procedure, but I think Arik the Shill is involved somehow (apologies to him if he's not). "Get on the list people!"

Thanks for "breaking for knights" and I look forward to today's show.

Sir Mark the Small, "Wandering Knight"

Factcheckfalse.com now points to No Agenda. :-)

Sincerely,

Steve Bostedor

Link to Article

Archived Version

Fri, 03 Mar 2017 08:15

Attorney General Jeff Sessions on Thursday announced that he would recuse himself ''from any existing or future investigations of any matters related in any way to the campaigns'' for president in 2016.

Things came to a head after a Washington Post report revealed that Sessions had met with Russian Ambassador Sergey Kislyak during the campaign season '-- and subsequently denied meeting with Russians during Senate hearings for his attorney general nomination months later.

Outside of his recusal, Sessions has maintained that he did not lie to Congress. The White House has brushed off the matter altogether. But the report has congressional Democrats calling for Sessions's resignation.

To speak to the legal precedence of Sessions's testimony and Washington's response to the report, I called up Richard Painter, who served as the chief ethics lawyer in President George W. Bush's White House from 2005 to 2007, and is currently a law professor at the University of Minnesota. He is also on the board of Citizens for Responsible Ethics in Washington, which has taken a strong stance against President Donald Trump's various conflicts of interest.

Painter argues that not only was there no wiggle room around Sessions's recusal from any investigations into the Trump campaign's alleged ties with Russia, but there is a case for Sessions to resign from the attorney general post altogether '-- and the White House isn't helping the situation with its response to the whole thing.

Here is our full conversation, prior to Sessions's recusal announcement, lightly edited for clarity.

Tara GolshanHow do you understand Attorney General Jeff Sessions's Senate testimony and the reports that followed?

Richard PainterHe said they had not had talks with Russians during the political campaign. And now he says, well, what he meant to say was that he had not had contact with the Russians to discuss the political campaign. But that's not what he said.

And if he had contact with the Russians as a United States senator, as a member of the Armed Services Committee, he needed to disclose that and qualify that answer. Then of course he would have had to answer questions about what those conversations were. I will add that it is unusual for a member of the Senate Armed Services Committee to be conducting these types of unilateral discussions with the Russian ambassador. And I think we can rest assured that the Russians have very detailed notes of these conversations or tape recordings of them.

[Sessions] misled the Senate, and the Senate was entitled to find out about the communications with the Russians.

Tara GolshanWould you say Jeff Sessions committed perjury, or is there some wiggle room?

Richard PainterThis is one of those situations where the testimony was highly misleading. Whether or not it amounts to perjury is debatable. Of course, we had a situation with President Clinton 20 years ago where he was never prosecuted for perjury even though he gave a highly misleading testimony in a civil deposition.

The difference here, of course, is that this is a matter of extreme national importance '-- what the Russians are doing in the United States and who's been contacting the Russians. Whereas the president's personal sex life is not of importance at all to the American people. [But] there are still consequences of such actions, particularly when it comes to issues of national security.

Tara GolshanIt's very rare for these kinds of perjury cases to move forward. What's the precedent here?

Richard PainterAttorney General Alberto Gonzales, under the Bush administration, did resign from his post because some members of Congress felt his testimony was misleading '-- he was never prosecuted for anything. His testimony was never so misleading that he could be prosecuted even with a failure to provide information to Congress. [But] it was sufficiently dubious that he did end up resigning.

The attorney general of Richard Nixon, Richard Kleindienst, in 1972 in his own confirmation hearing was asked whether there had been discussions between himself and the White House about a pending antitrust case brought by DOJ against ITT [International Telephone and Telegraph], and Kleindienst said no. And then Leon Jaworski uncovered the Nixon tapes where the president told Kleindienst to drop the ITT case.

Kleindienst's excuse there was that he thought the question in the Senate was about a different time frame than the one in which he communicated with the president '-- a quite pale excuse. But what ended up happening was that Jaworski prosecuted Kleindienst for crimes of failure to provide accurate information to Congress, which is a misdemeanor '-- which, of course, falls short of perjury, which is a felony.

Kleindienst was forced to resign as attorney general and was reprimanded by the Arizona bar. There is precedent for this type of testimony which [is] misleading, which may not be a blatant lie that amounts to perjury but is more in the debatable category.

The facts now in this investigation are much worse than the facts in the early stages of Watergate, which was a simple break-in ordered by midlevel campaign officials '-- not by the president. Here we have facts that are much worse: We have a foreign power that has orchestrated a break-in. It's a much worse situation than the outset of Watergate.

Tara GolshanWhat have you made of the White House's response to this? You were the ethics lawyer under the Bush administration '-- are they following the guidance you would have given in this situation?

Richard PainterI don't see much of a response. They are blowing it off. It's very clear President Trump needs to immediately find out who in his campaign had any communications with the Russians about anything. Find out what those communications were to the best of his ability and find out who in the administration knew what the Russians were doing. He needs to support a thorough inquiry, not a cover-up '-- that is the mistake Nixon made with Watergate.

Their public comments have been atrocious so far. They keep accusing CNN of fake news; then the spokesperson for the Kremlin accuses CNN of fake news. What we are seeing is the White House putting themselves on the same page as the Kremlin, when they [the Russians] have been spying on the United States and attacked our democratic system in 2016. That is a terrible posture they are in. They need to do a complete reversal here.

Don't cover it up. Get the people out that collaborated with the Russians, have a thorough investigation. If there is something that Putin has that is embarrassing to Donald Trump, just tell it to us. They certainly shouldn't be repeating phrases like ''fake news'' that are being repeated by the Kremlin to attack the American media. That is exactly the wrong approach.

Tara GolshanHow much weight should be placed on partisanship here? That's the argument the White House is making, after all '-- that this is a witch hunt.

Richard PainterI have been a Republican for decades, and the one thing that Republicans and Democrats should have in common is concern about our national security. And in particular the attempts by Russia over the decades '-- going back to the 1920s '-- to subvert our government by supporting extremist groups like the American Communist Party, or now white supremacist groups.

This is not a Democratic and Republican issue, and figuring out who in our government is cooperating with the Russians is of the utmost importance. We certainly don't need a McCarthy-type witch hunt, and this shouldn't be abused for political purposes, but it's a critically important issue, and Democrats and Republicans can be united on this. And I certainly don't think the Republican Party should become a pro-Putin party. If it is, we are going to have sort ourselves out.

Tara GolshanWith a recusal, are there still concerns with an independent review of the Trump campaign's potential ties to Russia? If so, where?

Richard PainterAt this point, he can't have anything to do with the investigation. It needs to be an independent prosecutor, and cannot report to the attorney general and should not be someone who reports to someone who reports to the attorney general.

We absolutely need to find out what happened with the Russians, but this attorney general is not equipped to do that. He is conflicted out.

Tara GolshanDo you think this could go further than recusal? Indictment?

Richard PainterThat's way down the road here. At this point, given the facts we have now, I don't think [Sessions] could continue as attorney general. Certainly if he were indicted, he would be forced to step down as attorney general. You don't need indictable conduct for an attorney general to step down.

This may very well fall into the category of what Bill Clinton did or Attorney General Kleindienst did '-- something falling short of perjury. We will deal with that when we get to it. At this point, [Sessions] provided misleading information to Congress, and we need to get to the bottom of it.

Watch: Sessions just added to Trump's Russia problems

Link to Article

Archived Version

Sat, 04 Mar 2017 14:53

President Trump exploded on Twitter early Saturday morning, blasting former President Barack Obama for allegedly wire tapping his phones before the election. He provided no evidence to back up the claim. ''Terrible! Just found out that Obama had my 'wires tapped' in Trump Tower just before the victory. Nothing found. This is McCarthyism!'' he declared. It wasn't clear what Trump was referring to as he raged against his predecessor, whom he labeled a "bad (or sick) guy!" He also said a talented lawyer could make a "great case" out of the situation.

Is it legal for a sitting President to be 'wire tapping' a race for president prior to an election? Turned down by court earlier. A NEW LOW!

President Donald Trump, via TwitterObama's post-presidency office did not immediately respond to a request for comment from Yahoo News on Trump's accusation, and the White House did not immediately clarify from whom Trump had "just learned" this new information. Trump has the authority to declassify almost any classified material, and could substantiate his accusations if he wanted to.

Summarized byYahoo News DigestTrump Tower is a 58-story, 664 ft mixed-use skyscraper located at 721''725 Fifth Avenue between 56th and 57th Streets in Midtown Manhattan, New York City. Trump Tower serves as the headquarters for The Trump Organization and houses the penthouse condominium residence of U.S.

Link to Article

Archived Version

Sun, 05 Mar 2017 07:33

Yesterday we highlighted a tongue-in-cheek outline about a transparent foreign official campaigning in the U.S. against Hillary Clinton to benefit Donald Trump, ie. Nigel Farage.

The reason for the outline was to prove a point that even if Russia had an ambassador in the United States actively campaigning to assist Donald Trump '' SO WHAT?

Is the media having a conniption because the Trump Campaign was calling and talking to Nigel Farage?

What's the difference?

It didn't happen, but even if Team Trump had contact with Russians about the U.S. election, there's absolutely no issue with such activity taking place. Take the name ''Russia'' out of the equation and it happens all the time, and political activists from the Obama administration have been the single most aggressive political campaigners doing exactly that in other countries.

Perhaps everyone forgets Obama's former White House official David Axelrod being paid $500,000 by the UK Labour party to assist candidate Ed Miliband, in the 2015 British election. (Below left) Oh, and he lost.

Perhaps everyone forgets former national field director for President Obama's 2012 reelection campaign, Jeremy Bird, being involved in an opposition effort to remove Benjamin Netanyahu from office and campaigning for Isaac Herzog in Israel. Or Secretary of State John Kerry (above right) openly doing everything he could to advance Herzog's chances over Netanyahu in 2015. Oh, and he lost too.

Was CNN, The Washington Post or New York Times calling for investigations of President Obama's interventionist political activity? Same/Same.

Both David Axelrod (Miliband) and Jeremy Bird (Herzog) lost. These are just two recent examples of President Trump officials and advisors working to ''manipulate'' the elections of foreign governments; did CNN broadcast 24/7 coverage of outrage in those campaigns?

Especially considering the reality that one of those campaigns was specifically against a sitting democratically elected ally of the United States, Benjamin Netanyahu in Israel?

Again, think about it.

Remember President Obama campaigning in London, England on behalf of the liberal politicians in the UK who wanted to remain in the EU ahead of the Brexit referendum? Same/Same. And U.S. taxpayers paid for Obama's trip to the U.K. to campaign on behalf of the Remain Camp. Was the media up-in-arms about spending U.S. taxpayer money to interfere in the British nationalist referendum?

Think about it.

If Canada's liberal Prime Minister Justin Trudeau was campaigning on behalf of Hillary Clinton in 2016 would it be an issue? Of course not. Same/Same '' ie. who cares?

Did the Mexican government openly oppose the U.S. presidential candidacy of Donald Trump? Of course it did. Were there voluminous outlines on CNN about the inappropriateness of that? Of course not. Same/Same '' ie. who cares?

The entire narrative about Russia having a preferred outcome in the U.S. election is a complete nothing burger. Of course Russia would have an opinion; so would, and did, just about every nation on the planet. Sheeesh has everyone forgotten the reported anti-Trump ''world marches'' the weekend after the U.S. inauguration of President Trump. Hello?..

Or what about President Obama calling for Egyptian President Hosni Mubarek to step down from his leadership position in Egypt in 2010/2011'.... Or even more extreme how Obama and Hillary Clinton worked with Nicolas Sarkozy to leverage U.S. military via NATO to kill Libyan leader Muammar Kaddaffi in 2011 without any input from congress? Now, that's some serious ''we came, we saw, he's dead'' type intervention.

The point is, everyone is going so far into the weeds on the 'Vast Russian Conspiracy', that no-one is left to objectively look at the screeching pundits and say ''SO WHAT''?

What exactly do you think Senator John McCain and Senator Lindsey Graham spend all of their time jaunting all over the world doing? They are engaging themselves in the outcomes of foreign countries politics. That's just about their entire full-time job. Ambassador Kislyak is a nosey Russian version of Senator John McCain. Same/Same.

So what if the very worst case scenario is found to be true. The Trump campaign talked to Russians; it's not, and they didn't, but so what if it was '' and they did? What is the issue with Trump Campaign officials talking about the U.S. election outcome with Russian emissaries? So what?

There's no there, there. And even if there was some there, there '' so what? This is a hyper-constructed partisan media narrative with no relevance '' except for those inside a DC bubble to find perpetual offense to their candidate Hillary Clinton losing an election.

Your thoughts?

Advertisements

Link to Article

Archived Version

Sun, 05 Mar 2017 07:49

SIGN UP FOR OUR NEWSLETTER

''Terrible! Just found out that Obama had my 'wires tapped' in Trump Tower just before the victory,'' he wrote on Twitter. ''Nothing found. This is McCarthyism!''

SIGN UP FOR OUR NEWSLETTER

Trump questioned whether it was legal for Obama to be wiretapping a presidential candidate while he was still in office.

''How low has President Obama gone to tapp (sic) my phones during the very sacred election process,'' hewrote. ''This is Nixon/Watergate. Bad (or sick) guy! Is it legal for a sitting President to be 'wire tapping' a race for president prior to an election? Turned down by court earlier. A NEW LOW!''

Trump is likely referring to calls from talk radio hosts Mark Levin and Rush Limbaugh to investigate the nature of the Obama administration's investigations of his campaign aides for their communications with Russia, as Breitbart News editor Joel Pollak reported.

As former Heat Street editor Louise Mensch reported the day before the election, ''sources with links to the counter-intelligence community'' confirmed that a FISA court had granted a FISA court warrant in October to monitor activities in Trump tower. They were previously denied a request in June, according to the report as well as a report in the Guardian.

The New York Times reported on Wednesday that the Obama team classified the investigation at the lowest possible level, allowing the data gathered from the investigation to be shared and leaked widely within the administration.

In January, The New York Times reported that intelligence reports based on some of the wiretapped communications had been provided to the Obama White House even though there was ''no conclusive evidence of wrongdoing'' between Russian officials and associates of Trump.

On Twitter, Trump suggested that he might even have legal options against the former president.

''I'd bet a good lawyer could make a great case out of the fact that President Obama was tapping my phones in October, just prior to Election!'' he wrote.

Link to Article

Archived Version

Sun, 05 Mar 2017 13:36

During the Vietnam War there was a popular slogan: "Suppose they gave a war and nobody came?"

On Saturday, President Donald Trump posed a new question: Suppose the commander-in-chief declared a massive political scandal '-- and nobody cared?

In a series of early morning tweets, Trump claimed '-- with no evidence '-- that President Barack Obama personally ordered wiretap surveillance of Trump Tower and implied he might take legal action in response. He likened the purported scandal to "Nixon/Watergate" in scope and called his immediate predecessor a "bad (or sick) guy."

It was an explosive allegation that raised immediate questions about both the Obama administration's behavior and the status of investigations into Trump associates' relationship to Russia, which the intelligence community has accused of a hacking campaign to aid Trump politically.

And then ... not much happened.

A little over an hour later, the president tweeted about Arnold Schwarzenegger's ratings as host of "The Celebrity Apprentice" (the former governor announced this week he was stepping down, blaming Trump's impact on the show's brand). Then he went to the golf course to hold meetings and perhaps, per his press office, "hit a few balls."

The White House didn't outwardly treat the president's public accusations against a former president as particularly urgent business either. As of Saturday evening, his staff had not put out any follow-up statements.

Obama spokesman Kevin Lewis said neither Obama nor any White House official ever ordered any surveillance of Trump or any U.S. citizen, but did not address whether such surveillance had occurred.

Related: Obama Spokesman Disputes Trump's Wiretapping Claim

In ordinary times, such an accusation would send both parties and the White House scrambling into action with demands and counter-demands for an immediate investigation. But Trump is not an ordinary president and the initial response from his own side was so muted as to barely be audible.

Senate Majority Leader Mitch McConnell and Speaker Paul Ryan did not respond to requests for comment Saturday, although Ryan told Fox News on Friday that he did not think the Obama administration surveilled Trump's campaign aides.

In general, few Republicans of note mentioned the news. Sen. Lindsey Graham, R-South Carolina, who happened to be at a town hall in the morning, told his constituents he was disturbed by the allegations '-- but also by the possibility a judge had found legitimate cause for surveillance '-- and would look into the matter.

At around 4 p.m., Trump-skeptic Sen. Ben Sasse, R-Nebraska, issued a statement warning of "a civilization-warping crisis of public trust" and calling on Trump to show evidence to support his claims.

The other side didn't seem too compelled to respond either. Rep. Adam Schiff, D-California, the ranking Democrat of the House Intelligence Committee, called Trump's claim "outlandish and destructive" in a statement.

House Minority Leader Nancy Pelosi, D-California, issued a single tweet calling Trump "Deflector-in-Chief" and reiterating her call for an independent commission. Senate Minority Leader Chuck Schumer, D-New York, gave no public comment at all as of Saturday evening.

What happened? They had seen this movie before. First, the president issues an incendiary claim. Then, a firestorm erupts. When the smoke settles, it becomes clear the president was making a charge without evidence to back it up, often by parroting a sympathetic commentator or a fringe supporter.

It happened on Trump's first full day in office after he claimed, against obvious photographic evidence, that his inauguration had attracted up to 1.5 million people.

It happened again when Trump argued, without any compelling evidence and against the word of Republican state officials around the country, that the election had been compromised by millions of illegal votes.

This was in keeping with Trump's repeated behavior during the campaign, like when he falsely linked rival Sen. Ted Cruz's father to the JFK assassination, and before that, most famously his false theory that Obama was not born in America.

So on Saturday, everyone decided to skip the "firestorm" part and wait for the inevitable conclusion. So far, things are going according to that script.

Related: Supporters 'March 4 Trump' in Cities Across Nation

Trump's tweets appeared to reference a Breitbart story that referenced commentary by radio host Mark Levin that referenced older unconfirmed reports describing FBI requests for FISA surveillance.

A senior official told NBC News Saturday morning that they and other officials had no idea what Trump was referring to in his tweet, and that the president apparently had not consulted with people inside the government who might know before tweeting.

The president's past eruptions often followed a difficult news cycle. The current questions swirling around Attorney General Jeff Sessions, who had recused himself from any investigation involving the Trump campaign after failing to mention conversations with Russian Ambassador Sergey Kislyak, clearly fit the bill.

In short, it was business as usual. But the fact that this pattern had become so established, so normal, was on its own a shocking moment in American politics. It took 43 days into the Trump administration to arrive at this point.

The reason why we homeschoolers don't want vouchers from their federal government is very simple. Like the power to tax, the power to give us "what we want" is the power to dictate what we do. So much for choice. What is taught and what test standards have to be met will be dictated to ALL variety of schools. Violation of that would be a FEDERAL OFFENSE, not State. Who in their right mind thinks the people of this country would have more control over Federal than local? One doesn't have to read very far on the HSLDA site to understand how much trouble homeschoolers have with local districts. Ever had a trouble with the IRS? Consider trying to deal with that like Obamacare. Read the problems homeschoolers have every week with local districts. Good luck fighting federal bureaucrats!!

Oh yeah... and vaccine standard some people are trying to put on ALL students, not just students enrolled in government schools.

Just eliminate the Depart of Education and let States fund education however they want. They can either become competitive or let homeschoolers move somewhere that supports parental rights.

~7 kids, homeschooling for 15 years

David Bevers

Link to Article

Archived Version

Fri, 03 Mar 2017 07:22

It has been said that there is no such thing as a free lunch. As homeschooling families know too well, government money will eventually lead to government control.

That's why HSLDA is opposing a bill introduced by our friends in Congress, Rep. Steve King (IA) and Rep. Andy Harris (MD). Though well-intentioned, H.R. 610 is ultimately ill-advised. It calls for sending all federal education dollars to the states in the forms of federal grants so that the states can then give the money as vouchers to public, private, and homeschool students.

(Note: While Rep. Franks is also listed as a cosponsor of H.R. 610, we talked with him and his staff last night and they agree with our concerns about homeschooling families being included in H.R. 610. As a result, there is no need to contact his office, and we are deeply grateful to him for his commitment to protecting homeschool freedom from "help" by the federal government. Here is the statement Franks gave to us: "I understand the concerns of the homeschool community. My support for the bill only extends to vouchers for public school and private school students. If this bill moves forward, I would request that any language that would impose vouchers upon homeschools is taken out.")

If the bill only applied to public schools and traditional brick-and-mortar private schools, HSLDA would take no official position on it. There is no question that many millions of children are stuck in public schools that fail to meet their needs, and school choice would be an incredible benefit to them.

But HSLDA has repeatedly told our friends on Capitol Hill that our members and many other homeschooling families know that government dollars will eventually result in government regulation. Although we are grateful for our friends on Capitol Hill, and although we know that representatives King and Harris are well-intentioned, they need to hear loud and clear from the homeschool community. Even though the vouchers created by H.R. 610 would be voluntary, we believe that this would be a slippery slope toward more federal involvement and control in homeschooling.

If you do not want federal government ''help,'' if you just want to be left alone, this is the time to speak up.

Dangers of H.R. 610 (click here to read a PDF version of the bill with page numbers cited below).

1. Elimination of language protecting homeschool freedom in U.S. Code: Page 2, paragraph (a) repeals in its entirety the Elementary and Secondary Education Act of 1965, which was most recently reauthorized as the Every Student Succeeds Act. While HSLDA applauds this repeal language, as we believe that the federal government has no constitutional authority to make education decisions which should be left to state and local authorities, this full repeal would also eliminate HSLDA's language fully protecting homeschool freedom from all federal control.

2. Creation of a ''federal right to homeschool:'' Page 3, Sec. 104 requires states to make certain assurances in order to receive their portion of federal education dollars. One of the requirements (paragraph (2)(A) on page 3) is that states ''make it lawful for parents of an eligible child to elect '... to home-school their child.'' While this sounds good, HSLDA has fought'--successfully'--for decades to make sure that there is no ''federal right to homeschool'' because what could be created by a favorable Congress could be regulated by a future, hostile Congress. It is far better (and far more constitutionally sound) for education decisions'--and homeschool freedom'--to be protected at the state level. We ask our friends at the federal level to simply leave homeschooling families alone. The Constitution protects the right of parents to direct the education and upbringing of their children, as the U.S. Supreme Court has ruled in its seminal cases of Meyer, Pierce, and Yoder. Federal legislation to ''protect'' homeschooling is unnecessary.

3. States would need to track homeschooling students: Numerous provisions in H.R. 610 require states to count the number of eligible students in their state. Page 4 says ''The State shall distribute funds . . . based on the number of eligible children in the public schools . . . and . . . the number of eligible children . . . whose parents elect to send their child to a private school or to home-school their child.'' Page 5 requires ''on an annual basis'' that school districts count the number of eligible students who attend public schools, and ''whose parents elect'--to send their child to a private school or to home-school their child.'' There is only one way that states and school districts can do this: by requiring homeschooling families to register with them, and be tracked by the school district. This will be especially problematic in states that do not require homeschooling families to file a notice of intent with the local school district. H.R. 610 will require homeschooling families in all 50 states to register with the local school district. This would be just the first cost of ''free government money.''

4. The government would now get to decide how much parents should spend on homeschooling: Paragraph (B) on page 6 requires that the federal education vouchers to parents who choose a homeschool "shall not exceed the cost of home-schooling the child.'' Who will now decide how much it costs to homeschool a child? The government. Page 8 further requires that the federal education vouchers ''be distributed in a manner so as to ensure that such payments will be used for appropriate educational expenses.'' This is not defined, meaning that government officials and public schools will decide what qualifies as an appropriate educational expense. HSLDA has heard over the course of 33 years from numerous parents who have elected to teach their children at home through a government-funded virtual or correspondence school. In their experience, they found their curriculum options shrunk as each choice had to pass a government litmus test.

Link to Article

Archived Version

Source: The Daily Star >> Live News

Thu, 02 Mar 2017 22:42

you've reached a subscriber-only article.Sign up now and access the full breadth of The Daily Star content in minutes.

subscribe nowunrestricted access1 month...$12 | 3 months...$30 | 6 months...$55 | 1 year...$99Existing users can login here or register for a new account.

A version of this article appeared in the print edition of The Daily Star on March 03, 2017, on page 5.Advertisement

Link to Article

Archived Version

Sun, 05 Mar 2017 08:21

The International Monetary Fund approved a $17.5 billion loan program for Ukraine, including an immediate $5 billion disbursement, to help the former Soviet republic stave off default amid a conflict with pro-Russia rebels.

The IMF's executive board, which represents the 188 member nations, gave the go-ahead for the four-year program, Managing Director Christine Lagarde said in a statement on Wednesday. The aid is part of what the Washington-based lender and Ukraine's government hope will be a $40 billion package, including contributions from the U.S. and European Union and a prospective $15 billion in savings to be negotiated with Ukraine's bondholders.

The financing offers a lifeline to an economy that the government expects to shrink as much as 11.9 percent this year, as the conflict in the eastern part of the country hobbles its industrial capacity. The program, which replaces a two-year loan from last April, also marks a deepening of the IMF's involvement in the worst standoff in Europe since the end of the Cold War.

The revamped IMF plan ''will provide more funding, more time, more flexibility, and better financing terms for Ukraine,'' Lagarde said in a statement. ''The program is ambitious and involves risks, notably those stemming from the conflict in the east of the country.''

About $2.7 billion of the initial $5 billion payment will be allocated to budget support, the IMF said in a separate statement on Wednesday. Further disbursements will be based on standard quarterly reviews and performance measures, the fund said.

Front-Loaded LoanLagarde told reporters in Berlin today that Ukraine could receive as much as $10 billion in the first year of the program if it satisfies the IMF that the country is making progress on reforms.

The approval opens the way for $7.5 billion more in international loans, Ukraine Finance Minister Natalie Jaresko said Wednesday in Kiev. It also allows Ukraine to begin negotiations with holders of its sovereign bonds, a move that Jaresko has said could save the country $15 billion. She said she will hold a videoconference with investors on Friday.

The IMF said it expects Ukraine's real gross domestic product to shrink about 5.5 percent this year, before growing 2 percent next year. Inflation will spike due to the appreciation of the hryvnia and energy tariff increases, before subsiding to 27 percent by the end of 2015, according to the IMF.

Government DebtGovernment debt will rise to 94 percent of GDP this year, before falling to 71 percent of output by 2020, following a debt restructuring on sovereign bonds, according to the fund.

Ukraine has agreed to measures including maintaining exchange-rate flexibility, a monetary policy aimed at restoring price stability, overhauling the country's energy sector and cracking down on corruption, the IMF said.

Ukraine's bonds have recovered recently on optimism that investors won't be subject to writedowns. The country's $2.6 billion of 9.25 percent 2017 notes gained 0.6 cent to 47.29 cents on the dollar at 6:56 p.m. in Kiev.

The nation may avoid writedowns on the principal and instead reach a ''straightforward extension of maturities,'' Paul Rawkins, a senior director at Fitch Ratings, said in an interview this week.

A truce negotiated in Minsk, Belarus, last month by leaders of Russia, Ukraine, Germany and France is gradually taking hold after 11 months of fighting that has killed at least 6,000 people, according to the United Nations.

Cease-FireThe U.S. said Wednesday that Russian-armed separatists have recently violated the cease-fire. Russia has denied U.S. and EU accusations that it's sending troops and weapons into eastern Ukraine to help the rebellion.

Ukraine's international reserves have slid by almost two-thirds to $5.62 billion as its central bank fights to end a rout in the nation's currency, the hryvnia.

Lagarde announced initial details of the program Feb. 12, saying the financial assistance would help Ukraine stabilize its economy and restore growth. She said Wednesday that the new arrangement ''will support immediate economic stabilization in Ukraine and a set of deep and wide-ranging policy reforms aimed at restoring robust growth over the medium term and improving living standards for the Ukrainian people.''

The new IMF program replaces last year's package that was valued at $17 billion at the time. The government had drawn about 27 percent of the available aid from the program.

Austerity ConditionsApproval by Ukraine's parliament of IMF-recommended policy changes including austerity measures and increased household energy prices have contributed to a 55 percent rally in the the hryvnia since Feb. 26. The currency is still down 27 percent this year.

The most important business stories of the day.

Get Bloomberg's daily newsletter.

''Everyone is wondering about what is happening next, and what people are really looking out for is the details on Ukraine's debt restructuring,'' William Jackson, a London-based economist at Capital Economics, said by phone. ''Unless we see a peaceful and lasting resolution of the conflict, not on paper, but in reality, it will be really hard to reduce capital flight and improve the economic situation.''

Earlier Wednesday in Washington, the U.S. imposed sanctions on officials close to former Ukrainian President Viktor Yanukovych, as well as several separatists. The penalties, which follow similar actions by the European Union and Canada on Feb. 16, come after a truce last month and a lull in fighting between pro-Russian separatists and Ukrainian government troops.

Uncertainty over the security situation continues to present risks to Ukraine's economy, Ramin Toloui, the U.S. Treasury Department's assistant secretary for international finance, told the Senate Foreign Relations Committee on Tuesday.

''This year's intensification of the conflict has imposed severe damage on an already-fragile economy,'' Toloui said at a hearing in Washington. ''Currency depreciation and deposit flight have put a strain on the banking sector, and significant structural damage has occurred within Ukraine's economy.''

Link to Article

Archived Version

Sun, 05 Mar 2017 08:20

For more than a year, Ukraine has been debating about what, how and when should be privatized. It has not yet gotten as far as organizing actual tenders to sell large state-owned enterprises, but preparations for privatization are underway. This generates various rumors and myths that distort public opinion on privatization.

The process is more important than the result

More than a year ago, Prime Minister Arseniy Yatsenyuk announced "the largest privatization in 23 years." Nothing much happened over this year: privatization proceeds amounted to mere USD 467 million. Still, the process has been launched, and even advanced from empty talks to practical steps. In the recent months, the government went as far as organizing privatization tenders.

The government has done a lot in this time. The Ministry of Economic Development and Trade (MEDT) prepared Ukraine's Top-100 State-Owned Enterprises, a review report compiled jointly with PriceWaterhouseCoopers, Dragon Capital, the Soros Foundation and the Government of the United Kingdom, that is likely to catch investors' attention. This is the first report of the kind providing comprehensive analysis of the position and growth prospects for a hundred largest state-owned companies (accounting for over 90% of total income of all state-owned enterprises in Ukraine). The Ministry plans to publish such reports quarterly and annually, following the practices of more advanced countries. The report also looks at the best practices in public property management in member-states of the Organisation for Economic Co-operation and Development (OECD). Guided by international experience, the report announces the reform of state-owned enterprises. The ultimate goal is to increase their efficiency and make them more competitive on the market.

RELATED ARTICLE: An overview of Ukraine's new tax system

Public property reform suggests a number of interesting initiatives. One is to increase transparency in the operation of state-owned enterprises through a mandatory requirement to prepare their financial statements in accordance with international standards and to do audits by independent international agencies. In addition to that, the focus of state-owned enterprises is expected to shift to generating profit. This will be done through segregation of business operation and other functions '' social or political '' state-owned enterprises often carried out earlier. An example is Ukrzalisnytsia, Ukrainian state railway carrier that provides discounts for some social categories. The same goes for the separation of powers in ministries: they are currently both regulators and owners of the enterprises. This leads to a conflict of interests and distorts incentives that could otherwise come from the markets.

Finally, the crucial component of the reform is mandatory establishment of independent supervisory boards. They will appoint members of management boards and decide on business development strategies.

Previously, state-owned enterprises operated in two ways. One was for oligarchs, being minority shareholder de jure, to control managers. Thanks to good contacts in the government they preserved that status quo for years, while channeling company cash flows to their accounts (Ukrnafta, Ukraine's biggest state-owned oil extraction company operating on local oil fields, is the most recent example, but there are dozens more). The other scenario was for the managers to deliver suitcases full of cash to those at the helm, and in case of a power shift, to those "newly-elected". This would grant them a carte blanche to leave some cash for themselves (Ukrspyrt, the monopolist producer of alcohol further used in the production of alcoholic beverages, is probably the most well-known case). Under any of these ''business models'' state enterprises brought to the budget '' and to Ukrainian taxpayers '' mere pennies or, worse, losses, while the parasites rushed to grab as much as possible before a new change in government. This is bound to change after the current reform. Every state-owned enterprise will have its own supervisory board comprised of government representatives as well as independent experts (who may even outnumber the officials). This will stop excessive government meddling and the practice of being run by oligarchs de facto. Coupled with decent financial reward for the supervisory and management board members (the Ministry of Economy proposes a wage hike), this should make the operations of state-owned companies more efficient in the near future. They will then show improved cash flows which will guarantee real market price in privatization. For natural monopolies or strategic enterprises, privatization should not be an option.

RELATED ARTICLE: Agribusiness becomes the biggest component of Ukraine's economy. What will it take for the growth to continue?

Besides the report, the government has completed a lot of organizational work. Most importantly, Ihor Bilous was appointed head of the State Property Fund of Ukraine (SPF), filling the post that remained vacant for almost a year. The Cabinet decided to put up for privatization in 2015 a list of over 300 state-owned enterprises (majority and smaller stakes), including many large ones. The 2015 budget expects USD 17bn in privatization proceeds. All these principles of transformations and mechanisms to implement them have become part of the public property reform strategy and the relevant legislation amendments.

A list of a dozen companies that are top priorities for privatization is being compiled; the action plan on five of them is already in place and waits to be approved by the end of September. An inter-agency work group is to be set up to monitor and eliminate embezzlement at state enterprises. It is also expected to conduct independent audits of at least 100 largest enterprises, propose amendments to the legislation in order to increase wages for the managers, and develop a plan to restructure companies that pose the biggest risks of losses to be covered from the national budget.

Obviously, the preparations for large-scale privatization are well under way in compliance with the best international standards. There is political will for privatization, and it seems to be supported from the overseas. Actually, this will is so overwhelming that some believe the only significant function of Yatsenyuk as Premier to be "selling everything that has not been sold." According to Mr. Bilous, the first facility, Odessa Port Plant (OPP), will be set for an auction in November or December. Rumor has it that Norwegian, American, Arab and Ukrainian investors have already expressed their interest. It is yet to be seen whether no efforts are taken to restrict access to the auctions for bidders, and whether this interests translates into a decent price for the OPP.

RELATED ARTICLE: Transition from oligarch economy to EU membership for Ukraine

Today, the barriers significantly hampering the privatization process are plenty. Most importantly, the oligarchs are doing everything in their power to prevent privatization, since they stand no chance of winning transparent privatization tenders (the value of the companies for them is clearly lower than for foreign investors, because they will never manage to make them as efficient). This resistance is cited among the reasons for the dragged-out preparation of Tsentrenergo, a major supplier that generates 8% of electricity in Ukraine, for privatization. And just days before this article went to press, Premier Yatsenyuk postponed privatization of the Odesa Port Plant. The official reason '' a need to change evaluation methods for state-owned facilities '' caused rumors of his playing into the hands of oligarchs.

The judiciary poses another barrier. Recently, the infamous Kyiv Commercial Court deemed illegal the privatization of 25% of Dniproenergo, another major electricity supplier with Rinat Akhmetov's DTEK as a major shareholder. This actually means re-privatization. More similar lawsuits may delay the privatization process for months.

State capitalism in the world

In theory, privatization is undoubtedly necessary, since the state cannot be an efficient business owner. In practice, the concept has its pros and cons.

On the one hand, massive waves of privatization held in most countries in 1970''1990's are evidence in its favor. Privatized companies became more efficient and more capable of growth. Still, state-owned enterprises play a major role in many economies throughout the world today. These are the countries of state capitalism.

China, and less so other Asian countries, is a model of economy with successful and effective state companies. This is due to a number of specific features. One is mentality that puts national interests before private ones and prevents state company executives from filling their own pockets. Another one is severe punishment for corruption, ranging from huge fines to death penalty. Each year, about 100,000 corruptionists are caught in China (and their criminal cases do not get stuck at the Prosecutor's Office or the courts, as is the case in Ukraine), and thousands of them are sentenced to death. The third feature is the polished legislative environment with high standards of corporate governance, preventing officials from interfering with companies' work or pocketing parts of their cash flows. Of course, China, like any other country with state capitalism, uses state-owned enterprises for more purposes than profit making alone, but even these alternative purposes focus mainly on economic growth priorities that feed the economy.

RELATED ARTICLE:A Road Map for Economic De-Sovietization

In other countries of state capitalism, the performance of state corporations is far less impressive. Firstly, most state-owned companies there generate a much lower profit margin than their private-owned competitors. The market price of their shares always includes a discount for the low quality of their corporate governance, something that is unavoidable in a company with the state as the owner. Secondly, state-owned enterprises are reluctant to develop. Therefore they are virtually absent from most innovative industries. Thirdly, they appear in frequent corruption scandals. Facts of massive corruption related to the state gas giant Petrobras have recently surfaced in Brazil: private construction companies (and not only them) bribed government officials to get contracts from this state monopolist. The scandal involved the ruling party members, including President Dilma Rousseff. The losses of this state corporation today are estimated at USD 16bn. As long as state capitalism exists, such incidents will take place regularly.

In Russia, state capitalism has degraded further. State banks have monopolized the financial sector (which, by the way, made them a convenient target for Western sanctions), accumulating the bulk of financial resources and lending them to state companies. This environment hampers the development of either private banks or producers with limited access to financial resources. State oil and gas players squeeze private companies out of the market thanks to monopoly access to the best fields and transportation infrastructure. Add to that opportunities to seize the assets of private businesses '' the swallowing of Yukos by Rosneft is one example. Heads of state corporations and corrupt officials have formed an intricate net where one hand washes another. Operating in the environment of impunity and complete lack of self-criticism, this has brought Russia to the blind alley of civilization. Its state-owned companies are focused not on doing business, but on financing Russia's geopolitical interests, as seen by the Kremlin. Such form of state capitalism is the most vicious, and is completely at odds with business efficiency. Worst of all, state corporations in Ukraine were until recently following the Russian model. This requires drastic and radical change. If Ukraine is to embark on the path of development, it cannot afford to have state capitalism of the Russian kind.

Public property, Ukrainian style

According to the Ministry of Economy, Ukraine has 3,374 state-owned enterprises as of today. This is almost double the figures in 28 out of 34 OECD countries (except for the United States, Turkey and several small countries). Only 1,920 out of them are operating. The question is: what happened to the rest, and what were the management methods used by the state and its officials that led to this? Total assets of all state-owned enterprises were worth USD 813bn, or almost 52% of Ukraine's GDP, as of mid-2014. Cumulatively, they generated losses even before the Maidan. In 2014, their financial performance deteriorated further.

RELATED ARTICLE: Ukraine's Minister for the Power and Coal Industries on gas balance, the chances of modernizing this sector, and the role of oligarchs in the Fuel & Energy Complex

Total mismanagement of state corporations surfaces not only in journalist investigations that reveal corruption and abuse by state company executives, but also in mere facts and figures. Statistics give solid proof that public assets should be restructured to make them work effectively as a minimum, and privatized as a maximum. As seen by an average Ukrainian, the money the state collects (in the form of increased taxes or utility tariffs) is much more important than the money the state fails to receive because it was stolen by officials with a little help from state company managers. Yet, these losses amount to tens of billions of hryvnia. If they ended up in the budget (or were used to develop the companies and create jobs), the actual level of social benefits could be much higher than it is now.

Statistics dispel the myth about preserving the status quo as the best strategy for public property management. Firstly, what good are the assets that generate no cash flow? Secondly, what happened to the companies that went out of operation? The answer is simple: their equipment was used as scrap metal, stolen or taken away, and the buildings were rented out for kickbacks. All of this happens with the consent of the officials who transfer part of their income from this "up the chain." The longer the companies remain state-owned without reform and restructuring, the more they will be pilfered, increasing the burden on the budget. It is obvious that civil society should in no way tolerate this status quo.

Enchained by preconceptions

There are many other widespread myths related to privatization. The government should take seriously the issue of dispelling them by commenting on the process and on its outcomes.

The main myth is that after the privatization, companies will work worse. The best case to the contrary is ArcelorMittal Kryviy Rih (former Kryvorizhstal). In 2005, when the company was privatized following an open tender that remains unique to this day, it had 55,400 employees earning an average of 1,522 hryvnia per month, which was 89% higher than the average salary in Ukraine. Its net income was UAH11 bn, or USD 2.15bn. 10 years after the privatization, in 2014, the company had 28,800 employees (the ones that were laid off received huge compensations) with the average monthly salary of UAH 6,661, which is 91% more than the national average. Its net income increased by half to UAH 36.7bn, or USD 3.09bn. At the same time, over the 10 years from 2005 to 2014, the company invested USD 12bn, increasing almost six times its average annual investment from less than UAH 200mn before the privatization to UAH 1.2bn thereafter.

ArcelorMittal Kryviy Rih is a typical example of a successfully and transparently privatized company that improves its efficiency and increases production, while reducing staff and paying higher wages. The salaries of the company's employees could well have been higher, but that would hardly be a feasible option for the owners in a situation where there are armies of the unemployed willing to work for less.

RELATED ARTICLE: External factors are pushing Ukrainian economy to overcome its extreme dependence on specific export goods and unreliable export markets

Companies privatized non-transparently have fewer reasons to be proud. Ukrtelecom, the nationwide fixed line operator, faced a "grabitization" in early 2011. In 2011''2014, it reduced its staff by 31%, and payroll by 12%. In this way, the average salary increased by 29% compared to a 55% increase nationwide. Its net income fell 4% even in UAH terms. Annual investment dropped by several times, from UAH 0.7''1.7bn before privatization to UAH 0.15''0.65bn thereafter.

DTEK Zakhidenergo PJSC, grabitized by Rinat Akhmetov in the late 2011, is in a slightly better situation. In 2012''2014, its staff was reduced by 23% and payroll by 2%; however, its net revenue in hryvnia terms increased by 58%, and annual investment grew by several times, from UAH 100''150mn to UAH 400mn.

Quite often, state-owned enterprises begin to perform more poorly after falling into the hands of oligarchs through privatization. The workforce is hit the hardest: the only thing that the oligarchs manage to do under any circumstances is to lay off staff, and reduce salaries to get more benefit for themselves. Development and justified profitable investment are above their head. Therefore, those who believe that state-owned enterprises should not be privatized because they will work worse are right to a certain extent. However, the cause of possible deterioration is not privatization as such, but privatization that is obscure and noncompetitive, inaccessible to efficient private bidders. With a competitive and transparent tender, the result will be quite the opposite. The lone example of ArcelorMittal Kryviy Rih is the proof.

Another common misconception is that when a company is state-owned, it "feeds" many employees, who now and then sell stolen goods, spare parts etc. After the privatization, however, the new owner will quickly stop this petty trade by its personnel, thus impoverishing the population. There are several aspects to this. First of all, Ukrainians got used to stealing state property (at collective farms, state farms, and factories) back in the Soviet days. But back then, we fleeced a foreign country, while now it is our own. Therefore, this habit should be thoroughly eradicated. If privatization can remedy this, then it should be done as quickly and fully as possible. A state where theft and corruption are a social convention cannot develop. This has been taught by the greatest minds of the mankind since ancient times, and has been confirmed by practice.

RELATED ARTICLE: Who runs illegal coal business in the Donbas

Secondly, privatization does deprive many people of opportunities to make money, and therefore '' to survive, even if illegally, in the Ukrainian economy (in addition to hordes of petty traders of stolen goods, privatization will generate another horde of laid-off workers, as well as officials who lose their shadow income). Therefore, comprehensive economic reform should be carried out in parallel with privatization in order to improve business climate and foster new businesses that could absorb vacant workforce and give people the opportunity to make money. Only in this case will privatization be socially effective and contribute to the country's development. Otherwise, its only noticeable implication for society will be increased unemployment, social tensions, and emigration. Ukrainians have had enough of all these problems.

A careful analysis of the advantages and disadvantages of privatization on the basis of theory, international practices and local specifics shows that Ukraine really needs one. The phase of restructuring state-owned enterprises and preparing them for tenders is especially important. Coupled with the fact that, in times of war, the sale of state corporations is one of the few available sources of budget replenishment and foreign exchange earnings through FDI, it shows the dire need for privatization. Whether the current government manages to get the message across to the public and avoid social tensions caused by privatization by improving the business climate remains to be seen.

Link to Article

Archived Version

Sun, 05 Mar 2017 08:17

(C) 2015 International Monetary Fund IMF Country Report No. 15/218 UKRAINE FIRST REVIEW UNDER THE EXTENDED ARRANGEMENT'--PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR UKRAINE In the context of the first review under the Extended Arrangement, the following documents have been released and are included in this package: ‚· A Press Release including a statement by the Chair of the Executive Board. ‚· The Staff Report prepared by a staff team of the IMF for the Executive Board's consideration on July 31, 2015, following discussions that ended on May 29, 2015, with the officials of Ukraine on economic developments and policies underpinning the IMF arrangement under the Extended Fund Facility. Based on information available at the time of these discussions, the staff report was completed on July 22, 2015. ‚· A Staff Supplement updating information on recent developments. ‚· A Statement by the Executive Director for Ukraine. The documents listed below have been or will be separately released. Letter of Intent sent to the IMF by the authorities of Ukraine* Memorandum of Economic and Financial Policies by the authorities of Ukraine* Technical Memorandum of Understanding* *Also included in Staff Report The IMF's transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities' policy intentions in published staff reports and other documents. Copies of this report are available to the public from International Monetary Fund ‚· Publication Services PO Box 92780 ‚· Washington, D.C. 20090 Telephone: (202) 623-7430 ‚· Fax: (202) 623-7201 E-mail: publications@imf.org Web: http://www.imf.org Price: $18.00 per printed copy International Monetary Fund Washington, D.C. August 2015

Press Release No. 15/364 FOR IMMEDIATE RELEASE July 31, 2015 IMF Executive Board Completes First Review of Ukraine's EFF and Approves US$1.7 Billion Disbursement The Executive Board of the International Monetary Fund (IMF) today completed the first review of Ukraine's Extended Arrangement under the Extended Fund Facility (EFF). The completion of this review enables the disbursement of SDR 1,182.1 million (about US$1.7 billion), which would bring total disbursements under the arrangement to SDR 4.72 billion (about US$6.68 billion). Ukraine's four-year SDR 12.348 billion (about US$17.5 billion) EFF was approved on March 11, 2015 (see Press Release No. 14/189) to support the government's economic program, which aims to put the economy on the path to recovery, restore external sustainability, strengthen public finances, maintain financial stability, and support economic growth by advancing structural and governance reforms, while protecting the most vulnerable. Following the Executive Board's discussion, Mr. David Lipton, First Deputy Managing Director and Acting Chair, said: ''The Ukrainian economy remains fragile, but encouraging signs are emerging. In recent months, the exchange rate has stabilized, domestic-currency retail deposits have been increasing, and the pace of economic decline is moderating. Continued prudent policies and further reforms should allow the economy to turn the corner and growth to resume in the period ahead. ''Since the approval of a financial arrangement under the IMF's Extended Fund Facility, the authorities have made a strong start in implementing their economic program. The momentum needs to be sustained, as significant structural and institutional reforms are still needed to address economic imbalances that held Ukraine back in the past. ''Maintaining an appropriately tight monetary policy and building up official foreign exchange reserves will be critical to entrench external stability and anchor inflation expectations. As disinflation takes root, monetary policy can be carefully eased to support economic activity. Removal of administrative measures on foreign exchange operations should proceed in a gradual and sequenced manner, once the enabling conditions are in place. International Monetary Fund 700 19th Street, NW Washington, D. C. 20431 USA

2 ''Restoring a sound banking system is key for economic recovery. To this end, the strategy to strengthen banks through recapitalization, reduction of related-party lending, and resolution of impaired assets should be implemented decisively. ''The authorities recognize that continued fiscal discipline is needed to reduce risks and strengthen public finances. Strong political support should be mobilized to sustain budgetary consolidation and energy sector reforms going forward, while ensuring an adequate social safety net. At the same time, restoring debt sustainability will require the completion of a debt operation consistent with program objectives. The authorities and the holders of their sovereign debt should continue their efforts to reach an agreement ahead of the next program review. In the event that talks with private creditors stall, and Ukraine determines that it cannot service this debt, the Fund could continue to lend to Ukraine consistent with its Lending-into-Arrears Policy. ''Further substantial progress with structural reforms is essential to enable strong recovery of private activity. In this regard, efforts to fight corruption, improve the business climate, and reform state-owned enterprises should be stepped up.''

UKRAINE FIRST REVIEW UNDER THE EXTENDED ARRANGEMENT EXECUTIVE SUMMARY The economy is still fragile, but signs of stabilization are emerging. The escalation of the conflict in the East and the sharp deprec iation of the hryvnia in early 2015 deepened the recession in 2015:Q1, raised inflation, and eroded further bank balance sheets. In recent months, however, sign s of stabilization have been emerging. The balance of payments is in line with the program and the exchange rate has stabilized, retail hryvnia deposits are gradually increasing, the budget deficit is very low, and the pace of economic decline is moderating. The authorities have made a strong start in implementing the program . All performance criteria (PCs) for end-March 2015 and , based on preliminary information, all PCs for end-June were met. Eight benchmarks we re completed, albeit four of them with a delay and two were converted into prior actions for this review. Discussions with creditors have made prog ress towards a debt operation that would restore fiscal sustainability . The engagement has intensified recently with direct negotiations with the ad hoc creditor committee on the authorities' restructuring proposal. The two sides reported further steps forward in their discussions and reiterated their common objective to finalize the terms of the debt operation as soon as possible. Policy discussions focused on strengthening macroeconomic stability and sustaining progress in structural reforms . Supporting policies in the period ahead aim to: (i) continue the current prudent monetary polic y, maintain exchange rate flexibility, and improve banks' financial health; (ii) strengthen public finances, via fiscal consolidation and Naftogaz's reform, while revamping the social safety net; and (iii) advance structural reforms, specifically the anti-corruption framew ork and judicial system, overhaul the State-Owned Enterprise (SOE) sector, and improve business climate. In view of the authorities' performance under the program, their policy commitments for the period ahead, and progress toward a debt operation in line with its stated objectives, staff recommends the completion of the first review . The purchase released upon completion of the revi ew would be in the amount equivalent to SDR 1,182.1 million. July 22, 2015

UKRAINE2 INTERNATIONAL MONETARY FUND Approved By Thanos Arvanitis and Mark Flanagan Discussions were held in Kyiv during May 12''29, 2015. The IMF team comprised Nikolay Gueorguiev (head), Anita Tuladhar, Etienne Yehoue, Pamela Madrid, Beata Jajko, Linda Kaltani, Ricardo Llaudes, Brett Rayner, Almira Buzaushina (EUR); Olga Stankova (COM); David Amaglobeli (FAD); Emmanuel Mathias, Sebastiaan Pompe (LEG); Luis Cortavarr­a-Checkley, Annamaria Kokenyne Ivanics, Johannes Forss Sandahl (MCM); Cesar Serra (SPR); Jerome Vacher and Wim Fonteyne (Resident Representative office). Thanos Arvanitis (Deputy Director, EUR) and Oleksandr Petryk (Alternate ED) participated in discussions. Nikita Kannekanti and Christine Rubio (both EUR) provided support from headquarters. CONTENTS INTRODUCTION _____________________________________________________________________\_____________ 4 RECENT ECONOMIC DEVELOPMENTS __________________________________________________________ \ 4 DEBT OPERATION __________________________________________________________________\______________ 6 MACROECONOMIC FRAMEW ORK AND RISKS _________________________________________________ 7 MONETARY AND EXCHANGE RATE POLICY ____________________________________________________ 8 A. Background ________________________________________________________________________\______________8 B. Policies ________________________________________________________________________\___________________9 BANKING SE CTOR ___________________________________________________________________\___________ 10 A. Background _______________________________________________________________________\_____________ 10 B. Policies ________________________________________________________________________\_________________ 11 FISCAL PO LICY ___________________________________________________________________\_______________ 13 A. Background _______________________________________________________________________\_____________ 13 B. Policies ________________________________________________________________________\_________________ 14 ENERGY PO LICY ___________________________________________________________________\______________ 16 A. Background _______________________________________________________________________\_____________ 16 B. Policies ________________________________________________________________________\_________________ 16 STRUCTURAL REFORMS ________________________________________________________________________\ 18 A. Background _______________________________________________________________________\_____________ 18

UKRAINE INTERNATIONAL MONETARY FUND 3 B. Policies ________________________________________________________________________\_________________ 19 PROGRAM FINANCING AN D MODALITIES ____________________________________________________ 21 A. Program Monitoring _______________________________________________________________________\____ 21 B. Financing A ssurances _______________________________________________________________________\___ 21 C. Capacity to Repay the Fund and Risks to the Program ________________________________________ 21 STAFF APPRAISAL __________________________________________________________________\____________ 24 BOXES 1. Impact of Social Assistance on Household Ut ility Cost ________________________________________ 172. The State-Owned Enterpri se Sector i n Ukraine ________________________________________________ 203. Exceptional Access Criter ia ____________________________________________________________________ \ 22FIGURES 1. Real Sector In dicators, 2013''15______________________________________________________________\__ 262. Inflation, Monetary, and Exc hange Rate Developments, 2013''15 _____________________________ 273. External Sector Dev elopments, 2013''15 _______________________________________________________ 284. Debt and Rollover of Debt, 2013''16 ___________________________________________________________ 295. Banking Sector Deposi ts and Credit, 2014''15 _________________________________________________ 306. Financial Sector In dicat ors, 2013''15 ___________________________________________________________ 317. Structural Ref orms ________________________________________________________________________\_____ 32TABL ES 1. Program Scenario'--Selected Economic and Social Indicators, 2014''20 _______________________ 332. Program Scenario'--General Government Financ es, 2014''20 ( billions of Ukrainian hryvnias) _ 342. Program Scenario'--General Government Finances, 2014''20 ( percent of GDP) _______________ 353. Program Scenario'--Balanc e of Pa yments, 2014''20 ___________________________________________ 364. Program Scenario'--Gross External Financing Requirem ents, 2014''20 ________________________ 375. Program Scenario'--Monet ary Acc ounts, 2014''20 _____________________________________________ 386. Financial Soundness Indicators fo r the Banking Sector, 2014''15 ______________________________ 397. Indicators of Fund Cred it, 2014''25 ____________________________________________________________ 408. Proposed Schedule of Purchases Under the Extended Arrang ement __________________________ 41ANNEX Debt Sustainability Analysis ______________________________________________________________________ 42 APPENDIX Letter of Intent ___________________________________________________________________________________ 55 Attachment I. Memorandum of Economic and Financial Policies ________________________________ 57 Attachment II. Technical Memorandum of Understanding ______________________________________ 80

UKRAINE 4 INTERNATIONAL MONETARY FUND INTRODUCTION 1. The economy has yet to turn the corner, but signs of stabilization are appearing. The escalation of the conflict in January and a sharp depreciation of the exchange rate in February took their toll on economic activity. In recent months, the exchange rate volatility has subsided and the latest high-frequency indicators point to a gradual moderation in economic decline. However, the situation remains fragile. Foreign currency deposit outflows have eased but continue, banks' balance sheets are weak, and inflation is high. 2. The ceasefire in the East is broadly holding, despite intermittent flare-ups. The intensity of the conflict has subsided, but isolated attacks continue amid recurring regrouping and consolidation of military forces on both sides. The risks of intensification of the conflict are still high. The full implementation of the Minsk II agreement remains challenging amid uncertainties about local elections, border control, and constitutional reform for further decentralization. On the positive side, parliament approved legislation on decentralization proposed by the government, and the legislation is now under review by the Constitutional Court. 3. The political situation remains challenging. The parliament is divided between reformist and status-quo factions, with the latter heavily influenced by vested interests. In the run up to local elections in the fall, political pressures to undo reforms are mounting. For example, recently several populist bills that threatened to reverse a number of program policies in the fiscal and energy sectors were submitted, but eventually not considered by parliament. The government continues to fight corruption and public misconduct, but these actions are yet to gain sufficient traction to permanently weaken the influence of vested interests on the economy and truly transform the business climate. 4. Despite the headwinds, the authorities remain firmly committed to the program. All performance criteria (PCs) for end-March were met and, based on preliminary data, all end-June PCs are also met. Eight benchmarks were implemented, four of which with a delay, and two were converted into prior actions (MEFP Table 1). Going forward, the success of the program will crucially hinge on (i) the full and timely implementation of envisaged policies; (ii) adequate and timely external financing from the official sector and the private sector via the debt operation; and (iii) the non-intensification of the conflict in the East. RECENT ECONOMIC DEVELOPMENTS 5. The recession deepened in early 2015. Industrial production, construction, and retail trade declined by double digit rates on the back of heightened uncertainty from the escalation of the conflict as well as reduced demand from real incomes compression. In 2015:Q1, GDP declined by 17.2 percent y-o-y, some 1¼ percentage point worse than expected at the outset of the program. High frequency data for Q2 indicate continued decline, albeit at a more moderate pace. The crisis

UKRAINE INTERNATIONAL MONETARY FUND 5 has taken the heaviest toll on the Eastern regions, but has also affected (to a lesser extent) the rest of the country (text chart). 6. Inflation rose sharply in March''April on the back of one-off factors, but has declined since. The rapid pass-through of the large exchange rate depreciation in February and increases in regulated energy prices pushed inflation to 61 percent y-o-y in April (Figure 2 and text chart).1 As the hryvnia recovered and stabilized in April''June, prices of some imported goods declined while increases in prices of non-tradables remained moderate. As a result, inflation in June moderated to 0.4 percent m-o-m, or 57½ percent y-o-y. The high y-o-y number masks the sharp disinflation that has already occurred: the seasonally adjusted annualized inflation in May''June 2015 fell to 13 percent. 7. The balance of payments (BoP) moved broadly in line with the program projections. In January''May 2015, the current account deficit narrowed to US$0.35 billion. While exports underperformed (affected by trade restrictions imposed by Russia and the decline in commodity prices), imports were also compressed due to the weak economy, the hryvnia depreciation, and the import surcharge.2 Private outflows were lower than projected (by about US$0.7 billion), reflecting the ongoing restructuring of debt by private sector companies, and lower than projected FX cash outflows from the banking system. While FDI was somewhat higher than projected, in part due to 1 The authorities have revised the impact of gas tariff increases on inflation from June 2015. The previous methodology overstated the impact in April by about 4 percentage points, reflecting only the higher-tier tariff increase in the two-tier tariff structure. 2 The WTO did not reach consensus to approve Ukraine's import surcharge. The authorities reiterated their commitment to let the surcharge expire at end-2015 as planned. -50 -40-30-20-100 1020Jan-14Feb-14Mar-14Ap r -14May-14J un-14Jul-14Aug -14Sep-14Oct-14Nov-14Dec-14Jan-15Feb-15Mar-15Ap r -15May-15Industrial Production(year-on-year, percent change)EastWestSouthCentralSource: State Statistics Service of Ukraine.-40 -25 -10 5 2035 50-40 -25 -105 2035 502013 2014 2015Agriculture, Construction and Retail Trade(Year -on-y ear, per cent change, 3 m onth m a)Co ns tr uctio n o utputAg r icultur a l o utp utR eta il tr ad e tur no verSource: State Statistics Service of Ukraine. -202468 10121416Jan-14Feb-14Mar-14Ap r -14May-14Jun-14Jul-14Aug -14Sep-14Oct-14Nov-14Dec-14Jan-15Feb-15Mar-15Ap r -15May-15Jun-15Contributions to CPI (MoM change, percent)Others 1/EnergyCoreSourc e: National authorities and IMF staff calculations.1 / Raw food, fuel and administrative pric es other than energy.

UKRAINE 6 INTERNATIONAL MONETARY FUND bank recapitalization flows, portfolio flows remain minimal as investors are cautious amid the yet-to-be-concluded debt operation, the downgrade in Ukraine's sovereign ratings and the unsettled conflict in the East. Official financing, excluding the IMF, amounted to US$1.4 billion, below the projected US$2.5 billion, as the authorities needed more time to meet the prior actions for the World Bank's multi-sector DPL, which also delayed the associated financing from Japan and Norway. In addition, discussions with Switzerland took longer than expected. 8. Hryvnia deposits are rising while the decline in FX deposits is slowing. In 2015:Q2, hryvnia deposits increased by 1.9 percent q-o-q (excluding banks in temporary administration and liquidation), following a 0.8 percent decline in 2015:Q1 (text chart). FX deposits continue to decline, but the pace of outflows slowed to -2.4 percent q-o-q on average in 2015:Q2 from -3.1 percent on average in 2015:Q1. 9. Bank liquidity is gradually easing. New drawing of NBU refinancing has slowed recently. Nevertheless, outstanding NBU loans are still elevated for a number of domestic banks. At end-June, the aggregate liquidity ratio among the 35 largest banks was 15.2 percent, although seven of these domestic privately-owned banks had liquidity ratios below 5 percent. DEBT OPERATION 10. The authorities continue efforts to reach a collaborative agreement with creditors on the restructuring of public debt. They have pursued a two-track approach to restructure the US$22.7 billion of public and State-owned-Enterprise (SoE) debt included in the debt operation. ‚· Discussions for the restructuring of Ukraine's sovereign Eurobonds and sovereign guaranteed external debt (about US$19.3 billion) are taking place through a creditor committee representing four large private bondholders holding US$8.9 billion (nearly 40 percent of the debt subject to the operation). While progress in the discussions was initially slower than expected, the engagement has intensified recently. The creditor committee members have signed confidentiality agreements and have direct discussions over various aspects of the debt operation. While differences still remain, particularly on the degree of nominal haircut that might Source: National authorities.1/ Change since January 16, 2014.-100-80 -60 -40-200 2040Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15Change in Banking System UAH Deposits, 2014''15 1/(UAH billions)Total UAH depositsTotal UAH deposits (excluding banks in TA and liquidation)-18 -16-14-12-10-8-6-4-202Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15Change in Banking System FX Deposits, 2014''15 1/(US$ billions)Total FX depositsTotal FX deposits (excluding banks in TA and liquidation)

UKRAINE INTERNATIONAL MONETARY FUND 7 be needed, following a further round of discussions on July 15, the authorities and the creditors issued a joint statement signaling their objective to reach agreement on the terms of the debt operation as soon as possible. ‚· Discussions on the restructuring of external debt of state-owned entities (UkrEximBank, Oschadbank, and Ukrainian Railways for a total amount of about US$3.4 billion) have taken place through separate processes tailored to the specific circumstances of each entity. This debt has been included in the perimeter of the debt operation solely to achieve the external financing target of US$15.3 billion. As this debt is not part of public debt, the terms of their restructuring do not have an impact on the debt-to-GDP ratio (target 2) and government's gross financing needs (target 3). On July 6, the authorities launched a consent solicitation for a restructuring deal with a creditor group of Oschadbank (on Eurobonds and loans amounting to US$1.3 billion) and on July 7, the authorities announced a restructuring deal on three Eurobonds issued by UkrEximBank (amounting to US$1.5 billion).3 Discussions on the restructuring of the debt of the railway company continue. 11. The authorities expect the discussions with creditors of sovereign Eurobonds to intensify in the coming weeks. During this time, they have remained current on all debt service obligations falling due. At the same time, they have publicly noted that they cannot let this process drag on indefinitely, as they do not have the resources to repay public debt on its original terms. In this regard, on May 19 the Ukrainian parliament authorized the government to declare a moratorium on payments to holders of sovereign and sovereign-guaranteed debt if negotiations do not make adequate progress. MACROECONOMIC FRAMEWORK AND RISKS 12. The program's macroeconomic framework has been revised to take into account recent developments (Table 1). ‚· Growth. The 2015 baseline growth projection has been marked down to -9 percent (relative to -5½ percent at the EFF approval), driven by a delayed pick up in industrial production, construction, and retail trade, and expectations of a weaker agricultural season. Domestic demand will be somewhat more constrained than anticipated earlier by tighter credit conditions and larger-than-expected decline in real incomes amid higher inflation. Growth is expected to start recovering in the second half of the year, supported by growing consumer and investor confidence, gradual rehabilitation of the banking system, and restoration of broken supply chains in metals, mining, and energy production. Later on, manufacturing should also start benefitting from the restored competitiveness of Ukraine's exports. However, the recovery is 3 The deal, supported by the Ad Hoc Committee for UkrEximBank debt, envisages a 7-year maturity extension, gradual bond amortization beginning 3''4 years after the original maturity date, and an average increase in the coupon rate of about 1.3 percentage points.

UKRAINE 8 INTERNATIONAL MONETARY FUND expected to take hold only gradually through 2016. Medium-term growth projections remain unchanged. ‚· Inflation. The 2015 inflation has been revised upwards to 46 percent at end-2015, compared to 27 percent at program approval, driven by the faster-than-expected pass-through effects of the large exchange rate overshooting in March. Inflation is projected to recede quickly in 2016 to around 12 percent as the one-off effects subside and economic stabilization takes hold. Monthly core inflation rates are already well below 1 percent and expected to remain in such territory, as the negative output gap, subdued demand, and the stabilization of the exchange rate will put downward pressure on inflation. ‚· Balance of payments. The overall balance of payments remains broadly unchanged. The current account deficit is expected to widen to 1.7 percent of GDP in 2015, compared to 1.4 percent of GDP at program approval. Both exports and imports are projected to decline considerably this year, driven by (i) falling export prices and larger-than-expected loss of export capacity stemming from the conflict; and (ii) the weaker economy and steeper fall of energy consumption. The small increase in the current account deficit is expected to be offset by a better-than-expected financial account, driven mainly by continued restructuring by private companies of their external claims and higher-than-expected net sales of FX cash by the population. The average exchange rate is projected at UAH 22/US$1 in 2015, taking into account the recent stabilization of the hryvnia and assuming a slow depreciation in 2015:Q3 and Q4, reflecting seasonal factors and the programmed reserve accumulation. 13. Risks to the outlook remain exceptionally high. Risks to economic growth are predominantly on the downside reflecting (i) uncertainty about the duration and depth of the conflict in Eastern Ukraine; (ii) prolongation of the discussions on the debt operation (which could disrupt capital flows); and (iii) slippages in policy implementation. In addition, confidence could fail to revive due to these factors, or due to a more protracted bank resolution process. Higher-than-expected inflation'--due to inflation expectations becoming more entrenched'--could reduce domestic demand further. On the upside, an early resolution of the conflict could boost confidence and growth faster than projected. MONETARY AND EXCHANGE RATE POLICY A. Background 14. The authorities' monetary policy has been in line with the program. The authorities have met the end-March NIR and NDA targets with comfortable margins. In order to anchor inflation expectations, the NBU has kept its discount rate unchanged at 30 percent and its CD rates at 20''27 percent (the effective rates at which it has been absorbing liquidity). It is closely monitoring price developments, paying special attention to the impact of large supply shocks from the exchange rate depreciation and energy price hikes on inflation expectations.

UKRAINE INTERNATIONAL MONETARY FUND 9 15. As the balance of payments improved, the NBU has been accumulating reserves. Since program approval, the interbank FX market has become more balanced and its volatility has declined. The temporary administrative measures tightened at the onset of the program have helped contain BoP pressures and prevented destabilizing exchange rate overshooting. These measures were recently extended for three more months. Despite the administrative measures being in place, the spread between NBU official rate and the black cash market rate has been narrow. The NBU has been accumulating reserves through market purchases (about US$1 billion by end-June) while Naftogaz has also managed to purchase FX in the market covering the bulk of its FX needs. The NBU's purchases kept reserves at US$10.3 billion at end-June (in line with program projections excluding the second IMF disbursement), despite delays in official financing (¶42). 16. Additional financing resources identified since program approval provide a buffer for NBU reserves in case of need. The swap line with the People's Bank of China of RMB 15 billion (about US$2.4 billion) was extended until 2018. B. Policies 17. Monetary policy stance. The authorities and staff agreed that the current policy stance is appropriate given that (i) inflation has started to decelerate and expectations remain contained; (ii) the NBU's effective policy rate remains positive in real terms vis- -vis core inflation on a forward-looking basis at 3''12 month horizons; and (iii) further tightening would have significant negative implications on credit, economic activity, and the fragile banks. If inflation expectations remain well anchored, inflation subsides in line with program projections, and the foreign exchange market stability continues, the monetary policy stance could be eased later in the year to support economic activity. 18. Reserve accumulation. In keeping with program targets, the NBU will continue to accumulate reserves through market purchases. To support the NBU's task, the Ministry of Finance has started to partially roll over the government's domestic FX debt liabilities by offering suitable So ur ce: Na tio na l Ba nk o f Uk r a ine.20 2122 23 24 25 26 27-5 00 50 100 150 200 250 3002-Mar10-Mar17-Mar24-Mar31-Mar7-Apr15-Apr22-Apr29-Apr8-May18-May25-May2-Jun9-Jun16-Jun23-Jun1-Jul8-Jul15-JulUSD volume (US$ million)Interbank market exchange rate (UAH/ US$1, rhs)Interbank Exchange Rate and Volume, 20155 10152025305 1015202530Jan-13Mar-13May-13Jul-13Sep-13No v-13Jan-14Mar-14May-14Jul-14Sep-14No v-14Jan-15Mar-15May-15Jul-15UAH/US$1International Reserves and Exchange RateGross reserves (right scale)E xcha ng e r a t e (e .o .p , l e ft s ca le )

UKRAINE 10 INTERNATIONAL MONETARY FUND interest rate and maturity instruments. In addition, Naftogaz and other SOEs will seek to meet their import FX needs from the FX market or through FX borrowing, including from multilateral and regional development banks. 19. Administrative measures on FX operations and deposit controls. Staff and the authorities agreed that the current framework of capital and administrative restrictions remains appropriate for the time being, in view of the still tenuous financial situation and elevated uncertainty in the period ahead. The authorities are committed to removing the administrative measures, including capital flow measures imposed to help contain BOP pressures once conditions allow. To this end, in cooperation with Fund staff, they have developed a conditions-based plan for the gradual removal of restrictions introduced since the outset of the crisis in early 2014 (MEFP ¶6). The plan specifies conditions for the relaxation of these measures and suggests appropriate sequencing in view of the risks and uncertainties going forward. In the meantime, the NBU will continue to monitor and enforce bank compliance with existing restrictions, and enhance communication on progress being made in cleaning the banking system. 20. The authorities are continuing their efforts to strengthen the NBU's institutional foundation and independence. To this end, as a prior action, parliament passed amendments to the NBU law in accordance with IMF staff advice. The amendments enhance the supervisory mandate of the NBU Council and strengthen the NBU Executive Board's ability to formulate and implement financial and monetary policies. The amendments also uphold the financial autonomy of the NBU by ensuring that profits can be distributed only after the audited annual financial statements are ready and NBU general reserves are replenished. BANKING SECTOR A. Background 21. The recession and sharp exchange rate depreciation increased strains on banks. ‚· The NPL ratio reached 24.1 percent at end-May compared to 20.4 percent in January. Slightly less than half of the increase was due to new impaired loans, while the rest stemmed from the declining credit stock and valuation effects. ‚· The aggregate regulatory capital adequacy ratio (CAR) dropped to 7.7 percent at end-May 2015 compared to 13.8 percent at end-January, reflecting (i) the impact of the exchange rate depreciation on the banks' negative open position in FX; (ii) higher NPLs; and (iii) increased provisioning (from 63.7 percent of nonperforming loans to 68.5 percent). 0 200 400600 800 1,000 1,200 1,400Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15Non-Performing Loans 1/(UAH million)Non-performing loansPe rf o rm i n g l o a n sSource: National Bank of Ukraine.1/ Staff estimates, based on share of FX loans at end-2014.

UKRAINE INTERNATIONAL MONETARY FUND 11 ‚· Since January 2014, 51 insolvent banks, accounting for 21.8 percent of the system's total assets, have been intervened (42 of them liquidated and the remaining placed under temporary administration), including two large banks. 22. Work on addressing related-party lending has advanced. The top 10 banks submitted reports on related party exposure based on the new legal and regulatory framework by mid-June and a review process by independent accounting firms has begun. Once this is completed, the next stage'--unwinding the above-the-limit loans to related parties''''will commence. Additionally, the authorities are also working on the establishment of a specialized unit that will identify and monitor loans to related parties in all banks. B. Policies 23. Related party lending. To further support the review and monitoring process of related parties, the authorities plan to (i) create an internal committee to oversee the related-party review process and advise the NBU Board on the approval of the banks' unwinding plan; and (ii) enhance the NBU's monitoring capacity through greater information sharing with public registers and other financial sector regulators on shareholdings and asset ownership. The legal framework will also be strengthened to ensure that an appeal in court by borrowers'--defined as related parties to a bank'--does not halt the banks' unwinding plans. 24. Bank supervision. The NBU's supervisory capacity is being strengthened through establishment of a credit registry at the NBU and enhanced reporting of banks under special administration. Discretionary supervisory powers to request higher recapitalization of banks as a result of provisioning requirements above IFRS are being reinforced on the basis of international best practices. 25. Bank recapitalization and resolution. The authorities plan to focus their efforts on two fronts: ‚· Full implementation of the recapitalization plans based on the 2014 diagnostic studies was, by and large, achieved by end-June 2015 as planned. Thirteen banks raised their capital by a cumulative UAH 45.6 billion (2.3 percent of GDP), while five did not and were resolved. Total fiscal cost of recapitalization remains at an estimated 9½ percent of GDP, out of which 6.9 percent of GDP remain available for future needs (see below). ‚· A new wave of bank diagnostics, based on data as of March 2015, is underway with the aim to identify capital shortages as a result of losses associated with the recent macroeconomic shocks and the ongoing conflict in the East. To this end, the authorities have agreed to grant banks up to end-2018 to complete full recapitalization (MEFP ¶12).4 To this end, the largest 20 banks are 4 These facilities will be granted upon upfront recognition by banks of forward-looking losses in their loan portfolio (a similar gradual recapitalization approach was used in Indonesia and Korea during the Asian crisis)

UKRAINE 12 INTERNATIONAL MONETARY FUND set to submit credible recapitalization plans between August''October 2015, which should include clear commitments on capital injections going forward. ‚· Contingency planning to minimize fiscal costs associated with downside risks in the potential resolution of systemically important banks (SIBs) is being enhanced (MEFP ¶13). To this end, inter alia the authorities have agreed to: ‚· provision related loans in full and transfer them into a specialized unit inside the bank in case it is needed to ensure medium-term financial viability of any resolved SIB. ‚· inject public funds in the SIBs only after shareholders have been completely diluted and non-deposit unsecured creditors are bailed in (MEFP ¶14). ‚· ensure that the Financial Stability Council will develop a public communication strategy to explain how the authorities' actions protect depositors and help restore financial stability. 26. Strengthening the Deposit Guarantee Fund (DGF). The process of improving asset recovery, depositor payout, and DGF accountability is ongoing. The authorities have extended the timeframe to complete bank liquidation from three to five years with the view to maximize asset recovery. In addition, a process has been launched to conduct due diligence investigations (forensic audits) of failed banks. 27. Addressing NPLs. To address the rising NPLs, the authorities will draw on the recent Fund TA and strengthen the legal framework related to private debt restructuring. Parliament will approve by end-March 2016 (structural benchmark) amendments to the legislation listed in MEFP ¶17, consistent with IMF staff advice, to strengthen the corporate insolvency and credit enforcement regimes and to remove tax impediments. Specifically, these will include (i) the Bankruptcy Law to address key areas of weakness; (ii) the relevant laws to strengthen the legal environment of credit; and (iii) the Tax Code and other regulations to remove disincentives to insolvency and debt-restructuring activities (MEFP ¶17). The authorities are also progressing on designing a coordinated out-of-court restructuring arrangement for corporate debt (MEFP ¶18) and facilitating the restructuring of foreign-currency denominated mortgage loans through a voluntary negotiation process between borrowers and banks (MEFP ¶19). In light of this comprehensive approach, the president has committed to veto the recent legislation on FX loan conversion (which would entail substantial losses for banks, without necessarily resolving underlying problems).5 5 On July 2, parliament adopted a bill that would require banks to convert retail FX loans into hryvnia at the exchange rate when the loan was issued (around 5 UAH/US$1).

UKRAINE INTERNATIONAL MONETARY FUND 13 FISCAL POLICY A. Background 28. The end-March general government deficit target was met with a large margin, owing to revenue overperformance and under-execution of spending. The general government balance was in surplus of UAH 3.1 billion in 2015:Q1.6 Tax revenues have benefitted from higher-than-projected inflation and exchange rate depreciation. General government spending has been temporarily lower than projected, as the authorities have maintained strict discipline amid tight domestic financing conditions. 6 Measured below the line, as per the TMU, the surplus amounted to UAH 14.5 billion owing to valuation effects stemming from the large exchange rate depreciation in 2015:Q1. This has more than offset the increase in arrears in VAT refunds, an indicative target in the program that was missed for both March and June 2015. Timeline for Bank Recapitalization StrategyTT+2T+3T+5T+9T+11T+28T+40To p 1 0NBU completes 2015 Diagnostics (AQR and stress tests)Under capitalized bank s (CAR0%)Ba nk s CAR'‰¥ 5% (Tier 1 capital '‰¥ 4 percent)Banks CAR'‰¥ 7% (Tier 1 capital '‰¥ 6 percent)Banks CAR'‰¥ 10% (Tier 1 capital '‰¥ 7 percent)Next 10NBU completes 2015 Diagnostics (AQR and stress tests)Undercapitalized bank s (CAR0%); Ba nk s CAR'‰¥ 5% (Tier 1 capital '‰¥ 4 percent)Banks CAR'‰¥ 7% (Tier 1 capital '‰¥ 6 percent)Banks CAR'‰¥ 10% (Tier 1 capital '‰¥ 7 percent)Banks CAR'‰¥ 10% (Tier 1 capital '‰¥ 7 percent)Banks CAR'‰¥ 7% (Tier 1 capital '‰¥ 6 percent)

UKRAINE 14 INTERNATIONAL MONETARY FUND 29. The authorities have also made progress with fiscal structural reforms (MEFP ¶24). ‚· Revenue administration. In close cooperation with the Fund staff, the authorities have developed a coherent revenue administration reform strategy and started its implementation. In particular, after analyzing different models the authorities decided in favor of a revenue administration organized along functional streams, each headed by one deputy commissioner. Recognizing the challenges that are most pressing for Ukraine the reform plan includes specific measures to strengthen the fight against corruption and improve transparency. Moreover, the reform plan aims at fully integrating compliance enforcement through: demilitarizing the tax police and merging it with customs' compliance enforcement personnel; introducing a clear accountability framework for the revenue administration leadership; developing a new financial model to ensure that the revenue administration is adequately funded to meet its strategic objectives; and downsizing the revenue administration. ‚· Health and education reform. Parliament has recently approved laws allowing the public procurement of medicines through UN-based organizations, which will reduce costs. Draft laws changing the basis of public financing for healthcare and education legislation, which will allow for the consolidation of the secondary school network, are being finalized. ‚· Public procurement reform. The authorities have started piloting e-procurement in various government ministries and is developing draft legislation that will facilitate the introduction of a new procurement system starting from 2016. B. Policies 30. 2015 budget. The authorities remain committed to meet the programmed budget deficit of 4.2 percent of GDP and the targeted primary surplus of 1.1 percent of GDP. This is necessary to keep public debt sustainable after the debt operation is complete. The small projected revenue overperformance'--after accounting for the higher interest costs stemming from the exchange rate depreciation and the monetary tightening''''will be channeled to finance immediate priority needs and facilitate various structural reforms. These priority needs and reforms cover (i) national security needs; (ii) allocating sufficient funds for pensions and social assistance, including to support the internally displaced persons from the conflict in the East; (iii) clearing VAT refund arrears; and (iv) supporting ongoing judicial and civil service reforms (MEFP ¶23). 31. 2016 fiscal policy. The authorities remain committed to the program's general government deficit target of 3¾ percent of GDP and a primary balance of 1.4 percent of GDP. The target is ambitious, due mainly to a large (about 2¼ percent of GDP) loss of one-time 2015 revenue in 2016 on account of the temporary import surcharge and the smaller NBU profit transfer. To meet the deficit target, the authorities intend to implement both revenue-raising and spending-cut measures of about equal proportions. The precise measures are still evolving, given the early phase of the budget formulation. Planned structural policies'--which could cover the fiscal gap'--include:

UKRAINE INTERNATIONAL MONETARY FUND 15 ‚· Agriculture VAT. The tax code amendments, which the authorities plan to submit to parliament in September, will propose an elimination of the special VAT regime for agriculture effective January 1, 2016. ‚· Social Security Contribution (SSC) reform. Based on the analysis of the impact of recent amendments governing calculations of SSC rates, the authorities will develop'--in close consultations with Fund staff'--specific target features of the reformed SSC. One of the options being considered is to set a minimum income threshold against which SSC has to be paid. ‚· Natural resource taxation. By end-July 2015 the authorities will submit to parliament amendments to the tax code to shift tax burden from royalties to profits. The new taxation regime aims to strike a balance between preserving revenue (relative to GDP), while encouraging investments into the industry. ‚· Revenue administration reform. Specific measures for 2015 include (i) the introduction of the system of special VAT accounts in the whole country (in a pilot phase until June 2015); (ii) moving large taxpayers to a designated large taxpayers' office; and (iii) design of measures to enhance taxation of high-net-worth individuals. ‚· Pension reform. To strengthen the financial viability of the pension system, the authorities will subject the system to a thorough review, with the aim to launch a substantial reform that would reduce the pension bill already in 2016. The authorities will sequence the pension reform first to reform the pay-as-you-go system to reduce its structural deficit and will consider the introduction of the funded pillar by the time when all key preconditions are expected to be in place. Parliamentary adoption of the pension reform is expected by end-December 2015 (MEFP ¶24). ‚· Wage bill. The authorities will continue downsizing the budget sector, with proper compensation and safety-net programs (MEFP ¶24). ‚· A strengthened medium-term budget framework. The authorities remain committed to maintain key macroeconomic indicators, fiscal objectives and targets, and revenue and expenditure policies in line with the program commitments. The expenditure ceilings will be calibrated to deliver the adjustment needed for 2016''18. To this end, total expenditure in 2016 will be contained below 43.4 percent of GDP, of which current expenditure will not exceed 40.8 percent of GDP. The medium-term budget planning process will be strengthened to ensure that targeted ceilings for 2017''18 are achieved.

UKRAINE 16 INTERNATIONAL MONETARY FUND ENERGY POLICY A. Background 32. Progress is being made in tackling Naftogaz's deficit, despite economic headwinds. In 2015:Q1, the deficit reached 0.7 percent of GDP, within the program target. Revenue collections were lower than projected, in part due to the weak economy. However expenditures were contained, in part by lower import volumes. Under the latest projected energy import prices and exchange rate, the 2015 deficit target relative to GDP remains within reach, as does the medium-term objective to eliminate the Naftogaz deficit by 2017.7 B. Policies 33. The authorities have started reforming the loss-making and opaque energy sector. The sector weighs heavily on public finances, the external sector, and the overall economy. Very low prices for residential gas and district heating encourage excessive energy consumption and lead to large losses by Naftogaz, drive gas imports up, discourage investment in domestic production, and breed governance problems. ‚· Gas and heating prices increases. Gas prices for households were increased by 285 percent on average, effective April 1. Heating prices were also increased by 67 percent, effective May 8.8 Despite these increases, gas and heating prices remain among the lowest in the region. The program aims to reach 75 percent of cost recovery gas and heating prices based on international prices by April 2016 and 100 percent by April 2017. 7 An interim agreement through 2015:Q2 was reached in March between Naftogaz and Gazprom at a price of US$248/tcm. However, trilateral negotiations between Ukraine, Gazprom and the European Commission ended without agreement on extending gas supply for 2015:Q3. Talks on supply for Q4 and beyond are expected to resume later in 2015. 8 The impact of the delay on Naftogaz's deficit is estimated to be around 0.04 percent of GDP.

UKRAINE INTERNATIONAL MONETARY FUND 17 Box 1. Impact of Social Assistance on Household Utility Costs The Ukrainian authorities have initiated an ambitious and comprehensive reform agenda for the energy sector. In the context of this agenda, the authorities aim to bring gas and heating prices to cost recovery based on international prices by 2017 as low prices weigh on public finances, push gas imports up, and discourage investment in domestic production. Higher gas and heating prices will be accompanied by additional social assistance to support vulnerable households. Under the program, energy-related benefits will be scaled up significantly from UAH 6 billion in 2014 to around UAH 21 billion this year and UAH 43 billion in 2016 (Table 1). In addition, the current system will be reformed to better target benefits to the most vulnerable households. Existing social assistance programs are being streamlined to improve targeting. Following the recent elimination of the largely-redundant ''energy compensation'' program, there are two remaining energy-related social assistance programs: the category-based privileges program and the formula-based housing utilities subsidy program. The authorities have committed to streamline these two programs and modify the benefits formula by May 2016 to reduce the current near-universal coverage at upper income levels. In the meantime, the privileges program is being means tested to help target benefits to lower income households. There are various modifications to the authorities' current formula which would improve targeting. By way of illustration, the authorities could require larger contributions to the utility bill, in particular from higher-income households. A fiscally sustainable option would increase average household contribution by 2 percent of income and 8 percent of the utility bill on average, and even less for lower income groups. ‚· Social safety net. To help protect vulnerable households, social assistance is being scaled up significantly. Given the gas and heating price increases, energy-related benefits would increase from 0.4 percent of GDP in 2014 to a budgeted 1.2 percent this year, which is expected to be sufficient to cover eligible households. However, reforms will be needed to ensure sustainability of the social assistance system in 2016 and beyond. Staff and the authorities agreed on the need to streamline energy-related social assistance programs by May 2016 in order to improve targeting and manage fiscal costs (Box 1). 1. Existing programs and formula 20.6 55.5 96.52. Merger and modified formula by May 2016 20.6 43.0 61.31. Existing programs and formula 1.0 2.5 3.82. Merger and modified formula by May 2016 1.0 1.9 2.4Table 1. Estimated Costs of Social Assistance2017(UAH billions)(Percent of GDP) 2015 2016Source: National authorities and IMF staff calculations.0.0 2.0 4.06.08.0 10.0 12.012345678910Income DecileAuthorities' current formulaModified formulaFigure 1. 2016 Fiscal Costs by Income Decile(UAH billions)12345678910Avg.1. Under existing formula 0.08 0.090.090.100.110.120.130.140.160.230.122. Under modified formula 0.09 0.100.110.120.120.130.140.160.180.260.14Source: IMF staff calculations.DecileTable 2. 2016 Utility Payments as a Share of Household Income

UKRAINE 18 INTERNATIONAL MONETARY FUND ‚· Gas market law. The law, which was approved by parliament in April and becomes effective on October 1, establishes a new model of the gas market in Ukraine and paves the way for Naftogaz's restructuring, planned to be completed by June 1, 2016. ‚· Naftogaz receivables. An independent audit of Naftogaz receivables (end-June SB) has been completed. ‚· Naftogaz collections. Legislative amendments to improve Naftogaz collections were delayed (end-March SB). On May 14, the 2005 moratorium on enforcement proceedings against energy companies was lifted, effective September 1. The moratorium on enforcement proceedings against companies with at least 25 percent state ownership with debts to Naftogaz and its daughter companies is expected to be lifted as a prior action. STRUCTURAL REFORMS A. Background 34. Since the approval of the program, the authorities have made progress in implementing structural reforms. ‚· Anti-corruption. The National Anti-corruption Bureau (NAB) has been established (end-April SB) and the AML framework is being strengthened to assist prevention and detection of misuse of financial institutions by corrupt officials (end-June SB). A program implementing the anti-corruption strategy until 2017 has recently been adopted by the Cabinet of Ministers. ‚· Business climate. In April, parliament adopted a Law on Investor Protection aimed at (i) safeguarding minority shareholder's rights; (ii) improving transparency in business transactions; and (iii) strengthening independent audits. ‚· Deregulation. In March, the government adopted a deregulation action plan to remove a large number of regulatory and legislative impediments to a growth-conducive business climate. The first monthly report on progress with implementation of the plan has been published on the State Regulatory Service (SRS) website. Moreover, two laws, which substantially reduce the number of licenses and permits, were adopted by parliament in March. ‚· Judiciary. In February, parliament adopted a Law on the Judiciary and the Status of Judges as an initial step to strengthen effectiveness of the judiciary. This law is a step forward, although the Venice Commission of the Council of Europe also identified a number of important shortfalls, necessitating amendment of the constitution. The law on selective increases of court fees to provide financial incentives on whether or not to litigate and complement the budget of the judiciary was approved in May. ‚· SOE reform. (i) The first annual report on Ukraine's top 100 SOEs has been published; (ii) in May, the cabinet approved a list of about 350 state-owned assets that are subject to privatization in 2015 and the State Property Fund has prepared a privatization strategy for 10 SOEs among

UKRAINE INTERNATIONAL MONETARY FUND 19 them; (iii) in May, the first statement of fiscal risks assessment was prepared and the SOEs reform strategy was adopted; and (iv) the authorities have also prepared a draft law on corporate governance and are implementing a new nomination procedure for appointment of CEOs in SOEs through an independent committee. B. Policies 35. Business climate. The authorities remain committed to streamlining business procedures and strengthening transparency and governance to attract investors and spur growth. In the near term, they will (i) ensure full implementation of the deregulation action plan; (ii) prepare a broad-scale revision of regulatory norms to reduce the burden and administrative costs on business; (iii) ensure all new and amended draft legislation includes a quantitative analysis of their regulatory impact starting October 2015; and (iv) take the necessary steps to ensure that the recently adopted law on licensing of business activities is fully operational (MEFP ¶29). 36. Anti-corruption and anti money laundering (AML). Addressing corruption is a difficult endeavor in Ukraine's context. Investigations on the recovery of assets allegedly stolen by the former regime have not led to any significant confiscation yet, the public does not see major progress in reducing or sanctioning corruption, and vested interests continue to threaten recent progress. The authorities' ongoing efforts can support progress towards tangible results, including by making the NAB operational (structural benchmark) and able to access relevant information and supported by a specialized and autonomous anticorruption prosecution function (structural benchmark). The steps taken by the NBU and the financial intelligence unit to implement the AML framework, in close coordination with Fund TA, should assist in preventing and deterring the laundering of the proceeds of corruption. The government's initiative to amend the legal framework for asset disclosure, particularly to ensure that high-level officials disclose assets they beneficially own or control, is critical to facilitate corruption investigations. 37. Judicial reform. To strengthen the management of the judiciary, including on disciplinary oversight, the authorities will ensure that the High Council of Justice will become fully operational including by a prompt allocation of the budget to meet salary requirements. The authorities will also develop measures to speed up debt-claim enforcement, including order of payment procedure, garnishment, and setting up a private enforcement profession. 38. SOE reform. The authorities will continue implementing SOEs reform in line with the recently adopted SOE reform strategy. In the near term, they will focus on enhancing SOEs fiscal-risk assessment through the establishment of an inter-ministerial working group tasked with identifying and monitoring fiscal risks and preparing recommendations for risk-mitigating measures. The authorities are also pressing ahead with an ambitious privatization and restructuring agenda. Following the preparation of a priority-privatization list of 10 SOEs and respective privatization action plans, the authorities will seek adoption, by cabinet resolution, of the action plans for five companies by end-September 2015 (structural benchmark). Finally, the authorities will prepare a list of 10 SOEs posing the biggest fiscal risks that will be restructured and will prepare detailed

UKRAINE 20 INTERNATIONAL MONETARY FUND 0 5 10 15 2025 -30%-20%-10%0%Return on assets (percent, LHS)Total liabilities (percent of GDP, RHS)Ukraine SOEs FinancialsSourc e: Ministry of Ec onomy. Data through September 2 0 14 .1/Includes Naftogaz.restructuring action plans for five of these companies by end-January 2016 (structural benchmark). Necessary legislative steps to support these actions will be pursued, including adoption of a government decree mandating external audits for at least the largest 100 SOEs and a review of needed changes to the SOEs remuneration policy to better align shareholders and management's interests (MEFP ¶30). Box 2. The SOE Sector in Ukraine Ukraine's SOEs still account for a sizeable share of the economy, with assets equivalent to around 50 percent of GDP. The sector remains highly inefficient, characterized by weak governance and legal structures. Moreover, fiscal risks stemming from SOEs are significant. A comprehensive reform agenda is needed to tackle these deep-seated problems. SOEs still play a significant role in Ukraine's economy. Ukraine has 1,833 operating SOEs out of 3,350 registered SOEs, with output amounting to around 10 percent of GDP. A few large companies dominate the sector, with the top 100 SOEs accounting for around 90 percent of total SOE assets. The main industries of operation include energy, infrastructure, and manufacturing. Severe inefficiency problems in the sector are rooted in weak corporate governance systems. Ukraine SOEs generally lack proper corporate governance structures, such as supervisory boards or independent directors, geared at improving efficiency in operations. In this regard, appointment of SOE management lacks transparency and accountability, resulting in ill-prepared ownership. Moreover, financial statements of SOEs are considered to be unreliable as most SOEs are not subject to independent audits. The legal framework for SOEs in Ukraine also presents significant shortcomings, with unwieldy and fragmented legislation contributing to governance gaps. A large number of loss-making enterprises represent a significant fiscal risk for government finances. The operating and financial results of SOEs reflect the acute deficiencies that characterize the system: 740 out of 1,833 operating SOEs were loss-making through 2014:Q3, with losses amounting to around 1 percent of GDP. SOEs have also accumulated substantial liabilities at around 12.3 percent of GDP.1 Unprofitable enterprises represent a significant fiscal risk as these may require ever increasing budget funding (subsidies, grants, and loan guarantees): Direct subsidies to SOEs in 2014 amounted to around 2 percent of GDP while the stock of outstanding loan guarantees is around 3.5 percent of GDP. Moreover, accumulation of arrears by SOEs is another source of risks for the government. A broad-base reform agenda is needed. The authorities have formulated a reform strategy aimed at increasing SOE efficiency. This includes (i) improving budgetary oversight by enhancing the fiscal risk assessment; (ii) implementing a comprehensive ownership policy; (iii) strengthening corporate governance, including by adoption of a new law on corporate governance; (iv) prioritizing enterprises subject to restructuring; and (v) transparent privatization in the medium run. 1 Numbers exclude Naftogaz. Including Naftogaz, the ratio reaches 22.8 percent of GDP.

UKRAINE INTERNATIONAL MONETARY FUND 21 PROGRAM FINANCING AND MODALITIES A. Program Monitoring 39. The attached Letter of Intent (LOI) and Memorandum of Economic and Financial Policies (MEFP) describe the authorities' progress in implementing their economic program and set out their commitments. Modifications to the program's conditionality are proposed as well as PCs for end-September 2015 and end-December 2015, and new structural benchmarks (MEFP Table 1). One structural benchmark relating to the Code on Civil Procedure is proposed to be reset in light of additional time needed for technical preparations. B. Financing Assurances 40. Firm financing assurances are in place for the next 12 months, with good prospects for the rest of the program. Notwithstanding some delays in disbursements, official financing commitments are broadly on track. Since program approval, Turkey has announced fresh financing of US$50 million for budget support and US$10 million worth of humanitarian assistance, and Sweden is in discussions about extending a US$100 million loan in 2016. Disbursements from other multilateral and bilateral donors are also broadly on track. Specifically, Canada's C$200 million and EC's '‚¬250 million have been disbursed, and a US-guaranteed US$1 billion bond has been issued. The authorities have also ratified an agreement with the EC on a third MFA operation for '‚¬1.8 billion, of which '‚¬600 million is expected to be disbursed before end-July. Two DPLs of US$500 million each from the World Bank and an associated loan of US$300 million from Japan are expected to be disbursed shortly once the related prior actions for the DPLs are met. 41. The authorities are committed to continuing constructive efforts to reach agreement with creditors in line with the debt objectives set in the program. Successful completion of the debt operation in the coming months would close the financing gap in 2015''18, and put debt firmly on a sustainable path. If discussions with private creditors reach an impasse and a timely agreement proves infeasible, the authorities have publicly noted their preparedness to impose a temporary moratorium on debt payments while continuing best efforts to reach an appropriate restructuring agreement. The debt operation, as discussed above, together with the financing commitments from multilateral and bilateral donors, should provide sufficient financing to meet financing needs over the next 12 months. C. Capacity to Repay the Fund and Risks to the Program 42. Under the baseline, Ukraine's capacity to repay the Fund remains adequate (Table 7). Repayment to the Fund over the next five years would peak at a manageable 7.6 percent of reserves in 2018. The debt operation would also keep gross financing needs contained during the period when the first large repayments come due to the Fund in 2018 as well as during the post-program period, mitigating risks to the Fund. With the envisaged policies and reforms, the revival of growth,

UKRAINE 22 INTERNATIONAL MONETARY FUND the external and fiscal adjustment, and the buildup of reserves, Ukraine is expected to have an adequate capacity to repay the Fund. By the end of the arrangement in early 2019, outstanding credit to the Fund is expected to peak at about 16.4 percent of GDP, or 54 percent of gross reserves. Debt service to the Fund as a ratio of exports of goods and services would peak at 4 percent in 2018. 43. Notwithstanding these factors, risks remain exceptionally high given the large uncertainties surrounding the baseline scenario. The main risk is related to geopolitical developments. While the program can adapt and withstand moderate domestic and external economic shocks, Ukraine's ability to repay could be adversely affected by a prolonged or intensified conflict that could weigh further on market and investment sentiment. Regarding program implementation, policy reversals, including regarding the flexible exchange rate policy and fiscal/energy price adjustment could lead to continuing balance of payments problems and raise repayment risks. The longer Fund engagement under the EFF will help support Ukraine undertake deeper reforms, but it also commits Fund resources for a longer period. 44. A recent safeguards mission confirmed that the NBU has made progress in strengthening its governance and control environment. The amendments to the NBU legal framework, enacted in June (prior action), will further improve financial autonomy and governance. To address the credit risks stemming from the financial assistance to domestic banks, the assessment recommended that the ongoing reforms of the loan management process be given priority and fully implemented by October 2015 (MEFP ¶31). Box 3. Exceptional Access Criteria Staff is of the view that the program continues to satisfy the substantive criteria for exceptional access. This assessment is premised on the expectation that the authorities' policies under the program are implemented in full and completed in line with the program's objectives. Criterion 1. The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or the capital account resulting in a need for Fund financing that cannot be met within the normal limits. Ukraine is experiencing exceptional balance of payments pressures emanating from both the current and capital accounts. Official reserves remain low at US$10.3 billion at end-June, covering only 23 percent of short-term debt. To stabilize the foreign exchange market, a package of capital control measures has been implemented. In addition, Ukraine faces risks of further economic and trade disruptions from an escalation of geopolitical tensions. Together, these factors generate actual and potential financing needs beyond what can be financed within normal limits, despite expected financial support from the international community.

UKRAINE INTERNATIONAL MONETARY FUND 23 Box 3. Exceptional Access Criteria (concluded) Criterion 2. A rigorous and systemic analysis indicates that there is a high probability that the member's public debt is sustainable in the medium term. However, in instances where there are significant uncertainties that make it difficult to state categorically that there is a high probability that the debt is sustainable over the period, exceptional access would be justified if there is a high risk of international systemic spillovers. The authorities have made progress in discussions with creditors towards the debt operation in line with its stated objective (see ¶10 above). After the debt operation, public debt-to-GDP ratio is projected to decline steadily to around 70.8 percent of GDP by 2020. While debt would remain high relative to high-risk thresholds, this is compensated by gross financing needs staying significantly below DSA higher risk benchmarks. Sensitivity tests show that debt remains on a sustainable path after a number of macroeconomic shocks. A large shock associated with a sharp escalation of the conflict in the east could render debt dynamics unsustainable, but most observers consider this scenario unlikely. In light of the preceding discussion, staff judges that the debt will become sustainable over the medium term with high probability. Criterion 3. The member has prospects of gaining or regaining access to private capital markets within the timeframe when Fund resources are outstanding. The policy and financing mix under the program addresses the long-standing domestic and external imbalances needed to stabilize the economy and revive growth in the medium term. These measures, together with the effects of a completion of the debt operation in line with the authorities' objectives would improve confidence in the economy, helping to bring Ukraine CDS and bond spreads down and ultimately lead to regaining market access. Staff anticipates that with a successful implementation of the program and the debt operation, combined with support from the broader international community, Ukraine has good prospects for regaining access to private capital markets before the end of the program period. That said, in case that an agreement with creditors is not reached within a reasonable period and a moratorium on debt service is imposed, arrears to private creditors will provide temporary program financing. In this event, it will be important that the authorities continue to pursue good-faith efforts to reach a collaborative agreement with creditors in a timely manner in line with the objectives of the program and the Fund's lending into arrears policy, which should allow the authorities to return to markets in due course. Criterion 4. The policy program provides a reasonably strong prospect of success, including not only the member's adjustment plans, but also its institutional and political capacity to deliver that adjustment. The authorities performed reasonably well under the SBA-supported program and the EFF-supported one is on track with all PCs for end-March and end-June met. Key prior actions and structural reforms in areas such as NBU independence, Naftogaz reforms, gas-market law, anti-corruption legislation, SOE reforms, and banking resolution have been implemented, notwithstanding the adverse economic environment. While the conflict in the East and growing populist pressures in parliament present major challenges, the authorities' willingness and capacity to implement the program and prevent policy reversals remain strong, as evidenced by parliament's recent refusal to consider populist bills that aimed to roll back program policies and the president's commitment to veto any such legislation (MEFP ¶23). Given the authorities' implementation of program conditionality and indications of stabilization of Ukraine's conflict situation, staff is of the view that there are reasonably good prospects for program success.

UKRAINE 24 INTERNATIONAL MONETARY FUND STAFF APPRAISAL 45. Tentative signs of stabilization have appeared, but the economy is yet to turn around. Following a challenging period that took a heavy toll on the economy and the Ukrainian population, the conditions are now in place for economic activity to turn the corner. The balance of payments is in line with program projections, the foreign exchange market has stabilized, and the NBU is accumulating reserves. The fiscal position was better than programmed. However, the more prolonged recession and the higher inflation pose new challenges that need to be tackled. 46. To entrench stability and restart growth, the authorities need to persevere with the decisive and timely implementation of policies and reforms under the program. Against significant headwinds, the authorities showed again their determination to stay the course of the program. This same determination is needed in the period ahead, as significant structural and institutional reforms are pending, which are necessary to address economic imbalances that held Ukraine back in the past. However, although domestic support for a new Ukraine is strong, pressures from populist forces and vested interests are growing. Moreover, the local elections in the fall pose a risk that the reform momentum could fade. Against this, the authorities need to garner the necessary support to prevent policy reversals and push ahead reforms that are so needed to achieve robust and sustainable growth. 47. Maintaining an appropriately tight monetary policy and continuing with the targeted buildup of reserves will be critical to entrench stability. The authorities need to keep monetary policy oriented toward supporting disinflation, towards the aim of broader macroeconomic stability and to protect the incomes of the most vulnerable. Consistent with transitioning to a flexible exchange rate regime, and as market conditions permit, the NBU should continue to accumulate reserves through market purchases. For the time being, however, administrative measures will need to continue to play a critical role in guarding against BOP pressures. As external stability becomes more entrenched, and as disinflation gains speed, monetary policy can be carefully eased to support economic activity. In parallel, and in a coordinated manner, the authorities should proceed, in close consultations with the Fund, with removing administrative measures in a gradual and sequenced manner, carefully monitoring the impact of the relaxation. The temporary import surcharge should be allowed to expire at end-2015 as planned. 48. Efforts to restore a sound banking system to support the economic recovery need to advance in a decisive manner. To this end, implementation of the program's strategy to strengthen banks' financial health, through recapitalization, reduction of related-party lending, and resolution of impaired assets will be critical to regain public confidence and support economic recovery. In addition, the authorities need to proceed with the NBU institutional reform to entrench central bank independence and facilitate implementation of inflation targeting in due course. 49. Maintaining fiscal discipline in 2015 and formulating a robust 2016 budget consistent with the program are critical to reduce fiscal vulnerabilities. The reform agenda is challenging but important. Reforms to rationalize expenditure and improve tax administration need to proceed,

UKRAINE INTERNATIONAL MONETARY FUND 25 while the social safety net should be strengthened. Pension, health, and education reforms remain critical for ensuring that the budget remains in line with program understandings in 2016 and beyond. These reforms have been difficult for Ukraine in the past, and success will require careful design as well as building stakeholder coalitions to overcome resistance. Structural measures to enhance collections of receivables and reform Naftogaz need to be implemented expeditiously to limit Naftogaz's fiscal burden in the short run and eliminate Naftogaz deficit by 2017 as targeted. 50. Further substantial progress with structural reforms is essential for enabling strong recovery of investment and private economic activity. Overhauling governance and fighting corruption, improving the business climate, and reforming state-owned enterprises should remain the authorities' priorities. To this end, anti-corruption and judiciary reforms should proceed in a timely manner. A successful reform of the SOEs sector, although not without its challenges, will substantially limit fiscal risks and support development of the private sector of the economy. 51. The authorities' efforts merit adequate financial support from all partners. The authorities need to ensure that all conditions for the disbursement of multilateral and official bilateral loans are implemented on a timely basis. At the same time, the authorities and the creditors need to continue their efforts to reach a collaborative agreement in line with program objectives, to close the financing gaps and restore debt sustainability with high probability. Since Ukraine lacks the resources under the program to fully service its debts on the original terms, which it has recognized in passing legislation enabling a moratorium, and since significant debt service will come due by the end of the third quarter of 2015, timely completion of the debt operation with high participation is important. If the authorities were to decide on imposing a moratorium, it would be important for Ukraine to continue efforts to reach a collaborative agreement with creditors in line with the Fund's policy on lending into arrears, which applies to private creditors. With respect to debt owed to official creditors, staff is of the view that there are a range of options that would be available to deal with these claims, if a need arises. 52. In view of the authorities' performance under the program, their policy commitments for the period ahead, and progress towards the debt operation in line with its stated objectives, staff recommends the completion of the first review.

UKRAINE 26 INTERNATIONAL MONETARY FUND Figure 1. Ukraine: Real Sector Indicators, 2013''15 Sources: State Statistics Committee of Ukraine; Haver; Bloomberg; GFK Ukraine; International Centre for Policy Studies; and IMF s t a ff ca l cul a t i o ns .1 / C o n s u m e r c o n fi d en c e i n d ex i s b a se d o n s u r v e y r e s p o n d e n ts ' a n s w e rs t o q u es ti o n s t h a t r e l a te t o p er s o n al fi n a n c i al sta nd i ng , cha ng es i n p erso nal fi na ncial standi ng, eco no mic co nd itio ns o ver the next yea r, eco nomic co ndi tions o ver the next five years, and propensity to consume. Index values range from 0 to 200. The index equals 200 when all respondents positively assess the economic situation. It totals 100 when the shares of positive and negative assessments are equal. Indices o f l e s s t h a n 1 0 0 i n d i c a t e t h e p r ev a l en c e o f n e g at i v e a s s es sm en t s. 2/ Values above 100 indicate that more respondents expect unemployment to rise than fall over the next one to two m o nths. Va lues can va ry fro m 0 to 200.-35 -20-5 10-3 5 -2 0-5 102013 2014 2015Recession has deepened, driven by loss of capacity caused by co nflict in the East. Real GDP, Exports and Industrial Production(Year-on-year percent change)Re a l GDPE xports of goods a nd s e rvice sIndus tria l production90 1101301501701902107 89 10112013 2014 2015Unemployment is on the rise. ILO unemployment rate (NSA, percent)ILO unemployment rate, SAExpected change in unemployment index (rhs ) 2/ Unemployment -40 -25-105 20 3550-40 -25-105 20 35502013 2014 2015A gricu ltu re, Co n stru ction an d Retail Trade(Year-on-year percent change, 3 month ma)Co nstruction o utputAg ricultural o utputRetail trade turnover ...a nd so have a g ricul ture, co ns tructio n, a nd trad e.-30 -20 -10 0 10-30 -20 -100 102013 2014 2015IPIMiningManufacturingUtilities IPI Main Components(Year on year percent change, 3 month ma)Industrial production has stabilized at a low level...-2 0 -1 5 -1 0-5 0 5 10 15 2035 455565758595 1052013 2014 2015Avera g e m o nthly real wa ges (12 m o nth cha ng e) (rhs)Co nsum er co nfi dence ind ex (l hs ) 1/ Real Wages and Consumer ConfidenceR e a l w a g e s h a v e d e c l in e d s h a r p l y , a l t h ou g h c o n s u me r co nfid ence ha s m o dera tely rebound ed . -50 -40 -30 -20 -10 0 10 20-50 -40 -30 -20 -100 10 202013 2014 2015PriceProduction Steel Production and Prices(Year-on-year percent change, 3 month ma)Production of steel remains subdued, reflecting lower production capacity and drop in demand from Russia.

UKRAINE INTERNATIONAL MONETARY FUND 27 Figure 2. Ukraine: Inflation, Monetary, and Exchange Rate Developments, 2013''15 (Year-on-year percent change, unless otherwise indicated) So urces : Sta te Stati stics Co mmi ttee o f U k rai ne; Interna ti ona l Centre fo r Po l i cy Studi es; Na ti ona l Ba nk o f U k rai ne; Bloomberg; http://fin.biz.ua; and IMF staff calculations. 1/ Broad core excludes unprocessed food, fuel, and administrative services.2/ 12-m o nths a hea d i nfl a ti on exp ectatio ns. Fo r b usi ness es fro m Bus i nes s Outl oo k Survey, co nd ucted b y the NBU . Fo r ho us eho l d s fro m G fK-U k rai ne Co ns umer Co nfi dence Survey.-2 0 2 4 6 8 10 12 14-100 10 20 30 40 50 60 702013 2014 2015After peaking in April, inflation has eased sharply, refl ecti ng wea k d ema nd a nd hryvni a s tabi li zatio n. Headline I nflationMo nth-o n-m o nth cha ng e, SA (rhs)12-month change-5 5 152535 45 5565-55 152535 45 55652013 2014 2015In June, prices of imported goods and non-tradables declined...Contributions to Annual CPI InflationServicesOthe r g o o d sProcessed foodFresh food-2 02468 1012-100 1020304050602013 2014 2015... a s d i d co re i nfl a ti o n, whi ch ha s p l ummeted i n m o nthl y term s.Core Inflation 1/Mo nth-o n-m o nth cha ng e, SA (rhs )12-m o nth cha ng e0 1020300 1020302013 2014No m i na l wa ge g rowth s ta rted to p i ck up , refl ecting higher inflation expectations. Expected CPI, and Wage Inflation 2/Inflation expectations by householdsInflatio n exp ectations b y b usinessesNo m ina l wa ges20157.0 7.58.08.59.07.0 7.58.08.59.0Jan-13 Apr-13 Jul-13 Oct-13 Jan-14NBU official exchange rateMarket ex c hange rateExchange Rate(U k ra i ni a n hryvni a s p er U .S. d o ll ar)In 2013, NBU fixed the official exchange rate and tightly managed the market rate. 5101520 25 30355 101520 25 3035Jan-14 Apr-14 Aug-14 Nov-14 Mar-15 Jul-15NBU o ffi ci a lInterbank marketBl a ck ca s h m a rk et Exchange Rate(U k ra i ni a n hryvni a s p er U .S. d o ll ar)Since the NBU has let the exchange rate float, thehryvni a ha s l o st a b o ut 60 p e rcent o f i ts va l ue, tho ug h i t ha s rem a i ned b roa dl y s tab le i n recent m onths.

UKRAINE 28 INTERNATIONAL MONETARY FUND Figure 3. Ukraine: External Sector Developments, 2013''15 (Billions of U.S. dollars, unless otherwise indicated) Sources: National Bank of Ukraine; State Committee of Statistics; Bloomberg; and IMF staff estimates and calculations.1/ Incl ud es re si d ents ' co nversi on o f hryvni a ca s h to fo reign currency held o uts id e the b a nki ng s ys tem .-9 -6-3 0 3 6-9 -6-30 3 62013 2014 2015The external position improved in 2015:Q1 in line with program projections.Balance of PaymentsOve ra l l b a l a nceCurrent a cco untFina ncia l a cco unt-9 -6-3 0 3-9 -6-30 32013 2014 2015 The current a cco unt d efi ci t co nti nued to na rro w...Cu rren t Accou n t Balan ceCurrent acco untGoodsServicesIncome and transfers-8 -4 048-8 -40482013 2014 2015'...and net capital outflows were limited in co mparison to 2014.Financial AccountFina nci a l a cco untFD IPortfolio investmentOther i nves tm ent 1/-5 05 1015202530-5 -4 -3-2-10 12013 2014 2015Gross reserves have started recovering'...I nternational ReservesDaily FX interventionsGross (right scale)Net (current exchange rates, right scale)0 1,000 2,0003,0004,0005,0000 1,000 2,0003,0004,0005,0002013 2014 2015Sp rea d s co ntinue to refl ect exp ecta ti ons o f d e ep NPV reductions in the ongoing debt restructuring neg o ti a ti ons .External Spreads(Ba s i s p o i nt s )EMBIG: UkraineEMBIG: emerging Europe5-year CDS-5 255585 115 145-5 255585 115 1452013 2014 2015'...a nd li k e i n o the r co untries, the excha ng e ra te ha s stabilized after the large depreciation in February.Exchange Rates(U.S. dollar per national currency, Jan., 2008 = 100)UkraineRussiaHungaryTurkeyPo la nd

UKRAINE INTERNATIONAL MONETARY FUND 29 Figure 4. Ukraine: Debt and Rollover of Debt, 2013''16 1/ S o u r c e s : N a t i o n al B a n k o f U k ra in e ; B l o om b er g ; M i n i s t ry o f F i n a n c e ; a n d I M F s t a f f e s t i m at es .1/ 2015''16 are projections.0 40 80 1201600 40 80 1201602013 2014 2015 2016 External debt is projected to exceed 150 percent of GDP in 2015...External Debt (Percent o f G D P)Short-termMedium and long-term0 50 100 150 200 2500 50 100 150 200 2502013Q1 2014Q1 2015Q1Bank rollover rates for long-term debt have weakened considerably.Bank Rollover Rates(Per cent )Lo ng -termShort-termTotal0 50 100 150 200 2500 50 100 150 200 2502013Q1 2014Q1 2015Q1Corporate rollover rates remain subdued, with lo ng -term financing s everely co nstrained.Co rp o rate Ro llo ver Rates(Pe rcent )Lo ng -t ermShort-termTotal0 2040 60 80 1001200 2040 60 80 1001202013 2014 2015 2016 ...whi l e p ub l i c d e b t wi ll e xce e d 90 p e rcent o f G D P , partly due to exchange rate depreciation and bank recapitalization needs.Public Debt(Percent o f G D P)Domestic currencyFX0 10203040 500 1002003004002013 2014 2015M7 Ho useho ld d ebt co ntinues to d ecline as b a nks tighten credit.Ho u seh o ld L o ans (Billions of Ukrainian hrvynia)Domestic currencyFXT o t a l ( p e r c e n t o f G D P , r h s )0 10 20 30 4050 60 700 200400600800 100012002013 2014 2015M7 Corporate debt is declining, although hryvnia depreciation had significant balance sheet effects.Corporate Loans (Billions of Ukrainian hrvynia)Domestic currencyFXTotal (percent of GDP, rhs)

UKRAINE 30 INTERNATIONAL MONETARY FUND Figure 5. Ukraine: Banking Sector Deposits and Credit, 2014''15 So ur ces : Na tio na l a utho r ities ; a nd IM F s ta ff es tima tes .-80 -60 -40 -200 20 40-80 -60 -40 -200 20 40Luh an s k Do n ets k Uk rai n e av erage (excluding Cri mea an d East) ...wi t h d e cl i ne s s ub t a nti al l y hi g her i n r e g io ns most affected b y the co nflict. Household Deposits in Selected Regions, M ay 2015(Percent change from end-2013)-55 -40 -25 -10520-55 -40 -25 -105 20Jan Apr Jul Oct Jan Apr JulTo tal do mestic currencyHousehold domestic currencyTotal foreign currencyHousehold foreign currency Ch an ge in Ban kin g System Deposits, 2014-15(Percent change, under fixed ER of 7.993 UAH/US$)Decl ines i n ho usehol d d epo si ts ha ve d riven d epos i t trends since the start of the crisis...-25 -15-55 15 25-25 -15-55 15 25Jan Apr Aug Nov Mar Jul...a nd cred it to ho useho ld s has stab ilized a t lo w levels.HouseholdsCorporatesTotal UAH and FX credit Change in Banking System Credit, 2014-15(Percent y-o-y, under fixed ER of 7.993 UAH/US$)0 10 2030400 10 203040Jan Apr Aug Nov Mar JulLend ing rates (NC)Lend ing rates (FX )Deposit rates (NC)Deposit rates (FX) Deposit and Lending Rates, 2014-15(Percent, 5-day moving average)Interest rates on hryvnia loans and deposits have increased sharply...0 10 2030 400 10 2030 40Jan Ap r Aug Dec Mar Jul...following the increase in NBU's policy and refinancing rate.Discount rateO/N collateralized lendingLo ng -t e r m s t ab il iz a ti on l o ansO/N certificates of deposit NBU I n terest Rates, 2014-15-210 -170 -130 -90 -50 -1030-210 -170 -130-90 -50 -1030Jan Apr Aug Nov Mar JulHousehold deposit outflows have moderated...Ch an ge in Ban kin g System Depo sits, 2014-15(UAH millions, under fixed ER of 7.993 UAH/US$)HouseholdsCorporatesTotal UAH and FX deposits

UKRAINE INTERNATIONAL MONETARY FUND 31 Figure 6. Ukraine: Financial Sector Indicators, 2013''15 (Billions of Ukrainian hryvnias, unless otherwise indicated) Sources: National Bank of Ukraine; and IMF staff calculations.1/ From December 2012, NPLs are credit sclassified as doubtful or loss.2/ Includ es also cred its in sub stand ard category.500 700900 1100 1300200 250300 350 4002013 2014 2015Money GrowthBa s e m o ne yBro a d m o ney (rhs) After a s p urt o f i nfl a ti o n, m o ney g rowth ha s sl o wed.-35 -25 -15-5 5 1525-35 -25 -15-55 15252013 2014 2015The economy is experiencing a credit squeeze. Credit GrowthReal credit (y-o-y percent change)Credit at program exchange rate (y-o -y p e rce nt cha ng e )15 20 25 30 35 4045200 250 300 350 400 4505002013 2014 2015While deposit outflows have stalled in local currency, they co nti nue i n fo rei g n currency.Banking System DepositsDomestic currencyFX (billions of U.S. dollars, rhs)0 20 40 60 80 1000 10 20 30 40502013 2014 2015...with asset quality deterioration still ongoing.Asset quality(Pe rce nt o f to t a l )Provision coverage for narrow NPLs (RHS)Provision coverage for broad NPLs (RHS)NPL NBU (na rro w) d efi ni ti o n 1/NPL Broad definition 2/0 2550 75 1001250 2550 75 1001252013 2014 2015Since early 2014, NBU provided massive liquidity support to banks experiencing deposit outflows.NBU Claims on Banks-15 -10-5 050 5 10 15 20252013 2014 2015Capital and profits have decreased due to currency depreciation and the recession...Capital adequacy and profitability(Pe rce nt o f to t a l )CARR e t u r n o n a s s e t s ( R H S)

UKRAINE 32 INTERNATIONAL MONETARY FUND Figure 7. Ukraine: Structural Reforms Sour ces : Wor ld Bank , Doing Business Indicators; Transparency International, Corruption P erceptions Index; Heritage Found ation, Index of Economic Freedom; World Bank, World Governance Indicators, World Economic Forum Global Competitivenes s; and IMF staff calculations and estimates.1/ Index from 1 (the worst) to 7(the best performer). 2/ The "frontier" represents the highest performance observed for each indicator across all economies in Doing Business. Scale from 0 (the lowest performance) to 100 (the frontier).3/ The higher the rank the worse the score. Rank "1" indicates the best performer. 4/ Sco r e ind ica tes the p er ceived level o f p ub lic-s ecto r co r r up tio n. A hig h s co r e co r r es p o nd s to hig h p er cep tio n o f corruption. 5/ CE SE E includes E s to nia , Czech Rep., Po la nd , Tur k ey, Lithuania, La tvia , Slo venia , Hunga r y, Bulga r ia , Rus s ia , Slova k Rep. Montenegro, Ukraine, Romania, Croatia, Bosnia and Herzegovina, Serbia. 6/ Calculated as the normalized average of six indices from the World Bank Governance Database: rule of law, political s tability and abs ence of violence, control of corruption, government effectivenes s, regulatory quality, and voice and accountability. 0 20406080100120 EstoniaLa tvia LithuaniaPo l and Montenegro Slovak Rep. Bulgaria Czech Rep. RomaniaSlovenia HungaryTurkeyRussian Fed.CroatiaSerbia Ukraine Bo s ni a & He rz.Ease of Doing Business 2015 3/0 40 80 120 Estonia Czech Rep. LithuaniaLa t vi a Po l andTurkeyRussian Fed.Bulgaria RomaniaHungaryMontenegro Slovenia Slovak Rep. UkraineCroatia Bo s ni a & He r z.SerbiaGlobal Competitiveness ranks 2014-2015 3/ 0 2 46 8 10UkraineRussiaBo s ni a &H e rz.SerbiaMontenegroBulgariaRomaniaTurkeyCroatiaSlovakiaCzech Rep.Hung a ryLa tvi aLi thua ni aSloveniaPo la ndEstoniaPercep tio n o f Co rru p tio n 2014 4/0.0 1.53.0 4.5 6.0 Institutio nsInfrastructureMacro eco nomic environmentHealth and primary educationHigher education and trainingGoods market e ffi ci e ncyLa b o r m arket e ffi ci e ncy Financial market development Technological readiness Market sizeBusiness sophisticationInnovation Th e Glo b al C o mpetitiven es s I nd ex , 2014-2015 1/ UkraineBest from CESEE 5/0.0 20.0 40.060.080.0 100.0 Starting a businessDealing with Co nstruction Perm itsGetting ElectricityRegistering Pro p ertyGetting CreditPro tecting Investors Pa ying Taxes Trading Across Bo rd ersEnforcing ContractsResolving Insolvency Do in g Bu sin ess Distance to Fro ntier 2015 2/ UkraineBe s t fr o m C E SE E 5/0 0.10.20.3 0.4 0.50.60.7 0.8 0.9Russia Ukraine Turkey CESEE 5/ Hungary Poland E.U.Governance I ndicators, 2013 6/ (Average of six indicators normalized between 0 and 1)

UKRAINE INTERNATIONAL MONETARY FUND 33 Table 1. Ukraine: Program Scenario'--Selected Economic and Social Indicators, 2014''20 PreliminaryEFF requestPr oj.EFF requestPr oj. Pr oj. Pr oj. Pr o j. Pr oj.Real economy (percent change, unless otherwise indicated)N o mina l GDP (billio ns o f Ukr a inia n hr yvnia s ) 1/ 1,5671,8501,9812,0872,262 2,572 2,888 3,183 3,510Real GDP 1/ -6.8-5.5-9.02.02.0 3.5 4.0 4.0 4.0Contributions:Domestic demand -13.5-7.7-13.12.62.9 4.1 4.4 4.8 5.3Private co ns umptio n -7.7-5.2-8.22.02.1 2.5 2.8 3.0 3.1Pub lic co ns ump tio n 0.1-0.2-1.6-0.9-0.3 0.3 0.6 0.4 0.4Inves tme nt -5.9-2.3-3.31.41.1 1.3 1.0 1.4 1.8Net exports 6.62.24.1-0.6-0.9 -0.6 -0.4 -0.8 -1.3GDP deflator 14.827.639.010.612.0 9.9 8.0 6.0 6.0Outp ut g ap (p er cent o f p otentia l GDP) -2.6-4.3-5.4-2.9-3.3 -1.6 -0.6 -0.1 0.0Une mp lo yme nt r a te (ILO d e finitio n; p e r ce nt) 9.311.511.511.011.0 9.4 8.5 8.1 8.0Consumer prices (period average) 12.133.550.010.614.2 9.9 7.0 5.0 5.0Co ns umer pr ices (end o f p er io d) 24.926.745.88.712.0 8.0 5.0 5.0 5.0N o mina l mo nthly wa g es (a ver a g e) 5.914.522.310.616.5 13.5 11.0 9.2 9.2Rea l mo nthly wa ges (a ver a ge) -5.5-14.2-18.50.02.0 3.3 3.7 4.0 4.0Sa ving s (per cent o f GDP) 9.410.08.211.89.1 10.1 10.7 11.2 11.9Private 12.611.710.112.910.4 10.4 10.5 10.6 11.2Public -3.2-1.7-1.9-1.1-1.4 -0.3 0.2 0.5 0.8Inves tment (per cent o f GDP) 14.111.49.913.110.7 11.5 12.1 13.0 14.4Private 12.88.97.510.68.4 8.8 9.3 10.1 11.5Public 1.32.52.42.52.4 2.8 2.8 2.9 3.0Public finance (percent of GDP)Gener a l go ver nment b a la nce 2/ -4.5-4.2-4.2-3.7-3.7 -3.1 -2.6 -2.4 -2.2Over a ll ba la nce (including Na fto g a z o per a tio na l deficit) -10.1-7.4-7.3-3.9-3.9 -3.1 -2.6 -2.4 -2.2Public and Publicly Guaranteed Debt 71.294.194.492.692.1 87.8 82.4 76.9 70.8Public debt excluding guarantees (end of period) 61.474.975.572.171.1 66.1 61.4 57.9 54.3Public Debt Held Outside the Public Sector 49.672.373.174.874.9 74.1 72.2 69.9 65.6Money and credit (end of period, percent change) Ba s e mo ne y 8.527.327.311.317.7 12.4 10.7 9.5 8.3Br o a d mo ne y 5.319.124.515.422.5 17.4 16.1 13.3 10.3At program exchange rate -16.88.511.815.122.9 17.2 16.1 13.3 10.4Cr edit to no ngo ver nment 12.413.015.211.814.0 12.5 8.7 7.7 11.3At program exchange rate -15.6-0.6-2.910.912.6 11.7 7.6 7.0 12.0Velocity 1.61.61.71.61.6 1.5 1.5 1.4 1.4Inter ba nk o ver nig ht r a te (a nnua l a ver a ge, p er cent) 11.5'...'...'...'...'...'...'... '...Balance of payments (percent of GDP)Cur r ent a cco unt b a la nce -4.7-1.4-1.7-1.3-1.6 -1.4 -1.4 -1.9 -2.5Foreign direct investment 0.31.41.61.92.0 2.1 2.0 2.1 2.0Gross reserves (end of period, billions of U.S. dollars) 7.518.318.322.322.3 28.5 35.2 38.4 38.4Months of next year's imports of goods and services 1.63.33.73.74.2 5.1 5.8 5.9 5.4Pe r ce nt o f s ho r t-te r m d e b t (r e ma ining ma tur ity) 17.443.741.157.454.0 65.0 78.5 80.0 74.5Percent of the IMF composite measure (float) 27.165.965.479.578.8 95.1 111.5 115.8 112.7Goods exports (annual volume change in percent) -11.1-4.2-10.85.15.1 6.0 6.5 6.1 6.1Go o d s imp o r ts (a nnua l vo lume cha nge in p er cent) -24.6-11.9-23.15.75.6 6.3 6.6 7.4 7.7Goods terms of trade (percent change) -0.10.4-7.2-0.7-0.2 0.4 0.4 0.6 0.7Exchange rateHryvnia per U.S. dollar (end of period) 15.822.023.522.724.4 24.9 25.1 25.4 25.5Hryvnia per U.S. dollar (period average) 12.021.722.022.524.1 24.7 25.0 25.3 25.5Real effective rate (deflator-based, percent change)-21.0 -10.7 -1.8 3.9 2.7 1.4 1.3 Real effective rate (deflator-based, 2010=100)91.8 82.0 80.6 83.7 86.0 87.2 88.3Memorandum items:Per capita GDP / Population (2014): US$3,051 / 42.8 millionLiteracy / Poverty rate: 100 percent / 2.9 percent1/ Data based on SNA 2008, exclude Crimea and Sevastopol.2017 Sources: Ukrainian authorities ; World Bank, World Development Indicators; and IMF s taff estimates .2/ The g ener a l g o ver nment includ es the centr a l a nd lo ca l go ver nments and the s o cia l fund s . 2019 2018 2020 2014 2015 2016

UKRAINE 34 INTERNATIONAL MONETARY FUND Table 2. Ukraine: Program Scenario'--General Government Finances, 2014''20 1/ (Billions of Ukrainian hryvnia) EFF requestProj.EFF requestProj. Proj. Proj. Proj. Proj.Revenue639.7792.5808.4840.2898.3 1028.8 1155.5 1273.5 1399.7Tax revenue 561.2682.5695.2759.0808.9 927.7 1044.7 1155.0 1273.6Tax on income, profits, and capital gains 115.4134.4139.4150.0162.1 182.2 204.3 227.6 253.5Personal income tax 75.295.595.5106.2112.0 125.2 140.2 153.6 167.9Corporate profit tax 40.238.943.943.950.1 57.0 64.0 74.0 85.7Payroll tax 184.2195.6189.9217.5228.3 263.3 295.0 323.0 353.0Property tax 12.113.514.215.216.2 18.4 20.7 22.8 25.1Tax on goods and services 201.3253.2262.8295.3310.6 350.3 393.3 434.7 482.0VAT 139.0170.9185.6198.7218.1 245.9 277.6 305.7 337.4Excise 45.170.564.980.976.1 86.9 97.2 108.0 119.9Other 17.211.712.215.816.4 17.5 18.6 21.0 24.7Tax on international trade 12.634.936.621.625.0 27.5 30.0 34.6 37.8Other tax 35.651.052.359.466.7 85.9 101.4 112.3 122.2Nontax revenue 78.5110.0113.181.289.4 101.2 110.8 118.5 126.1Expenditure710.5870.7891.1916.4982.7 1107.6 1229.4 1348.9 1476.0Current 693.3802.5829.4862.7922.0 1020.3 1123.3 1224.5 1342.7Compensation of employees 162.5182.2183.0196.1200.7 217.0 243.7 269.8 297.4Goods and services 116.9141.9145.6150.7159.9 179.8 202.1 223.0 245.8Interest 52.599.4104.5106.0116.2 119.9 120.1 126.3 132.5Subsidies to corporations and enterprises 37.123.528.925.628.8 30.9 34.7 38.2 42.1Social benefits 324.2353.9365.8384.1416.2 472.5 522.5 567.0 624.7Social programs (on budget) 58.376.579.884.5105.0 120.3 127.7 133.6 148.2Pensions 243.6251.8260.0271.2284.6 323.0 363.3 400.0 441.0Unemployment, disability, and accident insurance22.325.626.028.326.6 29.2 31.6 33.5 35.5Other current expenditures 0.21.61.60.20.2 0.2 0.2 0.2 0.2Capital 20.146.346.652.353.2 70.8 79.5 92.7 103.9Net lending -2.811.811.10.85.3 6.6 13.9 17.4 15.2Discrepancy / reserve fund 0.010.13.90.62.3 9.9 12.7 14.3 14.3Overall balance-70.8-78.2-82.7-76.2-84.4 -78.8 -73.9 -75.4 -76.3Naftogaz balance -87.3-58.0-61.9-5.4-4.2 0.0 0.0 0.0 0.0General government and Naftogaz balance-158.1-136.2-144.6-81.6-88.6 -78.8 -73.9 -75.4 -76.3General government financing70.878.282.776.284.4 78.8 73.9 75.4 76.3External 37.0167.3172.053.448.5 65.0 54.9 27.9 53.8Disbursements 94.8197.9204.666.262.5 95.2 107.6 101.4 82.9Exceptional Financing92.093.450.754.2 81.4 0.0 0.0 38.2Amortizations -57.9-122.6-126.0-63.6-68.2 -111.6 -52.7 -73.5 -67.3Domestic (net) 33.9-89.1-89.322.835.9 13.8 19.0 47.5 22.5Bond financing 22.5-72.9-12.4-12.7-22.6 1.8 5.0 31.5 2.5Direct bank borrowing 0.10.00.00.00.0 0.0 0.0 0.0 0.0Deposit finance 10.4-25.0-85.825.048.0 0.0 0.0 0.0 0.0Privatization 0.88.88.810.510.5 12.0 14.0 16.0 20.0DiscrepancyOther financing33.6139.0152.00.00.0 0.0 0.0 0.0 0.0Bank recapitalization 26.7139.0152.00.00.0 0.0 0.0 0.0 0.0VAT bonds 6.90.00.00.00.0 0.0 0.0 0.0 0.0Naftogaz financing 87.358.061.95.44.2 0.0 0.0 0.0 0.0Government financing 2/96.950.650.645.449.3 0.0 0.0 0.0 0.0Accumulation of external arrears 1.00.00.0-30.8-33.0 0.0 0.0 0.0 0.0Other 3/-10.67.411.3-9.2-12.1 0.0 0.0 0.0 0.0Total financing191.7275.2296.681.688.6 78.8 73.9 75.4 76.3Memorandum items:Structural general government primary balance 4/2.838.349.254.861.6 57.4 51.4 52.0 56.2Primary balance (general government) -18.421.221.829.831.8 41.1 46.2 50.9 56.2Primary balance (general government and Naftogaz) -105.7-36.8-40.124.427.6 41.1 46.2 50.9 56.2Primary current balance (general government) -1.189.483.483.592.5 128.4 152.3 175.3 189.5Public and Publicly Guaranteed Debt 1,115.71,741.61,869.41,933.12,082.4 2,258.5 2,379.1 2,448.1 2,483.8Of which: In foreign currency 696.91,176.81,230.71,315.01,391.0 1,539.8 1,637.5 1,673.7 1,735.5Domestic 495.2663.9744.1717.7797.7 821.2 837.6 882.8 868.9External 620.51,077.71,125.31,215.31,284.7 1,437.3 1,541.5 1,565.3 1,614.9Public debt excluding guarantees 962.01,385.01,495.51,505.11,608.6 1,701.3 1,772.0 1,842.7 1,905.2Nominal GDP (billions of Ukrainian hryvnia) 1,5671,8501,9812,0872,262 2,571.93 2,888 3,183 3,510 Sources: Ministry of Finance; National Bank of Ukraine; and IMF staff estimates and projections. 2/ Government spending on Naftogaz financing and recapitalization, including through T-bills issuance. In 2014, includes repayment of a US$1.6 billion Eurobond. 1/ National methodology, cash basis. 3/ Includes external and domestic net disbursements, trade credits, and deposit drawdowns. 4/ The balance in 2014 treats part of the military spending and the EU grant as one-off operations. The balance in 2015 treats import duty surcharge, part of military spending and part of the NBU profit transfer as one-off operations.2020 2015 2014 2016 2017 2018 2019

UKRAINE INTERNATIONAL MONETARY FUND 35 Table 2. Ukraine: Program Scenario'--General Government Finances, 2014''20 (Concluded) 1/ (Percent of GDP) EFF requestProj.EFF requestProj. Proj. Proj. Proj. Proj.Revenue40.842.840.840.339.7 40.0 40.0 40.0 39.9Tax revenue 35.836.935.136.435.8 36.1 36.2 36.3 36.3Tax on income, profits, and capital gains 7.47.37.07.27.2 7.1 7.1 7.2 7.2Personal income tax 4.85.24.85.15.0 4.9 4.9 4.8 4.8Corporate profit tax 2.62.12.22.12.2 2.2 2.2 2.3 2.4Payroll tax 11.810.69.610.410.1 10.2 10.2 10.1 10.1Property tax 0.80.70.70.70.7 0.7 0.7 0.7 0.7Tax on goods and services 12.813.713.314.113.7 13.6 13.6 13.7 13.7VAT8.99.29.49.59.6 9.6 9.6 9.6 9.6Excise2.93.83.33.93.4 3.4 3.4 3.4 3.4Other1.10.60.60.80.7 0.7 0.6 0.7 0.7Tax on international trade 0.81.91.81.01.1 1.1 1.0 1.1 1.1Other tax 2.32.82.62.82.9 3.3 3.5 3.5 3.5Nontax revenue 5.05.95.73.94.0 3.9 3.8 3.7 3.6Expenditure45.447.145.043.943.4 43.1 42.6 42.4 42.0Current44.243.441.941.340.8 39.7 38.9 38.5 38.3Compensation of employees 10.49.99.29.48.9 8.4 8.4 8.5 8.5Goods and services 7.57.77.47.27.1 7.0 7.0 7.0 7.0Interest3.35.45.35.15.1 4.7 4.2 4.0 3.8Subsidies to corporations and enterprises 2.41.31.51.21.3 1.2 1.2 1.2 1.2Social benefits 20.719.118.518.418.4 18.4 18.1 17.8 17.8Social programs (on budget) 3.74.14.04.04.6 4.7 4.4 4.2 4.2Pensions 15.613.613.113.012.6 12.6 12.6 12.6 12.6Unemployment, disability, and accident insurance 1.41.41.31.41.2 1.1 1.1 1.1 1.0Other current expenditures 0.00.10.10.00.0 0.0 0.0 0.0 0.0Capital1.32.52.42.52.4 2.8 2.8 2.9 3.0Net lending -0.20.60.60.00.2 0.3 0.5 0.5 0.4Discrepancy / reserve fund 0.00.50.20.00.1 0.4 0.4 0.4 0.4Overall balance-4.5-4.2-4.2-3.7-3.7 -3.1 -2.6 -2.4 -2.2Naftogaz balance -5.6-3.1-3.1-0.3-0.2 0.00.00.00.0General government and Naftogaz balance-10.1-7.4-7.3-3.9-3.9 -3.1 -2.6 -2.4 -2.2General government financing4.54.24.23.73.7 3.1 2.6 2.4 2.2External2.49.08.72.62.1 2.5 1.9 0.9 1.5Disbursements 6.110.710.33.22.8 3.7 3.7 3.2 2.4Exceptional Financing5.04.72.42.4 3.2 0.0 0.0 1.1Amortizations -3.7-6.6-6.4-3.0-3.0 -4.3 -1.8 -2.3 -1.9Domestic (net) 2.2-4.8-4.51.11.6 0.5 0.7 1.5 0.6Bond financing 1.4-3.9-0.6-0.6-1.0 0.10.21.00.1Direct bank borrowing 0.00.00.00.00.0 0.0 0.0 0.0 0.0Deposit finance 0.7-1.4-4.31.22.1 0.0 0.0 0.0 0.0Privatization 0.10.50.40.50.5 0.5 0.5 0.5 0.6DiscrepancyOther financing2.17.57.70.00.0 0.0 0.0 0.0 0.0Bank recapitalization 1.77.57.70.00.0 0.0 0.0 0.0 0.0VAT bonds 0.40.00.00.00.0 0.0 0.0 0.0 0.0Naftogaz financing 5.63.13.10.30.2 0.0 0.0 0.0 0.0Government financing 2/ 6.22.72.62.22.2 0.0 0.0 0.0 0.0Accumulation of external arrears 0.10.00.0-1.5-1.5 0.00.00.00.0Other 3/ -0.70.40.6-0.4-0.5 0.00.00.00.0Total financing12.214.915.03.93.9 3.1 2.6 2.4 2.2Memorandum items:Structural general government primary balance 4/ 0.22.02.32.52.6 2.2 1.8 1.6 1.6Primary balance (general government) -1.21.11.11.41.4 1.6 1.6 1.6 1.6Primary balance (general government and Naftogaz) -6.7-2.0-2.01.21.2 1.6 1.6 1.6 1.6Primary current balance (general government) -0.14.84.24.04.1 5.0 5.3 5.5 5.4Public and Publicly Guaranteed Debt 71.294.194.492.692.1 87.8 82.4 76.9 70.8Of which: In foreign currency 44.563.662.163.061.5 59.9 56.7 52.6 49.4Domestic 31.635.937.634.435.3 31.9 29.0 27.7 24.8External 39.658.356.858.256.8 55.9 53.4 49.2 46.0Public debt excluding guarantees 61.474.975.572.171.1 66.1 61.4 57.9 54.3Nominal GDP (billions of Ukrainian hryvnia) 1,5671,8501,9812,0872,262 2,572 2,888 3,183 3,510 Sources: Ministry of Finance; National Bank of Ukraine; and IMF staff estimates and projections.1/ National methodology, cash basis.3/ Includes external and domestic net disbursements, trade credits, deposit drawdowns, as well as company receivables. 4/ The balance in 2014 treats part of the military spending and the EU grant as one-off operations. The balance in 2015 treats import duty surcharge, part of military spending and part of the NBU profit transfer as one-off operations.20202/ Government spending for Naftogaz financing, including through recapitalization bonds. In 2014, includes repayment of a US$1.6 billion Eurobond. 2015 2014 2016 2018 20192017

UKRAINE 36 INTERNATIONAL MONETARY FUND Table 3. Ukraine: Program Scenario'--Balance of Payments, 2014''20 (Billions of U.S. dollars, unless otherwise indicated) EFF requestProj.EFF requestProj. Proj. Proj. Proj. Proj.Current account balance-6.2-1.2-1.5-1.2-1.5 -1.5 -1.6 -2.4 -3.4Goods and services trade balance-6.2-0.4-1.2-0.5-1.2 -1.1 -0.8 -1.1 -1.8Merchandise trade balance-7.0-0.4-1.4-1.2-1.8 -1.9 -1.9 -2.3 -3.0Exports, f.o.b.55.349.843.653.046.4 50.0 53.9 58.0 62.4Imports, f.o.b. 1/-62.2-50.2-45.0-54.1-48.2 -51.9 -55.8 -60.4 -65.4Of which: gas-6.6-6.0-6.0-4.7-4.2 -5.0 -5.5 -6.1 -6.2Services (net)0.80.10.20.60.6 0.8 1.0 1.2 1.2Receipts13.212.110.113.511.2 11.9 12.5 13.3 14.0Payments-12.4-12.0-9.8-12.9-10.5 -11.0 -11.5 -12.1 -12.8Income (net)-1.5-2.4-2.0-2.5-2.2 -2.6 -3.0 -3.4 -3.9Current transfers (net)1.51.51.71.81.8 2.2 2.2 2.2 2.2Capital and financial account balance-11.8-8.1-7.9-4.3-3.4 -1.2 3.3 5.3 2.5Capital account 0.00.00.20.00.0 0.0 0.0 0.0 0.0Financial account-11.8-8.1-8.2-4.3-3.4 -1.2 3.3 5.3 2.5Direct investment (net)0.41.21.41.71.9 2.1 2.4 2.6 2.8Portfolio investment (net)-2.8-3.4-4.4-3.6-3.5 -3.4 0.4 2.1 -0.7Of which: general government-1.7-2.5-2.7-2.6-2.6 -2.3 2.0 1.0 -1.5Of which: eurobond issuance1.02.02.00.00.0 1.0 2.0 2.0 2.0Other investment (net)-9.4-5.8-5.2-2.4-1.8 0.1 0.5 0.6 0.4Medium and long-term loans-3.6-5.3-5.9-2.5-2.4 -0.3 -0.1 -0.1 -0.3Official-0.4-0.9-0.8-0.8-0.8 -0.7 -1.0 -0.9 -1.1Disbursements 2/'...'...'...'...'...'...'...'...'...Repayments-0.4-0.9-0.8-0.8-0.8 -0.7 -1.0 -0.9 -1.1Banks-1.2-0.6-1.30.10.1 0.1 0.3 0.3 0.3Other sectors-2.0-3.8-3.8-1.7-1.6 0.3 0.6 0.6 0.6Short-term loans-4.20.50.7-0.2-0.2 0.3 0.6 0.5 0.5Banks0.10.0-0.10.10.1 0.1 0.1 0.1 0.1Other sectors 3/-4.20.50.9-0.3-0.3 0.2 0.5 0.4 0.4Currency and deposits-1.6-1.00.00.30.8 0.1 0.1 0.1 0.1Banks1.1-1.9-1.10.20.2 0.1 0.1 0.1 0.1Other sectors 4/-2.70.91.00.10.6 0.0 0.0 0.0 0.0Of which: FX deposit outflows-7.1-1.5-2.20.00.0 0.0 0.0 0.0 0.0Errors and omissions0.10.00.20.00.0 0.0 0.0 0.0 0.0Overall balance-17.9-9.3-9.3-5.5-5.0 -2.7 1.7 2.9 -1.0Official financing 5/4.26.36.33.63.1 2.9 2.3 2.0 1.3World Bank1.51.31.90.50.4 0.5 0.5 0.6 0.3EU2.21.81.80.70.7 0.0 0.0 0.0 0.0EBRD/EIB/Others0.53.22.72.42.0 2.4 1.8 1.4 1.0Exceptional financing0.05.25.23.43.4 4.4 2.3 0.0 1.5Financing13.8-2.2-2.2-1.5-1.5 -4.7 -6.3 -4.9 -1.8Gross official reserves (increase: -)12.9-10.8-10.7-3.9-4.0 -6.3 -6.6 -3.3 0.0Net use of IMF resources 0.98.68.52.52.5 1.6 0.4 -1.7 -1.8Of which: Prospective Fund purchases4.610.09.92.52.5 2.5 2.5 '... '...Memorandum items:Total external debt (percent of GDP) 100.4158.4147.7149.5144.8 135.7 127.8 119.4 109.9Current account balance (percent of GDP) -4.7-1.4-1.7-1.3-1.6 -1.4 -1.4 -1.9 -2.5Goods and services trade balance (percent of GDP) -4.7-0.4-1.3-0.6-1.3 -1.0 -0.7 -0.9 -1.3Gross international reserves7.518.318.322.322.3 28.5 35.2 38.4 38.4Months of next year's imports of goods and services 1.63.33.73.74.2 5.1 5.8 5.9 5.4Percent of short-term debt (remaining maturity) 17.443.741.157.454.0 65.0 78.5 80.0 74.5Percent of the IMF composite measure (float) 27.165.965.479.578.8 95.1 111.5 115.8 112.7Merchandise export value (percent change) -15.0-10.5-21.16.46.4 7.7 7.9 7.6 7.6Merchandise import value (percent change) -26.8-19.7-27.77.87.2 7.6 7.5 8.2 8.4Merchandise export volume (percent change) -11.1-4.2-10.85.15.1 6.0 6.5 6.1 6.1Merchandise import volume (percent change) -24.6-11.9-23.15.75.6 6.3 6.6 7.4 7.7Goods terms of trade (percent change) -0.10.4-7.2-0.7-0.2 0.4 0.4 0.6 0.7Gross domestic product (current prices) 130.785.490.192.693.8 104.3 115.5 126.0 137.94/ Mainly reflects residents' conversion of hryvnia cash to foreign currency held outside the banking system and cash financing of informal trade.5/ Includes project financing to the public and private sector. The planned Eurobond issuance of $2 billion with U.S. guarantees is included above the line in portfolio investment, general government. Sources: National Bank of Ukraine; and IMF staff estimates and projections. 1/ For 2015-20, projected gas prices are: $291, $292, $310, $319, $325, and $330 per tcm, respectively. Naftogaz is currently disputing the arrears to Gazprom. For program financing and risk assessment considerations the potential liability to Gazprom was estimated using US$385.5 per tcm in 2014:Q2. This price is used for accounting purpose only and does not constitute an expression of a view by Fund staff on what the gas price should be.2/ Financing and grants from the World Bank, EU, EIB, EBRD, and official bilateral are recorded below the line.3/ Includes trade credit and arrears, including those related to Naftogaz potential arrears to Gazprom.2020 2014 2015 2016 20192018 2017

UKRAINE INTERNATIONAL MONETARY FUND 37 Table 4. Ukraine: Program Scenario'--Gross External Financing Requirements, 2014''20 (Billions of U.S. dollars) EFF requestProj.EFF requestProj. Proj. Proj. Proj. Proj.Total financing requirements66.948.249.351.652.1 49.4 48.6 48.2 53.8Current account deficit 6.21.21.51.21.5 1.5 1.6 2.4 3.4Portfolio investment 3.55.66.33.63.5 4.5 2.6 1.1 5.0Private 0.71.21.61.00.9 1.2 2.6 0.1 1.5Public 2.74.54.72.62.6 3.3 0.0 1.0 3.5Medium and long-term debt9.012.311.812.212.5 8.5 9.2 9.2 9.4Private 8.611.411.111.411.7 7.8 8.3 8.3 8.3Banks 2.92.52.82.52.8 2.8 2.8 2.8 2.8Corporates 5.79.08.38.98.9 5.0 5.5 5.5 5.5Public 0.40.90.80.80.8 0.7 1.0 0.9 1.1Short-term debt (including deposits) 23.010.09.713.613.3 14.0 14.2 14.2 14.2Other net capital outflows 1/ 0.40.41.2-0.1-0.60.00.00.00.0Trade credit 24.918.618.621.121.8 20.9 20.9 21.3 21.8Total financing sources48.938.939.846.147.2 46.7 50.1 51.1 52.7 Capital transfers 2/ 0.00.00.20.00.0 0.0 0.0 0.0 0.0Direct investment, net 0.41.21.41.71.9 2.1 2.4 2.6 2.8Portfolio investment 0.72.21.90.00.0 1.1 2.9 3.3 4.2Private -0.40.2-0.10.00.0 0.1 0.9 1.3 2.2Public 1.02.02.00.00.0 1.0 2.0 2.0 2.0Of which: eurobond issuance 1.02.02.00.00.0 1.0 2.0 2.0 2.0Medium and long-term debt 4.87.05.99.710.1 8.2 9.1 9.1 9.1Private 4.87.05.99.710.1 8.2 9.1 9.1 9.1Banks 1.71.91.42.52.8 2.9 3.1 3.1 3.1Corporates 3.25.14.57.17.3 5.3 6.1 6.1 6.1Public 2/ '...'...'...'...'...'...'...'...'...Short-term debt (including deposits) 22.18.89.914.614.3 14.4 14.4 14.4 14.4Trade credit 20.919.720.520.120.9 20.9 21.3 21.8 22.2Increase in gross reserves -12.910.810.73.94.0 6.3 6.6 3.3 0.0Errors and omissions 0.10.00.20.00.0 0.0 0.0 0.0 0.0Total financing needs5.120.120.09.49.0 8.9 5.1 0.3 1.0Official financing5.114.914.86.05.6 4.5 2.7 0.3 -0.5IMF 0.98.68.52.52.5 1.6 0.4 -1.7 -1.8Prospective purchases 4.610.09.92.52.5 2.5 2.5 '... '...Repurchases 3.71.41.40.00.0 0.9 2.1 1.7 1.8Official creditors 3/ 4.26.36.33.63.1 2.9 2.3 2.0 1.3World Bank 1.51.31.90.50.4 0.5 0.5 0.6 0.3EU 2.21.81.80.70.7 0.0 0.0 0.0 0.0EBRD/EIB/Others 0.53.22.72.42.0 2.4 1.8 1.4 1.0Exceptional financing0.05.25.23.43.4 4.4 2.3 0.0 1.5Memorandum items:Gross international reserves7.518.318.322.322.3 28.5 35.2 38.4 38.4Percent of short-term debt (remaining maturity) 17.443.741.157.454.0 65.0 78.5 80.0 74.5Months of next year's imports of goods and services 1.63.33.73.74.2 5.1 5.8 5.9 5.4Percent of the IMF composite measure (float) 4/ 27.165.965.479.578.8 95.1 111.5 115.8 112.7Loan rollover rate (percent)Banks 96.694.486.6102.2102.2 103.1 104.9 104.9 104.9Corporates 63.970.064.397.197.1 103.8 104.0 104.0 104.0Total 85.481.077.399.699.5 103.8 104.6 104.6 104.6 Sources: National Bank of Ukraine; and IMF staff estimates and projections.2/ Financing and grants from official sources are recorded below the line. 2014 2015 20163/ Includes project financing to the public and private sector. The planned Eurobond issuance of $2 billion with U.S. guarantees is included above the line in portfolio investment, public. 1/ Mainly reflects residents' conversion of hryvnia cash to foreign currency held outside of the banking system.4/ The IMF composite measure is calculated as a weighted sum of short-term debt, other portfolio liabilities, broad money, and exports in percent of GDP. Official reserves are recommended to be in the range of 100''150 percent of the appropriate measure.2020 2017 2018 2019

UKRAINE 38 INTERNATIONAL MONETARY FUND Table 5. Ukraine: Program Scenario'--Monetary Accounts, 2014''20 Pr oj. Pr oj. Pr o j. Pr oj. Pr o j. Pr o j. Pr o j. Pr o j.Monetary surveyNet foreign assets -76 -145 -116 -92 -6 21 124 268 378 412 (In billions of US dollars) -4.8 -6.2 -5.4 -4.1 -0.3 0.8 5.0 10.7 14.9 16.1 Foreign assets 253 475 ... ... ... ... ... ... ... ... For eign liabilities 329 620 ... ... ... ... ... ... ... ...Net domestic assets 1,033 1,170 1,126 1,186 1,197 1,439 1,589 1,721 1,874 2,072Domestic credit 1,507 1,683 1,625 1,685 1,803 2,053 2,222 2,359 2,518 2,719Net claims on government 445 448 530 507 585 670 671 676 708 710Credit to the economy 1,024 1,195 1,055 1,139 1,179 1,344 1,512 1,643 1,770 1,970Domestic currency 549 534 437 481 615 707 796 841 894 1,032Foreign currency 474 661 618 658 564 637 715 802 876 938 (In billions of US dollar s) 30.1 28.2 28.9 29.1 24.0 26.1 28.7 31.9 34.5 36.7Other items, net -474 -513 -499 -499 -606 -614 -633 -638 -643 -647Broad money 957 1,025 1,010 1,094 1,191 1,459 1,713 1,988 2,252 2,483Currency in circulation 283 285 323 344 355 412 457 498 538 579Total deposits 672 740 686 749 836 1,046 1,255 1,490 1,713 1,903Domestic currency deposits 366 346 351 394 468 639 786 955 1,119 1,261Foreign currency deposits 307 393 336 355 368 407 469 534 594 642 (In billions of US dollars) 19.4 16.8 15.7 15.7 15.7 16.7 18.8 21.3 23.4 25.2Accounts of the NBUNet foreign assets 30 1 -11 38 93 132 246 403 527 574 (In billions of US dollars) 1.9 0.0 -0.5 1.7 4.0 5.4 9.9 16.0 20.8 22.5Net international reserves 29 1 -11 37 93 132 246 403 527 574 (In billions of US dollar s) 1.8 0.0 -0.5 1.7 4.0 5.4 9.9 16.0 20.8 22.5 Reserve assets 119 234 198 327 429 543 710 884 976 981 (In billions of US dollar s) 7.5 10.0 9.2 14.5 18.3 22.3 28.5 35.2 38.4 38.4 Reserve liabilities 90 233 209 290 336 412 464 481 449 407Net domestic assets 303 331 398 376 331 367 315 218 153 163Net domestic credit 413 403 458 426 396 438 402 309 249 261Net claims on government 324 309 320 318 319 334 297 239 167 126Claims on government 1/ 338 383 403 420 422 389 353 294 222 181Liabilities to gover nment 14 74 82 103 103 55 55 55 55 55Net claims on banks 90 93 138 108 78 104 105 70 81 135Other items, net -111 -72 -61 -51 -66 -70 -87 -91 -95 -99Base money 333 332 387 413 424 499 561 621 680 737Currency in circulation 283 285 323 344 355 412 457 498 538 579Banks' reserves 50 47 64 69 69 87 104 124 142 158Cash in vault 22 20222427 3441485662Correspondent accounts 28 27 41 45 42 53 63 75 87 96Deposit money banksNet foreign assets -107 -146 -105 -130 -99 -111 -122 -136 -149 -162 (In billions of US dollars) -6.8 -6.2 -4.9 -5.8 -4.2 -4.6 -4.9 -5.4 -5.9 -6.4 Foreign assets 129 171 176 197 217 221 223 223 222 221 (In billions of US dollar s) 8.2 7.3 8.2 8.7 9.2 9.1 9.0 8.9 8.8 8.6 For eign liabilities 235 317 282 298 316 333 345 358 371 383Net domestic assets 778 884 792 879 936 1,158 1,377 1,625 1,862 2,066Domestic credit 1,142 1,325 1,230 1,328 1,476 1,702 1,924 2,173 2,411 2,616Net claims on government 121 139 210 189 266 336 374 437 541 584Credit to the economy 1,023 1,194 1,055 1,139 1,179 1,344 1,512 1,643 1,770 1,970Other claims on the economy 39 39 39 39 39 39 39 39 39 39Net claims on NBU -41 -48 -74 -39 -8 -17 -1 53 61 23Of which: Refinancing loans 110 109 158 129 98 125 126 91 102 156Other items, net -364 -441 -439 -449 -541 -544 -547 -548 -549 -550Banks' liabilities 671 738 686 749 836 1,046 1,255 1,490 1,713 1,903Demand deposits 239 294 ... ... ... ... ... ... ... ...Time deposits 432 444 ... ... ... ... ... ... ... ...Memorandum items:Base money 8.5 0.9 10.2 17.6 27.3 17.7 12.4 10.7 9.5 8.3Broad money 5.3 8.5 6.4 10.0 24.5 22.5 17.4 16.1 13.3 10.3At program exchange rate -16.8 -16.6 -11.6 -7.2 11.8 22.9 17.2 16.1 13.3 10.4Credit to the economy 12.4 19.3 6.6 13.8 15.2 14.0 12.5 8.7 7.7 11.3At program exchange rate -15.6 -17.4 -21.1 -14.3 -2.9 12.6 11.7 7.6 7.0 12.0 Real credit to the economy 2/ -10.0 -18.2 -32.5 -25.4 -21.0 1.8 4.1 3.5 2.6 6.0 Credit-to-GDP ratio, in percent 65.3 75.5 62.4 61.6 59.5 59.4 58.8 56.9 55.6 56.1Velocity of broad money, ratio 1.64 1.54 1.68 1.69 1.66 1.55 1.50 1.45 1.41 1.41Money multiplier, ratio 2.87 3.09 2.61 2.65 2.81 2.92 3.05 3.20 3.31 3.37Hryvnia per U.S. dollar, market rate 15.8 23.4 21.4 22.6 23.5 24.4 24.9 25.1 25.4 25.5Hryvnia per U.S. dollar, official rate 15.8 23.4 21.4 22.6 23.5 24.4 24.9 25.1 25.4 25.5So ur ces : Na tio na l Ba nk o f Ukr a ine; a nd IM F s ta ff es tima tes a nd p r o jectio ns .1/ Includ es Na fto g a z r ecap ita liza tio n bo nd s a nd DGF fina ncing2/ Deflated by CPI (eop), at c urrent ex c hange rates .2015 2016 2017 2020 20142018 2019(Billions of Ukr ainian hryvnias unless other wis e noted)(Year-on-year percent change, unless otherwise indicated)Ma r . J un. Sep.Dec.

UKRAINE INTERNATIONAL MONETARY FUND 39 Table 6. Ukraine: Financial Soundness Indicators for the Banking Sector, 2014''15 (Percent, unless otherwise indicated) 2015Mar. Jun. Sep. Dec. Mar. Apr. MayOwnership Number of banks, of which 1/ 181 174 168 163 148 145 143Private174167 161 156 141 138 136Domestic 123 116 110 105 95 93 91Foreign 51515151464545Of which: 100% foreign-owned 19191919191919State-owned 3333333State-controlled (incl. bridge banks) 4444444Foreign-owned banks' share in statutory capital 33.6 32.3 32.1 32.5 30.5 28.0 28.0Concentration Share of assets of largest 10 banks 55.5 57.3 58.8 59.7 63.8 63.6 64.7Share of assets of largest 25 banks 77.2 79.5 81.0 82.0 83.8 85.5 86.6Number of bank with assets less than $150 million 95 95 91 103 99 n.a. n.a.Capital Adequacy Regulatory capital to risk-weighted assets 14.8 15.9 16.0 15.6 8.4 7.8 7.7Capital to total assets 12.8 12.6 12.3 12.4 6.5 6.1 6.0Asset Quality Credit growth (year-over-year percent change) 2/ 21.2 18.0 15.7 12.4 19.3 10.5 4.0Credit at program exchange rate growth (year-over-year percent change) 2/ 5.3 -0.6 -5.9 -15.6 -17.4 -17.5 -21.1Credit to GDP ratio 2/ 67.7 65.9 65.2 66.8 74.9 n.a. n.a.NPLs to total loans (NBU definition) 3/ 13.3 14.6 16.7 19.0 24.7 25.5 24.1NPLs to total loans (broader definition) 5/ 26.1 27.7 30.6 32.0 39.7 43.7 44.3NPLs net of provisions to capital (NBU definition) 3/ 37.6 47.0 55.0 61.1 129.5 126.5 n.a.NPLs net of provisions to capital (broader definition) 4/ 100.2 142.5 153.8 163.9 367.2 388.0 n.a.Specific provisions (percent of NPLs, NBU definition) 3/ 79.4 72.3 71.1 76.7 80.1 n.a. n.a.Specific provisions (percent of total loans, NBU definition) 3/ 13.8 13.7 15.6 19.1 26.1 n.a. n.a.Specific provisions (percent of NPLs, broader definition) 4/ '... 34.6 36.1 42.6 48.8 48.8 n.a.Foreign Exchange Rate RiskLoans in foreign currency to total loans 2/ 41.6 42.9 44.2 46.4 55.3 52.4 51.9Deposits in foreign currency to total deposits 43.4 42.2 41.2 45.6 53.2 49.9 49.1Foreign currency loans to foreign currency deposits 2/ 143.3 153.5 162.3 154.8 168.0 169.3 164.5Net open FX position to regulatory capital (NBU definition) 5/ 13.4 14.6 23.7 31.7 113.4 n.a. n.a.Net open FX position to regulatory capital (staff estimate) 5/ -18.3 -20.4 -20.9 -41.2 -97.2 n.a n.aLiquidity Ri s kLiq uid a s s ets to tota l a s s ets 21.6 21.9 24.3 26.4 n.a . n.a . n.a .Customer deposits to total loans to the economy 66.8 66.1 66.1 65.6 61.8 n.a. n.a.Earnings and Profitability Return on assets (after tax; end-of-period) 6/ -0.6 0.2 -1.1 -4.1 -22.3 -17.3 -12.4Return on equity (after tax; end-of-period) 6/ -4.2 1.4 -7.9 -30.5 -285.9 -232.0 -168.1N et inter es t ma r g in to to ta l a s s ets 4.6 4.4 4.3 4.2 3.6 n.a . n.a .Interest rate spreads (percentage points; end-of-period) Between loans and deposits in domestic currency 7.4 4.5 6.2 6.9 10.8 8.4 8.1Between loans and deposits in foreign currency 1.9 2.3 2.6 1.9 0.8 1.5 1.8Between loans in domestic and foreign currency 11.4 8.4 7.5 8.4 16.2 15.0 14.0Between deposits in domestic and foreign currency 5.9 6.2 3.8 3.3 6.1 8.0 7.7Number of banks not complying with banking regulations Not meeting capital adequacy requirements for Tier I capital 7/ 6 5 8 14 29 24 n.a.Not meeting prudential regulations 7/ 28 25 26 34 56 43 n.a.Not meeting reserve requirements 37 27 33 34 29 26 n.a.1/ E xcludes b a nks und er liq uida tio n. Sources: National Bank of Ukraine; and IMF staff estimates (for intra-quarter indicators where data available).6/ Cumulative profits year-to-date, annualized.7/ From 2015 ''2018, given the advers e ex c hange rat e and los s es in c onflic t areas , bank s will be grant ed forbearanc e on meeting prudential requirements relat ed t o c apit al levels . 2/ Monetary statistics data.5/ N BU d efinitio n d id no t ta ke into a cco unt the effects o f N BU R es o lutio n 109, which 20143/ From December 2012, NBU changed loan classification, which resulted in the NPL series break. 4/ Includes NPLs that are classified as substandard, doubtful, and loss. From December 2012, estimated by staff using NPL data publis hed by NBU according to new metho d o logy, which res ulted in series break.

Table 7. Ukraine: Indicators of Fund Credit, 2014''25 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Stock of existing and prospective Fund credit 1/ 2/In millions of SDRs 3,941 10,065 11,817 12,940 13,206 12,053 10,797 9,250 7,411 5,353 3,295 1,533In percent of quota 287 734 861 943 963 878 787 674 540 390 240 112In percent of GDP 4.4 15.8 17.8 17.7 16.4 13.9 11.5 9.2 6.9 4.7 2.7 1.2In percent of exports of goods and services 8.3 26.5 29.0 29.8 28.5 24.5 20.7 16.6 12.4 8.3 4.8 2.1In percent of gross reserves 75.8 77.5 75.1 64.6 53.8 45.5 41.1 34.3 28.7 22.8 15.9 8.6Stock of existing Fund credit 1/ 2/In millions of SDRs 3,941 6,519 6,519 5,890 4,404 3,251 2,660 2,069 1,478 887 296 0In percent of quota 287 475 475 429 321 237 194 151 108 65 22 0In percent of GDP 4.4 10.2 9.8 8.0 5.5 3.7 2.8 2.1 1.4 0.8 0.2 0.0In percent of exports of goods and services 8.3 17.1 16.0 13.6 9.5 6.6 5.1 3.7 2.5 1.4 0.4 0.0In percent of gross reserves 75.8 50.2 41.4 29.4 18.0 12.3 10.1 7.7 5.7 3.8 1.4 0.0Stock of prospective Fund credit 1/ 2/In millions of SDRs 0 3,546 5,298 7,050 8,802 8,802 8,138 7,182 5,934 4,467 3,000 1,533In percent of quota 0 258 386 514 642 642 593 523 433 326 219 112In percent of GDP 0 5.6 8.0 9.6 10.9 10.1 8.7 7.2 5.5 3.9 2.5 1.2In percent of exports of goods and services 0 9.3 13.0 16.2 19.0 17.9 15.6 12.9 9.9 7.0 4.4 2.1In percent of gross reserves 0 27.3 33.7 35.2 35.9 33.2 31.0 26.6 23.0 19.0 14.5 8.6Obligations to the Fund from existing and prospective drawings 2/In millions of SDRs 0 652 246 928 1,863 1,543 1,602 1,840 2,067 2,208 2,127 1,791In percent of quota 0 48 18 68 136 112 117 134 151 161 155 131In percent of GDP 0 1.0 0.4 1.3 2.3 1.8 1.7 1.8 1.9 1.9 1.8 1.4In percent of exports of goods and services 0 1.7 0.6 2.1 4.0 3.1 3.1 3.3 3.5 3.4 3.1 2.4In percent of gross reserves 0 5.0 1.6 4.6 7.6 5.8 6.1 6.8 8.0 9.4 10.3 10.0Obligations to the Fund from existing drawings 2/In millions of SDRs 0 619 118 744 1,575 1,198 623 617 611 605 599 297In percent of quota 0 45 9 54 115 87 45 45 45 44 44 22In percent of GDP 0 1.0 0.2 1.0 2.0 1.4 0.7 0.6 0.6 0.5 0.5 0.2In percent of exports of goods and services 0 1.6 0.3 1.7 3.4 2.4 1.2 1.1 1.0 0.9 0.9 0.4In percent of gross reserves 0 4.8 0.7 3.7 6.4 4.5 2.4 2.3 2.4 2.6 2.9 1.7Obligations to the Fund from prospective drawings 2/In millions of SDRs 0 33 128 184 287 346 979 1,223 1,456 1,604 1,529 1,494In percent of quota 0 2 9 13 21 25 71 89 106 117 111 109In percent of GDP 0 0.1 0.2 0.3 0.4 0.4 1.0 1.2 1.4 1.4 1.3 1.2In percent of exports of goods and services 0 0.1 0.3 0.4 0.6 0.7 1.9 2.2 2.4 2.5 2.2 2.0In percent of gross reserves 0 0.3 0.8 0.9 1.2 1.3 3.7 4.5 5.6 6.8 7.4 8.4 Source: IMF staff estimates. 1/ End of period. 2/ Repayment schedule based on repurchase obligations and charges. ProjectionUKRAINE 40 INTERNATIONAL MONETARY FUND

Table 8. Ukraine: Proposed Schedule of Purchases Under the Extended Arrangement DateMillions of SDRs Millions of US$ 1/ Per cent o f quota ConditionsMar 11, 2015 3,546.000 5,017.30 258.45 Board approval of ex tended arrangementJune 15, 2015 1,182.100 1,665.82 86.16 First review and end-Marc h 2015 performance criteriaSeptember 15, 2015 1,182.100 1,666.87 86.16 Sec ond review and end-June 2015 performanc e c rit eriaDec ember 15, 2015 1,182.100 1,668.60 86.16 Third review and end-Sept ember 2015 performanc e c riteriaMarc h 15, 2016 437.975 618.70 31.92 Fourth review and end-Dec ember 2015 performanc e c riteriaJune 15, 2016 437.975 619.07 31.92 Fifth review and end-Marc h 2016 performanc e c riteriaSeptember 15, 2016 437.975 619.84 31.92 Six th review and end-June 2016 performanc e c riteriaDec ember 15, 2016 437.975 621.03 31.92 Seventh review and end-September 2016 performanc e c riteriaMarc h 15, 2017 437.975 622.19 31.92 Eigth review and end-Dec ember 2016 performanc e c rit eriaJune 15, 2017 437.975 623.18 31.92 Ninth review and end-Marc h 2017 performanc e c riteriaSeptember 15, 2017 437.975 624.22 31.92 Tenth review and end-June 2017 performance criteriaDec ember 15, 2017 437.975 625.30 31.92 Eleventh review and end-September 2017 performance criteriaMarc h 15, 2018 437.975 626.31 31.92 Twelft h review and end-Dec ember 2017 performanc e c riteriaJune 15, 2018 437.975 627.30 31.92 Thirteent h review and end-Marc h 2018 performanc e c riteriaSeptember 15, 2018 437.975 628.44 31.92 Fourteenth review and end-June 2018 performanc e c rit eriaDec ember 15, 2018 437.975 629.73 31.92 Fifteenth review and end-September 2018 performance c riteriaTotal 12,348 17,504 900So ur ce : IM F s ta ff e s tima tes .1/ For 2015 ''18, the average USD/SDR rates used in this table are: 1.411, 1.415, 1.424, and 1.434, respectively. Amount of purchase UKRAINE INTERNATIONAL MONETARY FUND 41

UKRAINE 42 INTERNATIONAL MONETARY FUND Annex. Debt Sustainability Analysis Under the policy and financing package supportin g the extended arrangement under the EFF, including the expected outturn from the debt op eration, Ukraine's public debt is assessed as sustainable with high probability. Such an assessment depends crucially on three main assumptions: (i) the full implementation of policies under the program; (ii) adequate and timely external financing from the official sector and, via a debt operation, the private sector; and (iii) the non-intensification of the conflict in the East. Given the revisions to the ma croeconomic framework, public debt after the debt operation is projected to peak at 94 percent of GDP in 2015, above the 70 percent of GDP high-risk benchmark in the debt sustainability framework. De bt is projected to decline thereafter'--reaching below 71 percent of GDP by 2020'--driven by the su ccessful completion of the envisaged debt operation, sustained fiscal adjustment, the eliminatio n of quasi-fiscal losses in the energy sector, and growth recovery. The projected downward trajectory of Ukraine's public debt remains subject to considerable risks, particularly from growth and real exchange rate shocks, and larger-than-expected contingent liabilities emanating from the banking se ctor. The average gross financing needs during the program and post-program period are forecast to remain below 15 percent of GDP, somewhat mitigating the risks associated with the high-debt level. The shift in the composition of debt towards official debt with longer maturity and lower cost also lessens the risks. The external DSA continues pointing to significant solvency concerns as extern al debt would peak at about 148 percent of GDP in 2015, but the presence of significant corporate assets in foreign currencies provides a buffer for maintaining external debt service, while a sustai ned reduction in current account deficits and the ongoing process of voluntary private debt restructuring would put external debt on a downward path. Though external debt would remain on a downward trend, growth and export shocks would keep it more elevated than under the baseline. 1. This appendix considers the analysis of sustainability of Ukraine's public and externaldebt . Section A provides a brief summary of the revisions to the macroeconomic framework. Section B considers public debt sustainability, ex amining the debt trajectory under the program baseline, and under a variety of stress scenarios. Se ction C considers external debt sustainability. The analysis shows that the EFF-supported program would help place Ukraine's debt on a sustainable trajectory, but there are significant risks that its downward path may be interrupted by shocks. A. Key Assumptions in the DSA 2. The macroeconomic framework has been updat ed to reflect the most recentdevelopments . Such a revision projects a debt ratio be fore the debt operation of 79.2 percent of GDP by 2020. ‚· Growth . The baseline growth projection for 2015 have been revised down to -9 percent(compared to -5½ upon EFF approval), driven by the deterioration in industrial production dueto the flare-up of the conflict in the East during January''February, expectations of a weakeragricultural season, and tighter credit. Grow th projections for 2016''20 are broadly unchangedrelative to the program.

UKRAINE INTERNATIONAL MONETARY FUND 43 ‚· Exchange rate. The average exchange rate is projected at UAH 22/US$1 in 2015, reflecting the recent stabilization in the FX market, and is expected to end the year at UAH 23.5/US$1 compared to UAH 22/US$1 projected at program approval. ‚· Inflation. Inflation (measured by the GDP deflator) is projected to peak at 39 percent in 2015 compared to 28 percent at EFF approval. This is due to the largely one-off pass-through effects of the large exchange rate depreciation in February, and the increase in energy prices during Q2. ‚· Fiscal and Naftogaz deficits. The combined general government and Naftogaz overall deficit remains unchanged relative to GDP. The near-term adjustment path keeps a primary surplus target of 1.1 percent of GDP in 2015 (an improvement of 2¼ percentage points of GDP over 2014), followed by a medium-term sustained fiscal effort to attain a primary surplus of about 1.6 percent (Figure 3). As noted at the time of EFF approval, this path is ambitious in the context of previous fiscal performance in Ukraine (an average primary deficit of 2.4 percent of GDP over 2004''13) and international comparisons (well above the 75th percentile of historical primary balance adjustments in countries with IMF-supported programs, Figure 2), though it is not unprecedented. 3. Banking system support. Fiscal needs to support bank restructuring in 2014''15 remain unchanged at 9.4 percent of GDP, preserving a buffer of nearly 4 percent of GDP in public funds to absorb additional bank recapitalization and resolution needs. 4. Debt operation. The DSA is underpinned by the following program objectives that are currently guiding the negotiations with creditors: (i) generate about US$15 billion in public sector financing during the program period; (ii) bring the public and publicly guaranteed debt/GDP ratio from a projected pre-operation 79.2 percent of GDP to under 71 percent of GDP by 2020; and (iii) keep the budget's gross financing needs at an average of 10 percent of GDP (maximum of 12 percent of GDP annually) in 2019''25. The debt operation is also expected to reduce notably gross financing needs during the program period (2015''18), from an average of 18 percent of GDP to 12 percent (see charts below). The authorities published the list of debt instruments subject to restructuring, including non-guaranteed debt owed by state-owned enterprises (see text table below, which reports debt and debt service of eligible instruments). 5. Official financing. Multilateral and bilateral funding is provided at low borrowing costs (tied to Euribor/Libor and fixed annual rates below 2 percent, respectively), with loans amortizing in the range of 10''20 years (with multilaterals granting about five year grace period). IMF lending is calibrated to be on EFF terms. 6. Market access. Evidence points to an early return to market access in past successful debt operations with time to re-access at about three years. Ukraine's time to re-access markets after its 1998 debt restructuring was also about three years. It is then assumed that by late-2017 Ukraine would be able to re-access international capital markets. Objective 3 of the debt operation, which aims at preserving a strong capacity to repay in the post-program period and avoiding a bunching of maturities, helps ensure the needed continuous market access.

UKRAINE 44 INTERNATIONAL MONETARY FUND a. Public Sector DSA 7. The coverage of public debt in this DSA includes (i) central government direct debt (including domestic debt held by the NBU amounting to 20 percent of GDP at end-2014); (ii) domestic and external government guarantees on loans/bonds extended to state-owned enterprises; (iii) debt of local governments; and (iv) NBU's liabilities to the IMF. 2015 2/ 2016 2017 2018 TotalT otal 6. 2 4. 9 5. 7 3. 2 20. 0 22. 7of wh ich: Prin cip a l 5. 5 3. 6 4. 6 2. 6 16. 2of which: Interest 0.7 1.3 1.1 0.6 3.8Sovereign Eurobonds 3/ 4.9 3.5 4.1 0.5 13.0 16.8Principal 4.4 2.6 3.3 0.0 10.3Interest 0.5 0.9 0.8 0.5 2.8Sovereign-guaranteed Eurobonds 4/ 0.1 0.1 1.3 0.7 2.2Principal 0.0 0.0 1.1 0.7 1.8 1.8Interest 0.1 0.1 0.1 0.0 0.4Sovereign-guaranteed commercial loans 5/ 0.2 0.3 0.1 0.3 0.8Principal 0.2 0.2 0.1 0.3 0.7 0.7Interest 0.0 0.0 0.0 0.0 0.1Non-guaranteed SOEs liabilities 6/ 1.0 1.0 0.2 1.7 3.9Principal 0.9 0.8 0.1 1.6 3.4 3.4Interest 0.1 0.2 0.1 0.1 0.5Sources: Ministry of Finance1/ Eligible instrum ents to be restructured were announced in Cabinet Resolution No 318 on April 4.2/ Exc ludes debt repaym ents before the expec ted opening of the debt operation.3/ Inc ludes Eurobonds issued by the c ity of Kyiv and exc ludes the Eurobond issued in 2014 w ith US guarantees.4/ Includes Eurobonds issued by the SOE ''Financing of Infrastructural Projects'' issued in 2010, 2011, and 2012.5/ Inc ludes external loans of SOEs: Ukravtodor, Y uzhnoye State Design Offic e, and Ukrm edpostatc h.6/ Includes Eurobonds and external loans of SOEs: Ukrexim bank, Oschadbank, and Ukrzaliznytsya.Debt serviceEligible DebtU kraine: Debt and Debt Servi ce of Instruments To Be Restructured 1/(US$ billion)66 68 707274 76 7880Before debt operation After debt operationPublic and Publicly Guaranteed Debt, 2020 (percent of GDP)Source: IMF staff estimation.0 2 4 68 10 1214 16 1820Before debt operationAfter debt operationBefore debt operationAfter debt operationProgram period (2015-2018) Post-program (2019-2025)Gross Financing Needs(percent of GDP)Source: IMF staff estimation.

UKRAINE INTERNATIONAL MONETARY FUND 45 8. Baseline projections indicate that the debt ratio would fall to below 71 percent of GDP in 2020 after the debt operation (Figure 3). Debt reached 71 percent of GDP at end-2014, a jump of 30 percentage points from 2013, driven by the large exchange rate depreciation and notable external and domestic financing needs, mainly for Naftogaz. Similar factors at play in 2015 would lead public debt to peak at about 94 percent of GDP. Once the debt operation is completed, fiscal adjustment entrenched, and growth restored, the debt ratio is expected to gradually converge to below 71 percent of GDP, near the DSA high-risk benchmark. 9. A heat map and fan charts indicate that Ukraine faces significant risks to debt sustainability (Figure 1). Even with a successful program implementation and debt operation, significant uncertainty remains. However, risks stemming from the elevated debt level are mitigated by improved gross financing needs, projected to average 12 and 10 percent during and after the program period, respectively. The fan charts illustrate the possible evolution of the debt-to-GDP ratio over the medium term, based on both a symmetric and asymmetric distribution of risks. In the former, upside and downside risks to the main macro variables are treated as equally likely, while in the latter shocks to the primary balance and REER are restricted to be negative to reflect the ambitious fiscal adjustment plan and the possibility of continued depreciation. The asymmetric fan chart therefore shows that risks to the debt outlook are skewed upward if the envisaged fiscal consolidation and FX market stabilization fall short of expectations. Risks to the debt profile are mixed. High EMBIG spread reflects ongoing debt restructuring negotiations and the expectation of principal haircut. The share of public debt held by nonresidents is high, but the shift from private to official creditors is reducing the implied risks. On the other hand, short-term debt ratios are very UAH USD Percent of Percent(Billion) (Billion) GDP of totalPubl i c and publ i cl y guaranteed debt 1116 70. 8 71. 2 100. 0D omes ti c debt 495 31. 4 31. 6 44. 4Direct debt in UAH 400 25.4 25.5 35.9Direct debt in FX 67 4.3 4.3 6.0Guaranteed debt 28 1.8 1.8 2.5External debt 621 39. 4 39. 6 55. 6External di rect debt 495 31. 4 31. 6 44. 3Multilateral 1/ 171 10.8 10.9 15.3of which: IMF budget support 86 5.4 5.5 7.7Bilateral 2/ 43 2.7 2.7 3.8Sovereign Eurobonds 273 17.3 17.4 24.4Lo cal g o ver nment E ur o bo nds 3/ 9 0.6 0.6 0.8External guaranteed debt 126 8. 0 8. 0 11. 3of which: IMF loans to NBU 34 2.2 2.2 3.1o f which: E ur o b o nd s 29 1.8 1.8 2.6of which: Commercial loans 52 3.3 3.3 4.6So ur ces : M inis tr y o f Fina nce1/ Includ e s IM F, WB, E BR D, E IB.2/ Includes EU.3/ Issued by the city of Kyiv.Ukraine: Public and Publicly Guaranteed Debt, 2014

UKRAINE 46 INTERNATIONAL MONETARY FUND low, and the share of external debt is projected to decline in the coming years, mitigating rollover and exchange rate risks. 10. Stress tests continue pointing to a number of sensitivities, with the balance of risk mostly tilted to the downside. The projected decline in public debt remains fragile, vulnerable to lower growth, continued exchange rate depreciation, and contingent liabilities emanating from the banking system. Under a growth shock, entailing a cumulative growth decline of about 9 percentage points in 2016''17, the debt-to-GDP ratio reaches nearly 116 percent in 2017. A real exchange rate shock, not dissimilar to the one in 2014, would also keep the debt ratio above 100 percent of GDP throughout the projection period. The combined macro-fiscal shock, an aggregation of the shocks to real growth, interest rate, primary balance and exchange rate, produce unsustainable dynamics, sending debt above 200 percent of GDP in 2017. The contingent liabilities shock highlights the risk of a further deterioration of the banking sector and associated higher fiscal costs. Its impact is mitigated by the buffer embedded under the baseline for larger-than-expected bank restructuring costs. By imposing a large associated shock to growth (14 percentage points below the baseline in 2016''17) and given the resulting deterioration in the primary balance together with an increase in interest rates, under the contingent liabilities shock debt peaks at 113 percent of GDP in 2017. 11. The baseline and shocks scenarios highlight the considerable risks related to potentially larger-than-expected financing needs of the banking sector and Naftogaz in the near term. However, under the baseline, gross financing needs breach the high-risk benchmark of 15 percent of GDP only in 2015, as a result of the extensive support to the banking sector and Naftogaz. The average gross financing need for the remainder of the program period lies below 10 percent of GDP. Under stress tests, only the combined shock has a meaningful impact on gross financing needs, raising it to an average of more than 20 percent of GDP during the projection period. a. External Sector DSA 12. Baseline projections suggest that external debt could drop by about 40 percentage points of GDP by 2020, while remaining high. Assuming a successful implementation of policies under the program, adequate and timely external financing from the official and private sectors, and non-intensification of the conflict in the East, the gross external debt-to-GDP ratio would peak at 148 percent of GDP in 2015 from 100 percent in 2014 before declining to 110 percent of GDP by end-2020. The medium-term sustainability of external debt is underpinned by the significant external adjustment, with the trade balance of goods and services moving from a deficit of close to 10 percent of GDP in 2013 to an average of below 2 percent in the medium term. Its downward path is also supported by the impact of the debt operation through the income balance in the current account. Moreover, private corporations maintain significant foreign currency assets''''covering 84 percent of their foreign currency liabilities as of end-2014''''which reduce their net exposure to external shocks and help them maintain external debt service. Finally, a number of large corporations have already engaged in voluntary debt restructuring/rollover operations.

UKRAINE INTERNATIONAL MONETARY FUND 47 13. However, external debt dynamics are subject to downside risks due to macroeconomic shocks or a quick reversal of the recent external adjustment (Figure 6). A slower-than-expected resumption of export growth, due to a protracted impact of the war-induced supply shocks or to delays in finding suitable markets for products previously targeted to CIS trading partners, could undo the adjustment of the current account deficit at the time when imports start to respond to growth recovery. If the current account deteriorates on average by 1 percent of GDP per year compared to the baseline, the external debt ratio would increase by about 8 percent of GDP by 2020. More importantly, the external debt dynamics are significantly affected by a growth shock. A half historical standard deviation shock from the growth path under the baseline, about 2½ percentage points lower growth on average per year, increases the external debt ratio by about 23 percentage points of GDP by 2020. Reduced FDI due to confidence effects from a prolongation or intensification of the conflict in the East would also significantly affect external debt dynamics, with a sizable upward shift in the debt adjustment path.

UKRAINE 48 INTERNATIONAL MONETARY FUND Ukraine Public DSA'--Risk Assessment UkraineSource: IMF staff.1/ The cell is highlighted in gr een if debt bur den benchmar k of 7 0% is not exceeded under the specific shock or baseline, yello w if exceeded under specific shock but not baseline, red if benchmark is exceeded under baseline, white if stress test is not relevant.Real Interest Rate ShockExternal Financing RequirementsReal GDP Growth ShockHeat MapUpper early warningEvolution of Predictive Densities of Gross Nominal Public Debt(in percent of GDP)Debt profile 3/Lower early warning(Indicators vis- -vis risk assessment benchmarks, in 2014) Debt Profile VulnerabilitiesGross financing needs 2/Debt level 1/Real GDP Growth Shock Primary Balance Shock3/ The cell is highlighted in gr een if countr y value is less than the low er r isk-assessment benchmar k, r ed if countr y value ex ceeds the upper risk-assessment benchmark, yellow if country value is betw een the lower and upper r isk-assessment benchmar ks. If data ar e unavailable or indicator is not relevant, cell is white. Lower and upper risk-assessment benchmarks are:Change in the Share of Short-Term Debt Foreign Currency DebtPublic Debt Held by Non- ResidentsPrimary Balance Shock Real Interest Rate Shock Exchange Rate Shock Contingent Liability ShockExchange Rate Shock Contingent Liability shock5/ External financing requirement is defined as the sum of current account deficit, amortization of medium and long-term total exter nal debt, and shor t-term total exter nal debt at the end of pr evious per iod. 4/ EMBIG, an average over the last 3 months, 05-Mar-15 through 03-Jun-15. 2/ The cell is highlighted in gr een if gross financing needs benchmar k of 15 % is not exceeded under the specific shock or basel ine, yellow if exceeded under specific shock but not baseline, red if benchmark is exceeded under baseline, white if stress test is not relevant.200 and 600 basis points for bond spreads; 5 and 15 percent of GDP for external financing requirement; 0.5 and 1 percent for ch ange in the shar e of shor t-ter m debt; 15 and 45 percent for the public debt held by non-residents; and 20 and 60 percent for the share of foreign-currency denominated d ebt.Market Perception20 60 62%12200 600 3356 bp12515 52%120.51-0.5%12EMBIG External Financing Requirement Annual Change in Short-Term Public Debt Public Debt in Foreign Currency(in basis points) 4/(in per cent of GDP) 5/(in per cent of total) (in per cent of total)020 4060 80100 1202013 2014 2015 2016 2017 2018 2019 202010th-25th25th-75th75th-90thPercentiles:BaselineSymmetric Distribution020 4060 80100 1201402013 2014 2015 2016 2017 2018 2019 2020Restricted (Asymmetr ic) Distr ibutionno restriction on the growth rate shockno restriction on the interest rate shock0 is the max positive pb shock (percent GDP)0 is the max real appreciation shock (percent) Restrictions on upside shocks:15 4556%12Public Debt Held by Non-Residents(in per cent of total)

Ukraine Public DSA'--Realism of Baseline Assumptions Source : IMF Staff.1/ Plotted distribution includes program countries, percentile rank refers to all countries.2/ Projections made in the spring WEO vintage of the preceding year.3/ Not applicable for Ukraine, as it meets neither the positive output gap criterion nor the private credit growth criterion. 4/ D ata cover a nnua l oberva ti ons f rom 1990 to 2011 for advanced and emerging economies with debt greater than 60 percent of GDP. Percent of sample on vertical axis.Forecast Track Record, versus program countriesBoom-Bust Analysis 3/Assessing the Realism of Projected Fiscal Adjustment-25 -20 -15 -10-5052006 2007 2008 2009 2010 2011 2012 2013 2014Yea r 2/Real GDP GrowthInterquartile range (25-75)MedianUkra ine foreca st error -2.503%Has a percentile rank of: Ukraine median forecast error, 2006-2014:Distribution of forecast errors: 1/(in percent, actual-projection)-7 -6-5-4-3-2 -10 1232006 2007 2008 2009 2010 2011 2012 2013 2014Yea r 2/Primar y BalanceInterquartile range (25-75)MedianUkra ine forecast error -2.2529%Has a percentile rank of: Ukraine median forecast error, 2006-2014:Distribution of forecast errors: 1/(in percent of GDP, actual-projection)-1 0-50 5101520 252006 2007 2008 2009 2010 2011 2012 2013 2014Yea r 2/Inflation (Deflator)Interquartile range (25-75)MedianUkra ine forecast error 6.0594%Has a percentile rank of: Ukraine median forecast error, 2006-2014:Distribution of forecast errors: 1/(in percent, actual-projection)pessimisticoptimistic-6 -4-2024 6 8t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5Real GDP growthUkra i n e(in percent)Not applicable for Ukraine0 24 6 81012 14Less-4-3-2-1012345678Distribution 4/Ukrain e3-Year Adjustment in Cyclically-Adjusted Primary Balance (CAPB)(Percent of GDP)More3-year CAPB adjustment greater than 3 percent of GDP in approx. top quartilehas a percentile rank of 6%0 24 6 81012Less-4-3-2-1012345678Distribution 4/Ukrain e3-Year Average Level of Cyclically-Adjusted Prim ary Balance (C APB)(Percent of GDP)Mor e3-year average CAPB level greater than 3.5 percent of GDP in approx. top quartilehas a percentile rank of 37%UKRAINE INTERNATIONAL MONETARY FUND 49

UKRAINE 50 INTERNATIONAL MONETARY FUND Ukraine Public DSA'--Baseline Scenario (in percent of GDP unless otherwise indicated) As of June 03, 20152/2013 2014 2015 2016 2017 2018 2019 2020Nominal gross public debt 26.2 40.5 71.2 94.4 92.1 87.8 82.4 76.9 70.8 Sovereign SpreadsOf which: guarantees 6.2 7.1 9.8 18.9 20.9 21.7 21.0 19.0 16.5 EMBIG (bp) 3/ 2823Public gross financing needs 6.1 9.9 12.1 20.1 11.4 8.7 8.8 8.4 8.4 5Y CDS (bp) 3855Real GDP growth (in percent) 2.6 0.0 -6.8 -9.0 2.0 3.5 4.0 4.0 4.0 Ratings Foreign LocalInflation (GDP deflator, in percent) 17.2 4.3 14.8 39.0 12.0 9.9 8.0 6.0 6.0 Moody's Ca CaNominal GDP growth (in percent) 20.4 4.3 6.9 26.4 14.2 13.7 12.3 10.2 10.3 S&Ps CC CCCEffective interest rate (in percent) 4/6.5 8.7 10.7 10.9 7.7 7.4 7.0 6.9 7.0 Fitch CC CCC2013 2014 2015 2016 2017 2018 2019 2020 cumulativeChange in gross public sector debt 1.0 3.0 30.7 23.2 -2.3 -4.3 -5.4 -5.5 -6.0 -0.4Identified debt-creating flows -1.4 4.4 34.8 0.0 -5.1 -7.2 -6.3 -4.6 -4.4 -27.6Primary deficit 2.4 2.3 1.2 -1.1 -1.4 -1.6 -1.6 -1.6 -1.6 -8.9 Primary (noninterest) revenue and grants 41.3 43.3 40.8 40.8 39.7 40.0 40.0 40.0 39.9 240.5Primary (noninterest) expenditure 43.8 45.7 42.0 39.7 38.3 38.4 38.4 38.4 38.3 231.6Automatic debt dynami cs 5/-3.1 1.6 25.9 -8.7 -5.4 -5.1 -4.2 -2.5 -2.3 -28.2Interest rate/growth differential 6/-3.5 1.6 1.4 -8.7 -5.4 -5.1 -4.2 -2.5 -2.3 -28.2Of which: real interest rate -3.0 1.6 -1.1 -13.8 -3.7 -2.3 -1.1 0.5 0.5 -19.9Of which: real GDP growth -0.5 0.0 2.6 5.1 -1.6 -2.8 -3.1 -3.0 -2.8 -8.3Exchange rate depreciation 7/0.4 0.024.4 '...'...'...'...'...'... '...Other identified debt-creating flows -0.7 0.5 7.8 9.8 1.7 -0.5 -0.5 -0.5 -0.6 9.5 Net Privatization Proceeds (negative) -1.3 -0.1 -0.1 -0.4 -0.5 -0.5 -0.5 -0.5 -0.6 -2.9Bank and Naftogaz recapitalization 0.6 0.6 7.9 10.2 2.2 0.0 0.0 0.0 0.0 12.4Other adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Residual, including asset changes 8/2.4 -1.4 -4.1 23.2 2.7 2.9 0.9 -0.9 -1.6 27.2Source: IMF staff.2/ Based on available data.3/ EMBIG.4 / Defined as inter est payments div ided by debt stock (excluding guar antees) at the end of pr evious year .5/ Derived as [(r - Ï(1+g) - g + ae(1+r)]/(1+g+ Ï+g Ï)) times previous period debt ratio, with r = interest rate; Ï = gr ow th r ate of GDP deflator ; g = r eal GDP gr ow th r ate;a = share of foreign-currency denominated debt; and e = nominal exchange rate depreciation (measured by increase in local curre ncy value of U.S. dollar).6 / The r eal inter est rate contr ibution is derived fr om the numer ator in footnote 5 as r - Ï (1+g) and the r eal gr ow th contribution as -g.7 / The exchange rate contr ibution is derived fr om the numer ator in footnote 5 as ae(1+r ). 8/ Includes changes in the stock of guarantees (including IMF financing to NBU), and asset changes. For projections, includes e xchange r ate changes during the pr ojection per iod.9/ Assumes that key variables (real GDP growth, real interest rate, and other identified debt-creating flows) remain at the lev el of the last pr ojection year .1 / Public sector is defined as gener al gov er nment and includes public guar antees, defined as domestic and exter nal guar antees. Projections assume new guarantees issuance of 1.5 percent of GDP in 2015, 0.9 percent in 2016-17, and 0.5 percent in 2018-2020.-2.3balance 9/primaryDebt, Economic and Market Indicators 1/2004-2012Actual ProjectionsContribution to Changes in Public DebtProjections2004-2012Actualdebt-stabilizing-20 -10010 20 3040502004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Debt-Creating Flows Primar y deficitRe a l G D P g r o w t hReal interest rate Exchange rate depreciationOther debt-creating flowsRe s i d u a lChange in gross public sector debt projection(in percent of GDP)-50 -40 -30-20 -1001020 30 40 50cumulative

UKRAINE INTERNA TIO NA L MO NETAR Y F UND 51 Ukraine Public DSA'--Composition of Public Debt and Alternative Scenarios Baseline Scenario201520162017201820192020Historical Scenario201520162017201820192020Real GDP growth-9.02.03.54.04.04.0Real GDP growth-9.00.50.50.50.50.5Inflation39.012.09.98.06.06.0Inflation39.012.09.98.06.06.0Primary Balance1.11.41.61.61.61.6Primary Balance1.1-2.2-2.2-2.2-2.2-2.2Effective interest rate10.97.77.47.06.97.0Effective interest rate10.97.77.06.25.95.7Constant Primary Balance ScenarioReal GDP growth-9.02.03.54.04.04.0Inflation39.012.09.98.06.06.0Primary Balance1.11.11.11.11.11.1Effective interest rate10.97.77.47.06.97.0Source: IMF staff.Underlying Assumptions(in percent)Alternative ScenariosComposition of Public DebtBaselineHistoricalConstant Primary Balance02040608010012020132014201520162017201820192020Gross Nominal Public Debt(in percent of GDP)projection051015202520132014201520162017201820192020Public Gross Financing Needs(in percent of GDP)projection0102030405060708090100200420062008201020122014201620182020By MaturityMedium and long-termShor t-termprojection(in percent of GDP)0102030405060708090100200420062008201020122014201620182020By CurrencyLocal currency-denominatedForeign currency-denominatedprojection(in percent of GDP)

UKRAINE 52 INTERNATIONAL MONETARY FUND Ukraine Public DSA'--Stress Tests Primary Balance Shock2015 2016 2017 2018 2019 2020Real GDP Growth Shoc k2015 2016 2017 2018 2019 2020R eal GDP growth -9.0 2 .0 3.5 4.0 4.0 4.0 R eal GDP gr owth -9.0 -5.0 -3 .5 4.0 4.0 4.0Inflation 39.0 12.0 9.9 8.0 6.0 6.0 Inflation 39.0 10.2 8.1 8.0 6.0 6.0Primary balance 1.1 0 .7 0.9 1.6 1.6 1.6 Primary balance 1.1 -2.1 -5 .7 1.6 1.6 1.6Effective interest rate 10.9 7.7 7.4 7.0 6.9 7.0 Effective interest rate 10.9 7.7 7.5 7.5 7.3 7.3Rea l Interest Ra te Sh ock Rea l E xch a nge Ra te Sh ockR eal GDP growth -9.0 2 .0 3.5 4.0 4.0 4.0 R eal GDP gr owth -9.0 2.0 3.5 4.0 4.0 4.0Inflation 39.0 12.0 9.9 8.0 6.0 6.0 Inflation 39.0 44.4 9.9 8.0 6.0 6.0Primary balance 1.1 1 .4 1.6 1.6 1.6 1.6 Primary balance 1.1 1.4 1.6 1.6 1.6 1.6Effective interest rate 10.9 7.7 8.4 8.8 9.7 10.7 Effective interest rate 10.9 10.3 5.7 5.6 5.7 6.0Combined ShockContingent Liability ShockR eal GDP growth -9.0 -5.0 -3.5 4.0 4.0 4.0 R eal GDP gr owth -9.0 -5.0 -3 .5 4.0 4.0 4.0Inflation 39.0 10.2 8.1 8.0 6.0 6.0 Inflation 39.0 10.2 8.1 8.0 6.0 6.0Primary balance 1.1 -2.1 -5.7 1.6 1.6 1.6 Primary balance 1.1 -5.9 1.6 1.6 1.6 1.6Effective interest rate 10.9 10.3 5.8 6.7 7.5 8.6 Effective interest rate 10.9 8.2 7.5 7.0 6.9 7.0Source: IMF staff.Macro-Fiscal Stress TestsBaseline Primary Balance ShockReal GDP Growth ShockReal Inter est Rate Shock(in percent) Real Exchange Rate ShockCombined Macro-Fiscal ShockAdditional Stress TestsBaselineUnderlying AssumptionsContingent Liability Shock0 20 4060 80 100120 1402015 2016 2017 2018 2019 2020Gross Nominal Public Debt(in percent of GDP)0 50 100 150 200250 300 350 4002015 2016 2017 2018 2019 2020Gross Nominal Public Debt(in percent of Revenue)0 5 10 1520252015 2016 2017 2018 2019 2020Public Gross Financing Needs(in percent of GDP)0 50 100 150 2002502013 2015 2016 2017 2018 2019 2020Gross Nominal Public Debt(in percent of GDP)0 100200300400 500 600Gross Nominal Public Debt(in percent of Revenue)0 5 1015 20 2530Public Gross Financing Needs(in percent of GDP)

UKRAINE INTERNATIONAL MONETARY FUND 53 Ukraine External Debt Sustainability: Bound Tests 1/ (External debt in percent of GDP) Source: IMF staff estimates.1/ Shaded areas represent actual data. Individual shocks are permanent one-half standard deviation shocks. Figures in the boxes represent average projections for the respective variables in the baseline and scenario being presented. Ten-year historical average for the variable is also shown. 2/ Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current account balance.3/ In line with standard IMF stress tests, the shock simulates the impact of a one-time real depreciation of 30 percent in 2015 .Historical68Baseline110020 4060 80100 120 140 1600204060 80100 120 140 1602010 2012 2014 2016 2018 2020 Baseline and Historical ScenariosGross financing ne eds unde r ba se line(right scale)i-rate shock 114Baseline11060 80100120140 16060 80100120140 1602010 2012 2014 2016 2018 2020 I nterest Rate Sh ock (Pe rce nt)Growth shock 132Ba sel i ne 11060 8010012014016060801001201401602010 2012 2014 2016 2018 2020 Growth Shock(Pe rce nt p e r ye a r)CA shock 118Ba s e l i ne 110608010012014016060801001201401602010 2012 2014 2016 2018 2020 Noninterest Current Account Shock (Pe rce nt o f G D P)Combined shock 131Baseline11060 80100 120 140 16060 80100 120 140 1602010 2012 2014 2016 2018 2020 Combined Shock 2/167Baseline 11040 6080100120 140 160180 200 220 24040 6080100120 140 160180 200 220 2402010 2012 2014 2016 2018 2020 Real Depreciation Shock 3/30% depreciationBaseline:Scenario:Historical:5.34.10.5Baseline:Scenario:Historical:1.4-1.90.5Baseline:Scenario:Historical:5.56.17.2

Ukraine: Program External Debt Sustainability Framework, 2012 ''20 (Percent of GDP, unlesss otherwise indicated) 2012 2013 2014 2015 2016 2017 2018 2019 2020Baseline: external debt 76.6 78.3 100.4 147.7 144.8 135.7 127.8 119.4 109.9Change in external debt -0.8 1.722.1 47.4-2.9-9.1-7.9-8.4-9.5Identified external debt-creating flows (4+8+9) -4.4 0.935.1 12.4-2.9-6.2-7.9-6.6-4.5 Current account deficit, excluding interest payments 2.4 3.2 -1.3 -5.7 -5.9 -5.9 -5.6 -4.7 -3.8Deficit in balance of goods and services 8.2 8.7 4.0 1.3 1.3 1.0 0.7 0.9 1.3 Exports 51.2 47.6 52.4 59.5 61.4 59.3 57.6 56.6 55.4Imports59.4 56.3 56.5 60.8 62.6 60.3 58.3 57.5 56.7Net non-debt creating capital inflows (negative) 1/ -7.0-6.7 1.9 -3.2-1.7-3.1-4.4-3.7-2.6Automatic debt dynamics 2/ 0.24.434.6 21.34.82.82.11.91.9Contribution from nominal interest rate 5.7 6.0 5.4 7.7 7.6 7.4 7.0 6.6 6.3Contribution from real GDP growth -0.2 0.0 7.3 13.6 -2.8 -4.6 -4.9 -4.7 -4.4Contribution from price and exchange rate changes 3/ -5.4 -1.7 21.9 ... ... ... ... ... ...Residual, including change in gross foreign assets (2-3) 4/ 3.7 0.8 8.8 35.0 -0.1 -2.9 0.0 -1.8 -5.0External debt-to-exports ratio (percent) 149.5 164.5 191.5 248.1 236.0 228.8 222.1 211.0 198.3Gross external financing need (billions of U.S. dollars) 5/ 85.4 73.7 66.0 44.0 48.7 45.0 46.3 48.2 52.2Percent of GDP 48.6 41.0 50.5 50.4 53.5 44.5 41.4 39.5 39.1Scenario with key variables at their historical averages 6/ 100.4 91.5 85.7 82.3 79.7 74.8 67.8Key macr oeconomic assumptions underlying baselineReal GDP growth (percent) 0.2 0.0 -6.8 -9.0 2.0 3.5 4.0 4.0 4.0GDP deflator in U.S. dollars (change in percent) 7.4 2.2 -21.9 -26.7 2.4 7.4 6.3 5.0 5.2Nominal external interest rate (percent) 8.0 8.0 5.0 5.1 5.3 5.6 5.7 5.6 5.8Growth of exports of goods and services (U.S. dollar terms, percent) 1.3 -5.1 -19.9 -21.6 7.3 7.4 7.4 7.3 7.2Growth of imports of goods and services (U.S. dollar terms, percent) 5.4 -3.1 -27.0 -25.7 7.1 7.1 7.0 7.6 8.0Current account balance, excluding interest payments -2.4 -3.2 1.3 5.7 5.9 5.9 5.6 4.7 3.8Net non-debt creating capital inflows 7.0 6.7 -1.9 3.2 1.7 3.1 4.4 3.7 2.6 1/ Includes debt securities due to data limitations on the composition of FDI and portfolio flows. 4/ For projection, line includes the impact of price and exchange rate changes. 3/ The contribution from price and exchange rate changes is defined as [-r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock. r increases with an appr eciating domestic cur rency (e > 0) and rising inflation (based on GDP deflator). 7/ Long-r un, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in per cent of GDP) r emain at their levels of the last projection year . 2/ Derived as [r - g - r(1+g) + ea(1+r)]/(1+g+r+gr) times previous period debt stock, with r = nominal effective interest ra te o n e xter na l d eb t; r = cha ng e in domestic GDP deflator in U.S. dollar ter ms, g = r eal GDP growth rate, e = nominal appreciation (incr ease in dollar value of dom estic currency), and a = share 5/ Defined a s the s um o f cur r ent a cco unt d eficit, a mo r tiza tio n o n med ium- a nd lo ng -ter m d eb t, s ho r t-ter m d eb t a t end o f p r ev io us p er io d , a nd o ther ne t ca p ita l o utflo ws (ma inly r eflecting r es id ents ' co nver s io n o f hr yvnia ca s h to fo r eig n cur r ency held o uts id e the b a nking s ys tem). Excludes IMF transactions. 6/ The key var iables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-inter est curr ent a cco unt a nd no n-d eb t inflo ws in percent of GDP. ProjectionsActua l 54 INTERNATIONAL MONETARY FUND UKRAINE

UKRAINE INTERNATIONAL MONETARY FUND 55 Ukraine: Letter of Intent Kyiv, July 21, 2015 Ms. Christine Lagarde Managing Director International Monetary Fund Washington, DC 20431 Dear Ms. Lagarde: 1. In the attached update to the Memorandum of Economic and Financial Policies (MEFP) from February 27, 2015, we confirm our commitment to the policies and objectives of the economic program supported by an IMF arrangement under the Extended Fund Facility (EFF). We also describe progress and further policy steps toward meeting these objectives. 2. Notwithstanding the exceptionally difficult situation in Ukraine'--with the unresolved conflict in the East'--we have made steadfast efforts to implement policies under the EFF-supported program reflecting our strong commitment to economic adjustment and reforms. Following the significant economic contraction in 2015:Q1, there are signs that economic stability is gradually taking hold. The foreign exchange market has remained broadly stable in the last few months. Our official reserves, although still very low, have increased considerably following disbursements from official creditors and the NBU's foreign currency purchases from the market. We have taken bold measures to advance much needed reforms, including in the energy sector, by adopting a new gas sector law and increased gas and central heating retail prices by 285 percent and 67 percent, respectively. These are important first steps toward reaching cost recovery based on international market prices and thus eliminating the large losses in the state-owned gas company Naftogaz, while at the same time increasing significant allocations for social assistance programs. Budget outturn for 2015:Q1 was stronger than expected owing mainly to large VAT revenue driven by the higher-than-expected exchange rate depreciation and inflation. Banks' local currency deposits are growing again, although the FX deposit outflows continue, which remains a key concern. 3. Our actions ensured that all performance criteria (PC) for end-March, the continuous PC, and most structural benchmarks due through June 2015 were met, albeit some with a delay. We have also met the end-June PCs (preliminary data is reported in Table 2, with final data to be provided before the date of the Board meeting). We passed the necessary legislation to strengthen collections of Naftogaz receivables prior to the completion of the review. We also passed important legislation that strengthens the NBU independence and governance arrangements. 4. Our efforts now focus on restoring macroeconomic stability and setting the stage for robust and inclusive growth so critical for the Ukrainian people. This includes actions to improve competitiveness and the business climate through far-reaching structural reforms, rehabilitate the banking system, and restore sustainable external and fiscal positions.

UKRAINE 56 INTERNATIONAL MONETARY FUND 5. Despite our strong efforts, the debt restructuring process is advancing more slowly than expected. Constructive discussions with holders of the state-owned Ukreximbank's US$1.5 billion Eurobonds led to the completion of a consensual reprofiling of those notes on July 8. Separately, state-owned Oschadbank launched on July 6 a consent solicitation for a reprofiling of its US$1.2 billion Eurobonds with the backing of an ad hoc committee holding a majority of the notes. These reprofiling operations are fully in line with the debt operation targets under the EFF-supported program. We are also making steady progress on the broader sovereign debt restructuring with the objective of concluding an agreement as soon as possible (as noted in the joint statements with the Ad Hoc Creditor Committee on July 1 and 15). We remain determined to complete the debt operation in line with its stated program objectives. 6. On the basis of steps that we have already taken and commitments under the program, we request completion of the first review, and a disbursement in the amount of SDR 1,182.1 million. 7. We believe that the policies set forth in the attached MEFP are adequate to achieve the macroeconomic and financial objectives of the program, but we will take any additional measures that may be appropriate for this purpose. We will consult with the IMF on the adoption of these measures, and in advance of revisions to the policies contained in the MEFP, in accordance with the IMF's policies on such consultation. We will provide IMF staff with the data and information it requests for the purpose of monitoring program implementation. Reaffirming commitment to our policy of transparency, we consent to the IMF's publication of this letter, the MEFP, the Technical Memorandum of Understanding (TMU), and the accompanying Executive Board documents. Yours sincerely, /s/ /s/ Petro Poroshenko President Arseniy Yatsenyuk Prime Minister /s/ /s/ Natalie Jaresko Minister of Finance Valeria Gontareva Governor, National Bank of Ukraine

UKRAINE INTERNATIONAL MONETARY FUND 57 Attachment I. Ukraine: Memorandum of Economic and Financial Policies I. Recent Economic Developments and Outlook 1. The decline in economic activity continued in early 2015. As the conflict in the East intensified, industrial production, construction, and retail sales contracted sharply in January''March at a higher-than-expected pace. Accordingly, real GDP in the first quarter declined by 17.2 percent, about 1¼ percentage points worse than programmed. 2. Inflation surprised on the upside, reflecting the sharp exchange rate depreciation in February. After halving in value in February, the hryvnia recovered in March''May following the tightening of monetary policy and the administrative measures. In recent weeks, it has stabilized at around UAH 21''23/US$1, broadly as projected under the program. Headline 12-month inflation accelerated to 61 percent y-o-y in April, reflecting a rapid pass-through of the large exchange rate depreciation and sharp increases in energy prices.1 As the hryvnia recovered, however, prices of imported goods began declining while increases in prices of non-tradables remain moderate. This suggests that the sharp rise in inflation largely represents a one-time shift in the price level rather than acceleration of underlying inflation pressures, which are constrained by the weak economy. Indeed, inflation in June declined to 0.4 percent m-o-m (57½ percent y-o-y), broadly as expected. 3. While the current account deficit is somewhat weaker than expected, the overall balance of payments remains in line with the program. Lower domestic demand and tightening of import restrictions prior to approval of the program led to import compression. At the same time, exports also underperformed as the conflict flared up in January''February, directly impacting key export industries, terms of trade turned worse than expected, and the repatriation of export proceeds decreased. Nevertheless, the balance of payments remains in line with program and reserves reached US$10.3 billion at end-June, following the first EFF purchase, disbursement of other official assistance, and NBU FX purchases. 4. The macroeconomic framework has been updated to reflect the most recent developments. ‚· Growth for 2015 has been revised down to -9 percent (compared to -5½ percent upon EFF approval) driven by the deterioration in industrial production, tighter credit, and scaled-back exports as supply constraints caused by the conflict in the East proved tighter than expected. Projections for 2016''20 are unchanged relative to the program. 1 Subsequently, the State Statistics Committee found out that the effect of the April gas price increase was overstated by some 4 percentage points and revised its CPI methodology accordingly as recommended by an IMF TA mission. This revision will affect the CPI in October-November, once the two-tier winter season gas price schedule returns.

UKRAINE 58 INTERNATIONAL MONETARY FUND ‚· Inflation at end-2015 is projected at 46 percent compared to 27 percent at the EFF approval. This is due to the largely one-off pass-through effects of the large exchange rate depreciation in February 2015. Inflation is projected to recede in 2016 to around 12 percent as the one-off effects subside and economic stabilization takes hold. ‚· Balance of payments: The current account deficit is expected to widen to 1.7 percent of GDP, compared to 1.4 percent of GDP at program approval. Both export and import projections are more compressed than initially expected. This reflects mainly worse terms of trade than initially projected. The wider current account deficit is offset by a better-than-expected financial account, driven by significant private debt restructuring, lower than expected FX cash outflow from the banking system, and FDI pick-up in part related to bank recapitalization. Thus, the overall balance of payments remains unchanged. II. Policies under the Program 5. Against this backdrop and to keep the program on track, we have adapted program policies as needed to stabilize the economy and restore growth. To this end, we will continue to maintain a flexible exchange rate regime and accumulate reserves as programmed. Until financial conditions have stabilized more firmly, capital controls and other FX restrictive measures will largely remain in place. At the same time, we have prepared a conditions-based roadmap for the unwinding of these restrictive measures as stability is restored and confidence returns. We will continue the implementation of the bank resolution strategy consistent with achieving adequate bank capitalization and the gradual unwinding of related loans. We also continue to implement reforms that entrench high-quality fiscal adjustment. We remain committed to a successful debt operation that is consistent with the program financing and debt sustainability objectives. Repairing Naftogaz finances through energy price adjustments to market levels and structural reforms in the energy sector remains a priority. Finally, we will reinvigorate our push to improve Ukraine's business environment and strengthen governance. A. Monetary and Exchange Rate Policy 6. We remain committed to reducing inflation and maintaining a flexible exchange rate, while building up NBU reserves. In this regard, specific actions include: a. Rebuilding reserves. Efforts to rebuild a strong international reserve position in line with the program will continue. The NBU will continue to mop up the excess supply on the FX market, and limit FX sales to facilitate external payments by the central government and prevent disorderly market conditions. Naftogaz is now meeting its FX needs through borrowing and market purchases. The recent extension until 2018 of the swap line with the People's Bank of China for an amount up to the equivalent of US$2.4 billion will help mitigate our foreign exchange needs and strengthen the balance of payments. To relieve pressures on reserves, the Ministry of Finance will seek to roll over the government's domestic FX debt liabilities at least at

UKRAINE INTERNATIONAL MONETARY FUND 59 the rate assumed under the program by offering suitable interest rate and maturity terms (TMU, Section 1.A). b. Preparing for the removal of administrative measures. The temporary administrative measures have helped to contain BOP pressures. We expect that our policy program and the financial support of the international community will lead to steady improvement in the balance of payments, financial stability, and the return of depositors' and investors' confidence, which will set the stage for the safe removal of these administrative measures in due course. To this end, we have prepared a roadmap and will begin implementing it in a gradual and cautious manner once the following prerequisites are met: ‚· a successful completion of the debt operation in line with the objectives specified in paragraph 26 of the MEFP dated February 27, 2015; ‚· full implementation of bank recapitalization based on the results of the 2014 diagnostic studies; ‚· a target level of the NBU's net international reserves (NIR) as specified in the roadmap for the first stage of the liberalization; and ‚· full transition of Naftogaz to the interbank market for its FX purchases (i.e., no further reliance on NBU reserves). 7. Monetary policy will aim to reduce inflation to single-digit levels. For the time being, the current monetary policy stance remains appropriate given our near-term inflation projections and current inflation expectations (15''20 percent for the year to June 2016). Keeping the policy interest rate positive in real terms on a near-term forward-looking basis is essential to achieving our operational NIR/NDA targets through open market operations and anchoring inflation expectations. The NBU will monitor closely incoming data to ensure that inflation decelerates as projected and second-round effects from the exchange rate depreciation and energy price hikes remain contained. If inflation expectations are well anchored, inflation is under control, and foreign exchange market stability is entrenched, we will consider easing the monetary policy stance later in 2015 to support economic activity. Conversely, if despite our expectations inflation repeatedly surprises on the upside, or strong exchange rate depreciation pressures return, we will tighten policy as needed to address these adverse developments. 8. To support the conduct of monetary policy, we remain committed to (i) further improving the NBU's monetary policy and operational framework; (ii) strengthening the NBU's institutional independence and effectiveness, including safeguarding a strong balance sheet; and (iii) sharpening the NBU's accountability and communication with the market and general public to better guide their decisions and inflation expectations. In this regard: ‚· To strengthen the NBU's institutional foundation and effectiveness, parliament has passed legislative amendments to the NBU Law. The amendments transform the Board into an Executive Committee'--composed of the governor and deputy governors'--in charge of

UKRAINE 60 INTERNATIONAL MONETARY FUND formulating financial, monetary, and exchange rate policy. They also strengthen the oversight mandate of the NBU Council and the personal autonomy of the Council members. Given that the passage of these amendments was overdue (a missed structural benchmark for end-April), parliament passed these amendments (Laws 2742 and 2743) as a prior action. B. Financial Sector Policies 9. Our key near-term priority remains the restoration of stability and confidence in the financial sector. To this end, we continue taking steps to (i) stabilize the banking system through prudent provision of collateralized liquidity by the NBU and close monitoring of banks' liquidity conditions; (ii) strengthen our regulatory and supervisory framework; and (iii) update and implement our bank resolution strategy. In particular, we have passed legal amendments (Law 218) to increase bank owners' liability for bank failure in case of wrongdoing and strengthen NBU's powers to require banks to identify and unwind excess risk concentrations from related party loans. We have effectively completed the first wave of bank recapitalization (covering the largest 35 banks) and continue to clean up the system by resolving insolvent and nonviable banks. More generally, we are working on five fronts to restore confidence in the financial sector by (i) taking decisive steps to monitor and substantially reduce related party lending; (ii) enhancing our banking recapitalization and resolution strategy; (iii) strengthening governance and financial performance in the DGF and state-owned banks; (iv) improving the existing framework for resolving bad loans; and (v) reforming securities markets. Taking decisive steps to monitor and substantially reduce related party lending 10. We have initiated the review of the banks' related party loans and are further enhancing our capacity to monitor such exposures. By June 15, the top 10 private banks submitted their reports of related party exposure according to the new legal and regulatory framework. Moreover, independent accounting firms have begun reviewing these reports on the basis of terms of reference (TOR) provided by the NBU with IMF and World Bank (WB) staff assistance. To further support the review and monitoring process of related parties we will: a. Create a committee to oversee the review process. By end-July, the NBU will create a committee comprised of the first deputy governor, and the heads of the Special Monitoring Unit (SMU), On-site Supervision, Off-site Supervision and Licensing Departments. The committee will also have observers from the IMF and the WB. The resolution for the Committee will be agreed with the IMF and WB staff. The Committee shall consider and approve the outcomes of the comprehensive analysis of banks' related party transactions and advise the NBU Board to approve or not banks' related party exposure unwinding plans. b. Enhance the NBU's monitoring capacity. By end-July, the NBU will assess its information needs and agree on MOUs with the authorities that maintain public registers as well as the other financial sector regulators to share key data on corporations, including the main shareholders, senior managers, and properties, which the SMU can use to identify related parties. Furthermore,

UKRAINE INTERNATIONAL MONETARY FUND 61 no later than end-July, the NBU will ensure sufficient budgetary allocation for the SMU to be fully operational by end-September. 11. The NBU is also working to improve its supervisory capacity as well as other aspects of market discipline. More specifically, we are: a. Seeking parliamentary approval of the amendments to the banking law to establish a credit registry at the NBU by end-September 2015. To this end, a draft bill agreed with Fund staff has been submitted to parliament. Among other things, the draft requires banks to report to the NBU detailed information of their borrowers, and also states that the DGF should ensure that banks under special administration and liquidation must continue reporting the payment status of borrowers so that their total credit exposure is not suddenly reduced in case of bank resolution. b. Instructing banks to adopt full IFRS for both financial reporting and the accounting of their daily operations no later than end-December 2015. We are also reinforcing our discretionary supervisory powers to request higher capitalization to banks when the implementation of accounting rules on loan provision fails to timely capture credit risk. To this end, by end-September 2015, with technical support of Fund staff, we will complete the review of the relevant regulations with the aim to ensure that our potential use of such powers is prudent, transparent, and in line with international best practices. Enhancing banking recapitalization and resolution strategy 12. The NBU is monitoring closely the implementation of banks' recapitalization plans and will update assessments to identify new losses. Of the 18 largest banks identified by the 2014 diagnostic exercise as having capital needs, five were unable to present credible recapitalization plans and have been resolved by DGF, 12 have implemented their recapitalization plans as agreed with the NBU, and one large bank is set to raise the remaining UAH 2.5 billion by extending a subordinated loan that matures in September.2 Given the extraordinary events since last year, on April 24 we initiated a new round of diagnostics (asset quality review and stress tests), on the basis of TOR agreed with the IMF and WB staff, to identify losses from the larger-than-expected exchange rate depreciation and the conflict in the East. Results for the top 10 banks and 10 subsequent banks will be available by end-August and end-October 2015, respectively, and the recapitalization plans for each bank will be ready within three months after the bank receives its final capital need estimate from the NBU. Any bank that finds itself with negative equity after the diagnostics will have to bring it to positive territory as part of their recapitalization plans within the same time frame (three months after the receipt of the final capital need estimate); meanwhile, such banks will be 2 To ensure the credibility of the recapitalization process, this bank' shareholders have blocked in the bank funds of UAH 2.5 billion that will be immediately converted to subordinated debt by September 30 in case the envisaged extension of a subordinated loan that matures on this date does not materialize or if the extended loan does not meet the criteria for being counted as bank capital. This commitment of shareholders is final and irrevocable.

UKRAINE 62 INTERNATIONAL MONETARY FUND subject to enhanced supervisory constraints, including an in situ NBU supervisor. Furthermore, all banks will bring their post-diagnostics capital-asset ratios to at least 5 percent within six months after their recapitalization plans have been accepted by the NBU. We will allow viable but undercapitalized banks to temporarily continue operating with capital levels below 10 percent of risk weighted assets, with the 10 percent statutory CAR requirement being restored gradually by end-December 2018. Moreover, to support the bank restructuring efforts, we have: a. Established a Steering Committee (SC) to oversee the diagnostic results. The SC shall commence consideration of the reports for the largest 10 banks and 10 subsequent banks by mid-August and mid-September, respectively; and b. Identified a group of potentially problematic small banks based on quantitative criteria and supervisory intelligence as part of our efforts to identify emerging weaknesses in the banking system with the view to timely address them and prevent bank failure. We plan to continue strengthening our tools to anticipate problems, for which by end-August 2015 we plan to complete an assessment of our framework as regards to the soundness of metrics used to identify problems and effectiveness of our remedial measures. 13. Our contingency planning is being enhanced to minimize fiscal costs associated with downside risks. To this end, the NBU and MoF have agreed with IMF and WB staff on a set of strategic and operational principles that will guide the resolution of systemically important banks. These principles have established that: a. Triggers for resolution should be transparent and well grounded in the law. b. The NBU and MOF will take the lead in assessing tentative resolution options, taking into account viability criteria and including bail-in of non-deposit, unsecured creditors in line with international best practice; c. Key management may need to be replaced promptly with independent, experienced bankers; d. A sizeable amount of loans may need to be fully provisioned or removed to ensure bank viability, so there is a need to consider the transfer of such assets to a specialized unit (preferably inside the banks) to ensure prompt recovery; e. Public funds are injected on market terms in order to bring the bank's capital adequacy ratio to at least 10 percent or the average for the bank's peer group, whichever is lower. This will contain the risk that a systemic bank, recapitalized with public funds, may use its higher capitalization level to unfairly attract deposits from other banks; and f. The Financial Stability Council will need to develop a communication strategy to explain to the public how the actions protect depositors and help restore financial stability. 14. We are ensuring that our legal framework is set to facilitate program implementation. To this end, we will ensure that legislation is passed to:

UKRAINE INTERNATIONAL MONETARY FUND 63 a. Ensure that the law provides that an appeal before the judicial branch by borrowers classified by the NBU as related parties to a bank does not halt the bank's unwinding of excess lending to insiders (prior action). The law that enhances NBU independence and institutional capacity (¶8) already includes amendments to this effect; b. Enhance further our capacity to monitor, restructure and resolve problem and insolvent banks. To this end, we already have: i. Refined existing provisions in law to facilitate the resolution of systemic banks, including by giving the DGF the power to allow the bail-in of unsecured non-depositor creditors before public funds are used to recapitalize systemic banks and ensuring close coordination between the DGF, the MoF, and the NBU on resolution options; ii. Enhanced DGF powers to speed resolution, accelerate repayment of depositors, prevent former bank owners from participating in the acquisition of other banks and consolidate management of assets from banks under liquidation into the DGF to improve asset recovery. Strengthening governance and financial performance at the DGF and state-owned banks 15. We will continue to implement measures to improve depositor payout, the least cost resolution process, and prospects for asset recovery from failed banks. In this regard, we: (i) extended the timeframe to complete bank liquidation from three to five years; (ii) are creating a centralized unit to improve asset recovery; and (iii) have completed the terms of reference to conduct due diligence investigations (forensic audits) of failed banks and are pursuing funding to launch the bid process to select the auditing firms no later than end-August 2015. The DGF will develop an action plan to initiate immediate recovery of bank losses from shareholders found responsible for their banks' failures. For non-systemic banks, the DGF will start preparations for takeover, including early verification of banks' deposit records and prequalification of bidders, to improve the timeliness of depositor payouts. Also, banks meeting certain criteria will be automatically liquidated and the time period for temporary administration shortened to reduce the asset deterioration that occurs under the current lengthy administration process. 16. The MoF will also establish a plan to improve the financial performance and monitoring of majority state-owned banks. We are working on a strategic plan to strengthen governance and financial performance of the state-owned banks and have invited an expert supported by the IMF to assess the draft plan on the basis of international best practices. Based on the expert's recommendations, we will finalize the plan and publish it by end-September 2015 along with a schedule for its implementation. Improving the existing framework for resolving bad loans 17. We are working to strengthen the framework for resolving NPLs and corporate insolvency. With the assistance from the March 2015 IMF technical assistance mission, we have

UKRAINE 64 INTERNATIONAL MONETARY FUND identified a set of reforms that are needed to strengthen our legal framework for corporate debt restructuring on the basis of international best practice and cross-country experience. Key areas of reform, as identified by the technical assistance mission, should include: a. Improvements to the corporate insolvency regime to (a) lower barriers to creditor access, (b) increase involvement and protection of secured creditors and decision-making power for creditors generally, (c) streamline the process to limit appeals and other delaying tactics, (d) protect post-petition finance, (e) develop procedures of sale to maximize value in liquidation, and (f) strengthen the ''claw-back'' and executory contract rules to better protect the insolvency estate; b. Removal of tax impediments to debt restructuring; and c. Strengthening the legal regime for enforcement of loan collection, including use of out-of-court enforcement mechanisms, limitations on appeals, and reduction of the need for multiple valuations. To develop the necessary legislation, we will form by end-August an interagency committee with representatives of all agencies with competencies in these areas, a designated lead agency, and a secretariat. We will then prepare a first draft of the legislation by end- November, conduct a workshop with relevant stakeholders to seek their views on the draft legislation by end-December, and submit a final draft of the legislation to parliament by end-January. We will obtain parliamentary approval of the reforms of the bankruptcy law, the tax code, the mortgage law and the commercial and civil procedure codes to address all issues outlined in a), b) and c) above, consistent with Fund staff's advice, by end-March 2016 (structural benchmark). 18. Work on an alternative out-of-court mechanism for debt restructuring is also progressing. With technical assistance from the EBRD and the WB, we have made significant progress in designing a coordinated out-of-court restructuring arrangement for corporate debt (the ''Kyiv approach''), in line with international best practice including the INSOL principles, and the Istanbul approach. The necessary legislative framework will be introduced in parliament by end-September 2015 and adopted by end-October 2015. 19. We are taking steps to facilitate the restructuring of foreign currency denominated mortgage loans through a voluntary negotiation process between borrowers and banks. 11 banks have signed a Memorandum with the NBU on voluntary restructuring of mortgage loans and other banks with large portfolios are considering signing. Moreover, parliament passed amendments to the Tax Code in May 2015 that provide borrowers with tax relief from the proceeds arising from the partial debt forgiveness and tax deductibility of such losses to banks. By end-July 2015, the NBU, after consulting with Fund staff and stakeholders, will issue a Code of Conduct to guide the voluntary negotiations, debt restructuring, and appeals process.

UKRAINE INTERNATIONAL MONETARY FUND 65 Reforming the securities markets and other nonbanks 20. We are committed to reforming our securities markets' regulation and supervision. To function properly, Ukrainian securities markets require a significant overhaul and close supervision. However, a moratorium imposed in 2014 on conducting on-site inspections and investigations in regulated entities by most state agencies'--including the National Securities and Stock Market Commission'--may be undermining the Commission's ability to identify risk and misconduct. To correct this problem, by end-September 2015 we will lift the moratorium on inspections by the National Securities and Stock Market Commission. By end-August 2015, with technical assistance of international donors, we will define a clear action plan of measures to bring the functioning of our capital markets and the regulator's powers and independence to best international practices. Among other benefits, this could contain the evasion of capital controls by some corporates. C. Fiscal Policy 21. We are determined to reduce the fiscal deficit to the level necessary to secure a sustainable path for public debt in a balanced and socially fair manner. Our adjustment strategy remains focused on expenditure-led consolidation that targets a smaller and more efficient government, while making the tax system growth-friendly, efficient, and equitable. We remain committed to reducing the combined general government and Naftogaz deficit from 10.1 percent of GDP in 2014 to 7.4 percent of GDP in 2015. Within this, we are committed to achieve a general government primary surplus of 1.1 percent of GDP in 2015 and 1.6 percent of GDP in the medium term. At the same time, bringing Naftogaz to financial health and eliminating government support to the company by 2017 is a priority. Starting with the 2017 budget, any government support to Naftogaz will be in line with ESA/GFSM accounting standards, where government support to state-owned enterprises is shown as a current subsidy. To complement our fiscal efforts and bring debt firmly on a sustainable path towards our target of below 71 percent of GDP by 2020, we are advancing discussions with creditors on a debt operation, which we aim to complete by late September 2015. 22. The end-March general government deficit target was met with a significant margin. The general government budget registered a surplus of UAH 3.2 billion in 2015:Q1. Strong revenue growth, mainly in VAT'--owing to higher than projected inflation and exchange rate depreciation'--and spending restraint caused by liquidity constraints early in the quarter account for this outcome. 23. As revenue drivers are expected to wane in the remainder of the year, the 2015 budget deficit targets remain appropriate. As the exchange rate has appreciated in Q2, the economy remains weak, and inflation is expected to decline, we expect revenue growth to slow down in the remainder of the year. We plan to channel the small projected revenue overperformance towards (i) national security needs; (ii) allocating sufficient funds for pensions and social assistance, including to support the internally displaced persons from the conflict in the East; (iii) clearing VAT refund arrears, which have picked up again; and (iv) supporting ongoing judicial and civil service reforms. Moreover, the Ministry of Finance will prepare a plan to clear outstanding arrears to suppliers of

UKRAINE 66 INTERNATIONAL MONETARY FUND community services stemming from maintaining tariffs below cost as mandated by the state. With support from our parliamentary majority, we are committed to preventing adoption of laws that are inconsistent with program policies and objectives, including recently submitted draft bills in the areas of pension reform, expenditure rationalization, and energy sector reform. Should any of these bills be passed, the Cabinet of Ministers will submit to the president proposals for a veto and the president will veto them. For any potential new draft laws, inconsistent with program policies and objectives, the Cabinet of Ministers will submit to the parliament its objection. 24. We are preparing our 2016 budget in line with program targets. To this end, we will take the necessary measures to achieve the program's deficit target of 3¾ percent of GDP in 2016, a reduction of ½ percentage point relative to 2014. To meet this target, provide extra funds for energy-related social assistance, and offset the impending large loss of revenue (about 2¼ percent of GDP) from the expiration of the temporary import surcharge and lower NBU profit transfer to the budget, we aim to undertake revenue-raising measures to the tune of 1½ percent of GDP (mainly in VAT and social security contributions) and expenditure cuts of about 1¾ percent of GDP. In our 2016 budget, we will aim to contain total general government expenditure to 43.4 percent of GDP. Specific measures will include: ‚· Agriculture VAT. We plan to submit to parliament by September, Tax Code amendments, which will introduce the general VAT regime in agriculture effective January 1, 2016. This measure will yield about 0.3 percent of GDP. ‚· Social Security Contribution (SSC) reform. We are reviewing the impact of amendments governing the calculations of SSC rates introduced in December 2014 and March 2015 on the reporting of actual wages. This analysis will inform options for reforming the SSC. The specific features of the reformed SSC will be developed in consultation with IMF staff. We aim to raise 0.5 percent of GDP in extra revenue through this reform in 2016. ‚· Natural resource taxation. Royalty rates introduced in July 2014 on gas and petroleum extracting companies are high by international standards and could be discouraging investments in the industry. With the assistance of IMF staff and in close consultations with the industry, we will develop amendments to the tax code with the aim to strike a balance between preserving revenue and encouraging investments into the industry. The amendments will become effective by October 1, 2015. ‚· Revenue administration reform. The revenue administration reform is a crucial element of our broader reform effort to strengthen governance and improve business environment. With input from IMF staff, we have developed and adopted a coherent revenue administration reform strategy and have started its implementation. The system of special VAT accounts has been piloted since February 2015 and seems to have contributed to the revenue overperformance. We have introduced this system in the whole country from July 1, 2015 after reviewing its design to ensure that it does not unduly block working capital of the VAT-paying companies. The process of moving large taxpayers to the large taxpayers' office and taxation of high-net-worth

UKRAINE INTERNATIONAL MONETARY FUND 67 individuals is also progressing well. These reforms together with our efforts to strengthen control at customs will raise revenue by at least 0.3 percent of GDP in 2016. ‚· Public Procurement. With the assistance of the European Union, we have introduced an electronic procurement system on a pilot basis in various government agencies and state-owned enterprises. We are working on two procurement laws which will facilitate the full introduction of the new system. One'--about simplification of procedures and regulations to streamline the public procurement process'--was submitted to parliament and passed on first reading in June 2015. The second'--about the full-fledged introduction of the electronic procurement system'--will be submitted to parliament before end-2015. Following the adoption of these laws, the e-procurement system will be implemented over the course of 2016''17 in the entire public sector. When fully completed, this reform is expected to save about 20 percent of the total procurement budget, with about one-half coming from enhanced competition and the other half from transparency-induced cost-reduction effects. ‚· Pension reform. Following the reform measures adopted in March that began to improve the sustainability and equity of the pension system, we will continue with broader parametric reforms to make the system financially viable in the medium term. To this end, with technical assistance from the IMF, we will review all parameters of our current pay-as-you-go system and design a reform that will begin to steadily reduce pension expenditure relative to GDP already in 2016. Among other things, the reform options will include termination of special pensions, which had unjustifiably created a privileged group of pensioners, and further tightening of occupational early retirement options. Once these measures, in combination with improvements in contribution compliance, create sufficiently large and permanent fiscal space to finance the cost of a mandatory, fully-funded pension pillar, we will consider the introduction of such a scheme. This sequencing of reforms will also allow us to develop and implement a plan to strengthen the institutional, technological, and capital market preconditions required for safe, efficient, and transparent operation of the funded schemes. To this end, by end-December 2015, parliament will pass pension reform legislation agreed with IMF staff that revises the parameters of the pay-as-you-go system to make it more sustainable, abolishes special pensions, and lays the conditions for the adoption of a funded system that would complement the pay-as-you-go system (structural benchmark). ‚· Health reforms. Legislation allowing public procurement of medicines through UN-based organizations has been approved by parliament and the first procurements through the new system will take place within the next few months. Another legislation package changing the basis of public financing for healthcare will shortly be submitted to parliament. ‚· Education reforms. Amendments of the legislative framework this summer will allow the consolidation of the secondary school network. Local governments are analyzing the existing network and deciding on its optimization. According to recent information, their plans will result in reducing the number of schools by 5 percent after the end of the 2015''16 academic year. Expected savings will be reinvested in the sector to upgrade the school and class infrastructure

UKRAINE 68 INTERNATIONAL MONETARY FUND and support student transportation. The process of optimization of high education and vocational training institutions is also ongoing. ‚· Wage bill. We are making progress on rightsizing the budget sector and our compensation and safety net programs have been enhanced to better serve the retrenched workers. We have already reduced staff employment by 26,000 positions in 2015:Q1 and are on track to complete the planned retrenchment of 3 percent of all budgetary positions by end-year. ‚· Social assistance reform. Increasing gas and heating prices to cost recovery requires an effective and fiscally affordable strategy for protecting vulnerable households. Under the current benefits system and projected price increases, the vast majority of households'--including many with well above average income'--would be eligible to receive significant social assistance next year. Reforms to the current system are needed to cope with the expected large increase in applicants and contain the fiscal costs while protecting vulnerable households. Specifically: ‚· Effective July 1, 2015, we have introduced income testing into the category-based energy privileges program. Specifically, eligibility for privileges across most eligible categories (excluding people with disability, the military, military and police veterans, and Chernobyl survivors as specified in Law 76-VIII dated December 28, 2014) has been limited to households with gross monthly income per capita under the threshold for taxing social privileges (UAH 1710 in 2015). Moreover, we will make the necessary legislative and regulatory changes to ensure that from December 1, 2015 households that are subject to income testing according to Law 76-VIII/2014 can choose between being enrolled in either the privileges programs or the housing utility subsidy (HUS) one, but not both. ‚· By July 31, 2015, on the basis of current technical capabilities we will set up a central monitoring system of the characteristics of households participating in the privileges and HUS programs (number of recipients, evaluation of family income, the amount of subsidies, etc.). At present, we can collect most of the necessary information and will start the system with the available indicators, with the view to add the rest by October 1, 2015. We will regularly analyze this information to monitor whether the two existing programs deliver assistance as intended. These analyses will inform the design of the 2016 reforms as noted below. ‚· By May 31, 2016, we will reform utility-related social assistance by (i) reducing the scope of energy privilege programs to cover only households that remain exempt from income testing according to Law 76-VIII/2014; (ii) converging the associated benefits to the levels in the HUS program; and (iii) revising the benefit formula of the expanded HUS program in consultation with IMF staff to channel benefits to vulnerable households and provide incentives for energy efficiency. The overall fiscal envelope for all energy-related social assistance programs (privileges and HUS) will be set at UAH 43 billion. All these reform elements will be a structural benchmark for end-May 2016.

UKRAINE INTERNATIONAL MONETARY FUND 69 D. Energy Sector Policy 25. We have made significant progress with the agreed energy sector reforms. ‚· Naftogaz deficit remains within program targets. In 2015:Q1, the deficit reached UAH 14.3 billion (0.7 percent of annual GDP), below the program target. We remain committed to keeping Naftogaz's deficit below 3.1 percent of GDP for 2015. ‚· The independent audit of Naftogaz receivables (end-June SB) was completed on time by Price Waterhouse Coopers with external funding by the UK's DFID. As follow up actions, Price Waterhouse Coopers will work with Naftogaz to develop recommendations to improve debt recovery and to set collections targets. ‚· The gas market law was approved by parliament on April 8 (end-April SB). This law paves the way for the restructuring of Naftogaz by establishing a new model of the gas market in Ukraine. The law is expected to become effective on October 1, 2015. We are currently working on drafting necessary secondary legislation to operationalize the law. ‚· The Ministry of Social Policy has started an information campaign on assistance with the higher utility bills. In addition, an information campaign on energy savings has been rolled out. 26. Despite this progress, we recognize that more needs to be done to keep Naftogaz on track to reach its programmed deficit targets. We remain committed to improve Naftogaz's revenue collections. Although the end-March SB on parliamentary approval of legislative amendments to improve Naftogaz collections was missed, Law 2214 was passed on May 14. The law lifts the 2005 moratorium on collection enforcement proceedings against energy companies effective September 1, 2015 (and January 1, 2016 for Energoatom, our nuclear energy company). The law lifting the moratorium on enforcement proceedings for companies with at least 25 percent state ownership for companies that are debtors to Naftogaz and its daughter companies (Law 2956) was passed as a prior action for the approval of the review and will become effective upon publication, but no later than July 31, 2015. We are committed to not extending the deadlines for repeal of these two moratoria or reintroducing them once their cancelation becomes effective (including for Energoatom). 27. We also intend to undertake additional measures to generate sufficient revenue flows for Naftogaz, strengthen transparency, and increase efficiency in the energy sector. These include: ‚· By August 31, 2015, we will revise the formula for the distribution accounts collecting district heating bill payments to include an ''adjustment coefficient'' that allows Naftogaz to gradually collect payments for district heating company arrears that have accumulated since November 1, 2014.

UKRAINE 70 INTERNATIONAL MONETARY FUND ‚· Also by August 31, 2015, we will adopt secondary legislation needed to facilitate the application of the new gas market law. This legislation will allow for below-international-parity gas pricing for a transition period until 2017 and the provision of subsidies to vulnerable consumers. In addition, we will take any necessary actions to change regulations in order for the distribution accounts in the gas market to continue being operational. ‚· By September 30, 2015, we will publish the independent audit on Naftogaz receivables to foster transparency and good governance. The study will also contain specific targets for Naftogaz debt collections and recommendations on needed collection methods and legislative improvements. ‚· We will improve Naftogaz collections by recommending to the energy regulator to revise by August 31, 2015 certain types of contracts for gas sales that delay the timing when Naftogaz can start collection procedures on payment arrears until the subsequent year. E. Governance, Business Climate, and State-Owned Enterprise Reform 28. Our reform strategy approved in December 2014 focuses on overhauling governance and fighting corruption, improving the business climate, and state-owned enterprise reform. We have undertaken a number of actions to implement it: ‚· We have ensured the establishment of the National Anti-corruption Bureau (NAB). The AML framework is being strengthened (end-June SB), and parliament adopted amendments in the legal framework related to asset disclosures to ensure that high-level officials disclose assets of which they are the ultimate owners or controllers and that the NAB can investigate cases of submission of fraudulent information. ‚· We supported the EBRD-led initiative to establish the Business Ombudsman. We are implementing the action plan to remove regulatory and legislative impediments to a growth-conducive business climate adopted in March. A deregulation law, the law on de-licensing, and the law on investor protection have recently been adopted by parliament. ‚· The State Regulatory Service, with assistance from the WB and external experts, is developing a methodology for regulatory impact assessment (RIA) of draft legislation, which will be used to prevent overregulation. ‚· A unit at the Ministry of Economy has been put in charge of SOE-related reform initiatives. The first statement of fiscal risks emanating from SOEs has been prepared. An annual report with financial indicators of the 100 largest SOEs has also been published. In addition, a draft law on corporate governance has been prepared and a new nomination procedure for appointment of CEOs in SOEs through an independent committee is being implemented. In May, the cabinet approved a list of about 350 state-owned assets that are subject to privatization in 2015. The new list includes SOEs previously on the non-privatization list.

UKRAINE INTERNATIONAL MONETARY FUND 71 29. We remain determined to continue our efforts to strengthen transparency and improve governance. Specifically: ‚· Business climate. a. The Cabinet of Ministers will take all the necessary steps to ensure the full implementation of the deregulation action plan. Monthly implementation reports will be published on the State Regulatory Service and the Cabinet of Ministers websites, following submission to the cabinet. b. We are preparing for a broad-scale revision of regulatory norms, which includes (i) codification of all norms that impact business; (ii) design of a list of criteria to assess these norms; and (iii) recommendations on whether the norm should be eliminated, revised or maintained. The government will adopt the reform and create a legal framework through a resolution of the Cabinet of Ministers. c. Starting October 2015, we will ensure that all new and amended draft legislation includes a quantitative analysis of their regulatory impact, in line with the methodology on the RIA approved by the State Regulatory Service. d. The Cabinet of Ministers will ensure that the recently adopted law on licensing of business activities is fully operational. Specifically, by end-July the licensing entities will submit to the Cabinet of Ministers proposed rules and conditions under which licenses in their competencies will be issued. Delays in submission or approval of these rules and conditions will not serve as a basis for denying a license or for prohibition of business activities. ‚· Anti-corruption. As the key legal and institutional reforms have been completed, we are resolutely turning to the implementation of the anti-corruption framework. Specifically, we will: a. Make the NAB operational. We will ensure the establishment of a specialized anti-corruption prosecution function in charge of overseeing NAB's investigations, in accordance with the Law on the Prosecutor's office and enable NAB to timely access relevant information from other public institutions by end-September 2015 (structural benchmark). In particular, we will ensure: ‚· Appointment of the head of the anti-corruption prosecutors and allocation of appropriate premises to the anti-corruption prosecutor's office. To ensure a timely, fair, and balanced appointment process, we will make the following amendments to the Law on Prosecutor Office: ‚· At least five members of the Selection Committee for the head of the Anti-Corruption Prosecutor Office and his/her deputies will be nominated by a decision of parliament, in order to eliminate the risks of challenging the results of the selection. These persons will be of impeccable reputation, high professional and moral qualities, and authority in the society;

UKRAINE 72 INTERNATIONAL MONETARY FUND ‚· As an interim measure, until the qualification commission for prosecutors is established, no more than five members of the above-mentioned Selection Committee will be nominated by the general prosecutor; ‚· The Selection Committee will be chaired by a widely recognized and well-respected expert with rich experience in the prosecution of corruption, elected by parliament as an additional member of the committee; ‚· The committee will submit one candidate for each of the three positions (head and two deputies) to the general prosecutor; ‚· There will be no amendments to the Law on Prosecutor Office concerning the selection procedure for the head of the Anti-Corruption Prosecutor Office and his/her deputies, other anti-corruption prosecutors, and non-prosecutorial staff, other than the ones specified above, unless otherwise agreed with the IMF. ‚· Agreement on technical details to ensure NAB's direct electronic access to administrative and law enforcement databases it deems relevant for its activities, particularly from the Ministries of Interior and Justice, and from the tax and customs administrations. An electronic mechanism will be agreed between the NAB and the financial intelligence unit (FIU) to enable the FIU to promptly respond to NAB's information requests. In cases when the FIU deems dissemination of information from its databases inappropriate, it will provide justification to the NAB. We will also ensure that the NAB is fully operational by end-January 2016 (structural benchmark). In this regard, steps will be taken to ensure: ‚· Allocation of necessary infrastructure (e.g., hardware; software; access to administrative, law enforcement, and commercial databases; vehicles; special tools; investigative material), supported by the appropriate budgetary allocation if necessary. ‚· Operation of a hotline, including back office to identify cases deserving pre-trial investigation. b. Implement the AML framework. The NBU will develop risk-based off-site and on-site AML supervisory tools, focusing on risks related to domestic politically exposed persons, by end-December 2015. c. Implement asset disclosure requirements for high-level officials. By end-December 2015, the Ministry of Justice will ensure that applicants and newly appointed officials to high-level positions under the NAB's jurisdiction file their asset disclosures electronically. The disclosures will be directly and freely available to the public on a single website shortly after submission. In line with legislation, all high-level officials will report their assets electronically by end-April 2016.

UKRAINE INTERNATIONAL MONETARY FUND 73 d. Other measures. Going forward, and in line with the July 2014 diagnostic study and the Anti-Corruption Strategy for 2014''2017, the government will supplement the above measures by prioritizing the submission of a Bill on the Business Ombudsman to ensure adequate authority and access to information to perform his functions, preparing amendments to the legal framework for asset recovery including to establish an agency in charge of managing seized and confiscated assets, and ensuring that specialized judges receive training relevant to corruption cases. Finally, we will continue our efforts to establish a robust and effective institutional framework for prevention of corruption, including through the launch of a national corruption prevention agency. ‚· Judicial reform. Following up on the recommendations of the July 2014 diagnostic report, we will press for measures to enhance the efficiency and effectiveness of the legal enforcement process and the integrity of legal institutions. Specifically, our reform program will encompass the following areas: (i) judicial reform; (ii) financial efficiency; and (iii) effective enforcement of commercial claims. These reforms will be supported by a number of measures: a. Order of Payment Procedure and Garnishments. By end-December 2015, a Law will be adopted which strengthens the provisions in the Code of Civil Procedure on Order for Payment for domestic transactions and on garnishment of bank accounts (modified structural benchmark). In particular, the Order of Payment provisions will be amended to expand substantially the range of claims covered, streamline the evidence required, and make use of standardized forms. Regarding garnishment, our goal is to remove bottlenecks that have been identified as hampering the effectiveness of the procedure in such areas as definitional issues, locating debtor bank accounts, service of process, adherence to strict timelines, and the liability of banks for noncompliance. We will complete an implementation plan for the new provisions by end-December 2015. The law will take effect according to a schedule allowing assessment of the results of its implementation and mitigating the risks of negative consequences. b. Private Enforcement Profession. We will continue to work on a Law establishing a profession of private enforcement agents as outlined in the February 2015 MEFP, to be adopted by end-September 2015. c. High Council of Justice. We will take steps to strengthen the management of the judiciary by taking the following steps by end-September 2015: appointing sufficient commissioners to the High Council of Justice to meet quorum requirements and allocating to the Council the necessary budget for salary payments. 30. We are committed to a thorough implementation of the SOE-reform strategy. This includes actions needed to (i) improve budgetary oversight, specifically by enhancing the fiscal-risk assessment; (ii) implement a comprehensive ownership policy and ensure a clear separation of ownership and regulatory functions; (iii) strengthen corporate governance, including by adoption of a new law on corporate governance; (iv) prioritize enterprises subject to restructuring; and

UKRAINE 74 INTERNATIONAL MONETARY FUND (v) implement transparent privatization of identified assets in the medium run. Specific near-term measures include: a. SOE fiscal risk assessment. We will establish an inter-ministerial working group which will be led by the Ministry of Finance with the participation of the Ministry of Economic Development and Trade. The main task of the working group will be to (i) improve the methodology for assessing risks and identify the largest 30 SOEs with the highest fiscal risks, and (ii) review the financial plans of these SOEs and inform the respective ministry about fiscal risk aspects. The working group will also inform the Minister of Finance on the adequacy of financial plans of the SOEs with the highest risks and recommend mitigation measures as an input to the budgetary process. An update of the first SOE fiscal-risk statement will be published on Ministry of Finance and Ministry of Economic Development and Trade websites by end-October 2015. b. Stocktaking of arrears. By end-August, we will extend the coverage of the SOEs reporting to include all arrears of the 50 largest companies, as defined in consultation with Fund staff and prepare information on the stock of these arrears as of end-2013, end-2014, March 2015 and June 2015. c. Privatization/Restructuring. We will start implementing our SOE Reform Strategy. Key near-term measures include: ‚· Completion by end-September 2015 of a review of the existing portfolio of SOEs to identify non-operating companies for immediate liquidation. The review, prepared in consultation with Fund staff, will outline a timeline for the disposal of each company with the necessary intermediate steps, as well as preliminary estimates of budgetary and other costs stemming from liquidation, with the goal of initiating the first liquidations by end-2015. ‚· Preparation, in agreement with the line ministries, of the priority privatization list of 10 SOEs by end-July 2015. Companies shall be selected based on cost-benefit analyses. Building on this list, we will establish a working group, including the State Property Fund (SPF) that will develop a privatization action plan. The plan will define, for each SOE, the key parameters and conditions of the process, including the timeline for divesting, method of privatization, and intermediate steps to be taken. The action plans for five of these companies will be approved by SPF decision by end-August 2015. Furthermore, we will seek adoption, by cabinet resolution, of the action plan for these five companies by end-September 2015 (structural benchmark). ‚· Preparation of the list of 10 SOEs posing the biggest fiscal risks that will be subject to restructuring other than privatization by mid-September 2015. Detailed restructuring action plans for five of these companies will be agreed, in consultation with IMF staff, between the respective line ministry, Ministry of Economy and the Ministry of Finance by end-January 2016 (structural benchmark).

UKRAINE INTERNATIONAL MONETARY FUND 75 d. We will prepare legislative amendments needed to facilitate these actions. In particular, ‚· In July, we adopted a government decree mandating external audits for at least the largest 100 SOEs (by assets or revenue). ‚· By September 30, 2015, the Ministry of the Economy will adopt a regulation revising the methodology for developing the SOEs' financial plans to require the inclusion of a three-year action plan to increase operating efficiency. ‚· We will review needed changes to the SOEs remuneration policy to better align shareholders and management's interests. In this context, we will also seek to strengthen the legal environment to improve transparency and governance, including by introducing supervisory boards in unitary enterprises. III. Safeguards 31. In line with the recommendations of the IMF safeguards assessment of the NBU, we are taking the necessary measures to improve NBU governance and autonomy as well as NBU internal controls. We have adopted legislative amendments to the NBU Law to address the governance and autonomy issues (¶8) and remain committed to their implementation. This will include prompt re-establishment of an Audit Committee following constitution of a new Council of the NBU. With regards to internal controls, the NBU established a permanent senior-level credit committee in June 2015 to oversee NBU's lending to financial institutions. Further, a new loan origination and management process is being developed and will be implemented by October 2015. Concerning the servicing of future financial obligations to the IMF related to budget support, we have updated the relevant agreements on the respective roles and responsibilities between the MoF and the NBU. In addition, quarterly data audits are ongoing with the results timely conveyed to the IMF. IV. Program Monitoring 32. Implementation of the policies under the program will continue to be monitored through prior actions, quantitative performance criteria, indicative targets, continuous performance criteria, structural benchmarks, and quarterly reviews, as envisaged in our Memorandum of Economic and Financial Policies dated February 27, 2015 along with this Memorandum. The attached Technical Memorandum of Understanding (TMU) defines the quantitative performance criteria and indicative targets under the program. The prior actions and structural benchmarks are set out in Table 1. The quantitative targets for target dates through end-December 2015, along with a continuous quantitative performance criterion are set out in Table 2.

UKRAINE 76 INTERNATIONAL MONETARY FUND Table 1. Ukraine: Prior Actions and Structural Benchmarks Prior actions Status Completion date Parliamentary passage of Law 2956, lifting the 2001 moratorium on enforcement proceedings for companies with at least 25 percent state ownership that are debtors to Naftogaz and its daughter companies (July MEFP ¶26). Parliamentary passage of Laws 2742 and 2743 to strengthen the governance and autonomy framework of the NBU as agreed with IMF staff and also ensure that the law provides that an appeal before the judicial branch by borrowers classified by the NBU as related parties to a bank does not halt the bank's unwinding of excess lending to insiders (July MEFP ¶¶8, 14). Met June 18, 2015 Proposed New Structural Benchmarks Status Completion date Parliament will approve amendments to legislation as described in MEFP ¶17, consistent with IMF staff advice, to strengthen the corporate insolvency and credit enforcement regimes, and to remove tax impediments (July MEFP ¶17). End-March 2016 Undertake measures to make the National Anti-Corruption Bureau operational, including with regard to its prosecutorial function (July MEFP ¶29). End-January 2016 Establish a specialized anticorruption prosecution function in charge of overseeing NAB's investigations, in accordance with the Law on the Prosecutor's Office, and enable NAB timely access to relevant information from other public institutions (July MEFP ¶29). End-September 2015 Adoption by a cabinet resolution of the privatization action plan for five large SOEs from the priority privatization list (July MEFP ¶30). End-September 2015 Agreement on detailed restructuring action plans, prepared in consultation with IMF staff, for five SOEs with the largest fiscal risks, between the respective line ministry, Ministry of Economy and the Ministry of Finance (July MEFP ¶30). End-January 2016 Parliamentary passage of pension reform legislation, as agreed with IMF staff that revises the parameters of the pay-as-you-go system to make it more sustainable, abolishes special pensions, and lays the conditions for the adoption of a funded system that would complement the pay-as-you-go system (July MEFP ¶24). End-December 2015 Reform utility-related social assistance by (i) reducing the scope of energy privilege programs to cover only households that remain exempt from income-testing according to Law 76-VIII/2014; (ii) converging the associated benefits to the levels in the HUS program; and (iii) revising the benefit formula of the expanded HUS program in consultation with IMF staff to channel benefits to vulnerable households and provide incentives for energy efficiency. The overall fiscal envelope for all energy-related social assistance programs (privileges and HUS) will be set at UAH 43 billion (July MEFP ¶24). End-May 2016

UKRAINE INTERNATIONAL MONETARY FUND 77 Previous Structural Benchmarks Status Completion date NBU and Financial Sector Parliament will approve amendments to the NBU Law to strengthen the governance and autonomy framework of the NBU (February MEFP ¶9). Converted and met as a prior action End-April 2015 NBU will notify banks of any identified discrepancies in the related-party exposure reports based on steps (i) and (ii) as described in February MEFP ¶13. End-July 2015 Judiciary/Enforcement Parliament will approve a law on a selective increase of court fees, aiming to double court fee revenue in real terms within 12 months (February MEFP ¶35). Met May 22, 2015 Parliament will approve a law which strengthens the provisions in the Code of Civil Procedure on Order for Payment for domestic transactions and on garnishment of bank accounts (February MEFP ¶35). End-December 2015; reset from end-August 2015 Fiscal Policy Government will prepare a revenue administration reform plan in order to overhaul the state fiscal service. The plan will include measures to implement governance and institutional reforms that clarify the tax agency's reporting to the minister of finance; and remove large numbers of underperforming officials as described in February MEFP ¶25. Met with a Delay June 26, 2015 End-April 2015 The State Fiscal Service will transfer all taxpayers meeting large taxpayer criteria to the LTO (February MEFP ¶22). End-December 2015 The State Fiscal Service will implement its new arrangements as specified under the revenue administration reform plan (February MEFP ¶25). End-December 2015 State-Owned Enterprises The Ministry of Economy in cooperation with the Ministry of Finance will prepare a statement of fiscal risks emanating from SOEs as described in February MEFP ¶36. Met with a delay May 29, 2015 End-April 2015 The government will adopt a broad-based strategy (prepared in consultation with the IMF and the WB staff) to reform the SOE sector as described in February MEFP ¶36, including measures needed to improve budgetary oversight, develop a comprehensive ownership policy, strengthen corporate governance, prioritize which enterprises should be made subject to restructuring, and examine options for improving management of other state assets. Met May 27, 2015

UKRAINE 78 INTERNATIONAL MONETARY FUND Previous Structural Benchmarks Status Completion date Governance Take necessary measures to establish the National Anti-corruption Bureau (February MEFP ¶32). Met with a delay May 7, 2015 End-April 2015 Strengthen the implementation of the AML framework to prevent the misuse of the financial sector to launder the proceeds of corruption. This includes (i) regulatory amendments to ensure proper implementation of the legal requirements related to domestic politically exposed persons (PEPs); (ii) the FIU will develop guidance to assist financial institutions in identifying domestic PEPs; and (iii) proper arrangements will be put in place to facilitate cooperation between the NBU, FIU and NAB (February MEFP ¶32). Met with a delay July 20, 2015 End-June 2015 Energy Sector Parliament will approve legislative amendments to improve Naftogaz collections. These amendments should include (i) lifting two long-lasting moratoria (Law 2711-IV/2005 and Law 2864-III/2001) that protect energy and other companies from enforcement proceedings; and (ii) disconnecting noncompliant customers from the gas supply grid (February MEFP ¶28). Converted into a prior action End-March 2015 Parliament will approve a new gas market law (February MEFP ¶28). Met April 9, 2015 Undertake an independent audit of all Naftogaz receivables (February MEFP ¶28). Met June 30, 2015

Table 2. Ukraine: Quantitative Program Targets and Projected Performance 1/ (End of period; millions of Ukrainian hryvnias, unless otherwise indicated) 2014December SeptemberDecember March JunePC Adj. PC Actua l PC E s t. Adj. PC Es t. PC PC IT ITI. Quantitative performance criteria Ceiling on the cash deficit of the general government (- implies a surplus) 2/ - 20,400 13,357 -14,536 32,700 34,110 7,816 43,100 82,700 12,700 32,400Ceiling on the cash deficit of the general government and Naftogaz (- implies a surplus) 2/ - 36,500 29,457 -243 62,000 59,079 31,329 9 7,100 144,600 5,700 37,100Floor on cumulative change in net international reserves (in millions of U.S. dollars) 3/ 4/ 1,827 -2,502 -2,639 -2,125 -1,448 -2,528 -1,492 -284 2,098 2,224 2,545Ceiling on cumulative change in net domestic assets of the NBU 3/ 4/ 304,385 57,704 62,490 32,303 76,176 103,878 20,709 84,571 57,720 54, 520 69,445Ceiling on publicly guaranteed debt 2/ - 30,000 30,000 0 30,000 30,000 0 30,000 30,000 20,000 20,000II. Continuous performance criterion Non-accumulation of new external debt payments arrears by the general government 2/ 0 0 0 0 0 0 0III. Indicative TargetsCeiling on cumulative change in base money 2/ 333,194 18,256 18,256 -1,203 53,350 53,350 -2,816 80,086 90,796 89,584 109,578Ceiling on net accumulation of VAT refund arrears 2/ 697 0 2,942 0 7,000 0 0 0 0IV. Memorandum Items Naftogaz deficit 87,301 16,100 16,100 14,293 29,300 24,970 23,512 54,000 61,900 -7,000 4,700E xte r na l p r o ject fina ncing 2/ - 4,523441 11,064 1,485 13,000 14,937 6,995 15,107NBU loans to DGF and operations with Government bonds issued for DGF financing or banks recapitalization 3/ - 25,000 7,950 44,00024,750 53,000 55,000 55,000 55,000Government bonds issued for banks recapitalization and DGF financing 2/ 26,716 29,0000 59,50018,004 59,500 152,000 0 0Programmed disbursements of international assistance except IMF (millions of U.S. dollars) 3/ 4/ -476 172.7 3,233 1,476 3,504 5,475 6,204 6,204Percent of it applied to adjustment 100100 100 100 100 100 100 100Co nver s io n o f a no n-r es er ve cur r ency under a centr a l ba nk s wa p line into a r es er ve cur r ency thr o ug h a n outright s ale 4/ -- 0581Exceptional financing (millions of U.S. dollars) 3/ 4/ --- 500 4,228 4,228 5,478Purchases of foreign exchange from the NBU for the purposes of critical energy imports (incl. those of Naftogaz, millions of US dollars) 3/ 4/ - 1,4861,319.9 1,686 1,590 1,686 1,686 1,686 1,686NBU purchases of T-bonds Issued by Government for Naftogaz recapitalization 3/ - 17,20017,200 26,100 26,100 28,300 28,300 28,300 28,300Projected Payments of Interest on government bonds held by NBU 2/ - 7,1008,500 17,400 17,400 30,300 41,800 10,600 21,800Program exchange rate, Hryvnia per U.S. dollar 15.7686 15.768615.7686 15.7686 15.7686 15.7686 15.7686 15.7686 15.7686 Sources: Ukrainian authorities; and IMF staff estimates and projections. 20162015 1/ Definitio ns a nd a d jus tor s ar e s pecified in the Technica l Memo r a ndum of Und er s ta nding (TM U). 4/ Calculated using program exchange rates specified in the TMU. March 2/ Targets and projections are cumulative flows from January 1, 2015. Data for December 2014 are stocks as of end-December, 2014. For 2016, cumulative flows from January 1, 2016. 3/ Targets and projections are cumulative flows from January 1, 2015. Data for December 2014 are stocks as of end-December, 2014.J uneUKRAINE INTERNATIONAL MONETARY FUND 79

UKRAINE 80 INTERNATIONAL MONETARY FUND Attachment II. Ukraine: Technical Memorandum of Understanding July 21, 2015 1. This Technical Memorandum of Understanding (TMU) sets out the understandings betweenthe Ukrainian authorities and IMF staff regardin g the definitions of the variables subject to quantitative targets (performance criteria and in dicative targets) for the economic program supported by the Extended Arrangement under the Extended Fund Facility, as described in the authorities' Letter of Intent (LOI) dated July 21, 2015 and the attached Memorandum of Economic and Financial Policies (MEFP). It also describes the methods to be used in assessing the program performance and the information requirements to ensure adequate monitoring of the targets. 2. Prior actions and structural benchmarks are listed in Table 1 of the MEFP, withcorresponding definitions in Section I below. Th e quantitative performance criteria are shown in Table 2 of the MEFP. The definitions of these q uantitative targets and the adjustment mechanisms are described in Section I below. The official ex change rate is defined in Section II. Reporting requirements are specified in Section III. 3. For the purposes of the program, all exchange rates used to evaluate reserve levels andmonetary aggregates are (i) the o fficial exchange rate of the Ukrainian hryvnia to the U.S. dollar of 15.7686 set by the NBU as of December 31, 2014; and (ii) reference exchange rates of foreign currencies reported by the European Central Bank (E CB) on its web site as of December 31, 2014, which the NBU used to set official exchange rates of hryvnia to those currencies. In particular, the Swiss Franc is valued at 0.9904 per dollar, the Euro is valued at 1.2141 dollars, the Pound Sterling is valued at 1.5587 dollars, the Australian dollar is valued at 0.8187 U.S. dollars, the Canadian dollar is valued at 0.8633 dollars the Japanese yen is valu ed at 119.6195 per dollar, and the Norwegian Krone is valued at 0.1343 dollars. The accounting exc hange rate for the SDR will be 0.690224 per dollar. Official gold holdings were valued at 1,206.00 do llars per fine ounce. These program exchange rates are kept fixed over the program period. Therefore, the program exchange rate differs from the actual exchange rate set in the foreign exchange ma rket of Ukraine. Furthermore, setting a program exchange rate for the purpose of computing monetary aggregates does not imply that there is any target exchange rate for policy purposes. 4. For the purpose of the program, gross domestic product is compiled as per the System ofNational Accounts 2008 and excludes Crimea and Sevastopol.

UKRAINE INTERNATIONAL MONETARY FUND 81 I. Quantitative Performance Criteria, Indicative Ceilings, and Continuous Performance Criteria A. Floor on Cumulative Change in Net International Reserves (Performance Criterion) Definition 5. Net international reserves (NIR) of the NBU are defined as the dollar value of the difference between usable gross international reserve assets and reserve-related liabilities to nonresidents, evaluated at program exchange rates. 6. Usable gross international reserves comprise all readily available claims on nonresidents denominated in convertible foreign currencies, consistent with the Balance of Payments Manual (Fifth Edition) and the Special Data Dissemination Standard (SDDS) (Table A, item 1). Excluded from usable reserves, inter alia, are: ‚· any assets denominated in foreign currencies held at, or which are claims on, domestic institutions (i.e., institutions headquartered domestically, but located either domestically or abroad, or institutions headquartered abroad, but located domestically). Also excluded are all foreign currency claims of the NBU on domestic banks, and NBU deposits held at the Interbank Foreign Currency Exchange Market and domestic banks for trading purposes; ‚· any precious metals or metal deposits, other than monetary gold and gold deposits, held by the NBU; ‚· any assets that correspond to claims of commercial banks in foreign currency on the NBU and any reserves assets that are (i) encumbered; or (ii) pledged as collateral (in so far as not already included in foreign liabilities, or excluded from reserve assets); or (iii) frozen; and ‚· any reserve assets that are not readily available for intervention in the foreign exchange market, inter alia, because of lack of quality or lack of liquidity that limits marketability at the book price. 7. For the purpose of this program, reserve-related liabilities comprise: ‚· all short-term liabilities of the NBU vis- -vis nonresidents denominated in convertible foreign currencies with an original maturity of one year or less; ‚· the stock of IMF credit outstanding;

UKRAINE 82 INTERNATIONAL MONETARY FUND ‚· the nominal value of all derivative positions1 (including swaps, options, forwards, and futures) of the NBU and general government, implying the sale of foreign currency or other reserve assets; and ‚· all foreign exchange liabilities of the NBU to resident entities (e.g., claims in foreign exchange of domestic banks, and NBU credits in foreign exchange from domestic market) excluding foreign exchange liabilities to the general government, or related to deposit guarantees. Table A. Components of Net International Reserves Type of Foreign Reserve Asset or Liability2 NBU Balance Sheet and Memorandum Accounts 1. International reserves Monetary gold Foreign exchange in cash Demand deposits at foreign banks Short-term time deposits at foreign banks Long-term deposits at foreign banks SDR holdings and Reserve Position in the IMF Securities issued by nonresidents Settlement of foreign securities 1100, 1107 1011, 1017 1201, 1202 1211 1212 IMF, Finance Department3 1300, 1305, 1307, 1308, minus 1306 2746, minus 4746 2. Short-term liabilities to nonresidents (in convertible currencies) Correspondent accounts of nonresident banks Short-term deposits of nonresident banks Operations with nonresident customers Use of IMF credit 3201 3211 3230, 3232, 3233 IMF, Finance Department Assumptions in line with the authorities' commitments 8. The NIR/NDA targets assume a rollover of general government's domestic foreign exchange debt liabilities in the amount of US$100 million in June 2015 and US$200 million in July 2015, and a rollover rate of at least 40 percent in 2016. The rollover will be achieved through an issuance of new general government foreign exchange bonds with a maturity of at least one year. Furthermore, the 1 This refers to the notional value of the commitments, not the market value. 2 The definitions used in this technical memorandum will be adjusted to reflect any changes in accounting classifications introduced during the period of the program. The definitions of the foreign accounts here correspond to the system of accounts in existence on December 31, 2014. The authorities will inform the staff before introducing any change to the Charts of Accounts of the NBU and the Commercial Banks, and changes in the reporting forms. 3 Before receiving the monthly data from the IMF's Finance Department, these components will be calculated on the basis of preliminary data from the NBU and memorandum accounts.

UKRAINE INTERNATIONAL MONETARY FUND 83 NIR/NDA targets assume that there will be no early repayment of domestic foreign exchange bonds, in line with the authorities' commitment. Adjustment mechanism ‚· The NIR targets will be adjusted upward (downward) by the full amount of the cumulative excess (shortfall) in program disbursements relative to the baseline projection (Table B). Program disbursements are defined as external disbursements (excluding project-financing disbursements) from official multilateral creditors (World Bank, European Commission, European Investment Bank, and European Bank for Reconstruction and Development), official bilateral creditors (net), and external bond placements that are usable for the financing of the central government budget deficit. ‚· NIR targets will be adjusted upward by the cumulative shortfall in purchases of foreign exchange from the NBU for the purposes of paying critical energy imports (including those of Naftogaz) relative to the baseline projection (Table C). ‚· NIR targets will be adjusted downward by the full amount of the cumulative excess in government purchases of foreign exchange from the NBU for the purpose and in the event of early repayment of the government-guaranteed part of a maturing external loan to Naftogaz (in case this loan is repaid ahead of schedule). The downward adjustment of the NIR targets will be capped at US$500 million. ‚· In case the NBU converts Renminbi or any other non-reserve currency provided under a central bank swap agreement with the NBU into a reserve currency through an outright sale, a symmetric adjustor will be applied to NIR targets. NIR targets will be adjusted upward by the amount that will be converted into a reserve currency at the time of the conversion. NIR targets will be adjusted downward by the amount of a reserve currency (both the principal and interest due), when the NBU repays the non-reserve currency provided under a central bank swap agreement. ‚· In the event of higher exceptional financing than envisaged under the baseline (Table D), either due to the discontinuation of payments or due to changes to the terms resulting from the issuance of new debt upon completion of the debt operation on general government direct and guaranteed debt included in the perimeter of the debt operation as published in the Cabinet of Minister's Resolution No. 318-p on April 4, 2015, NIR targets will be adjusted upward by the full amount of the cumulative excess in exceptional financing in foreign exchange relative to the baseline.

UKRAINE 84 INTERNATIONAL MONETARY FUND Table B. Eurobond Placements and Disbursements from IFIs and Official Sources: Projections for NIR/NDA Adjustment (Cumulative flows from end-December 2014, millions of U.S. dollars at program exchange rate) Eurobond placement World Bank EU Others (Canada, Germany, Japan) Total End-March 2015 0 0 304 173 4763 End-June 2015 1,000 500 1,032 701 3,233 End-September 2015 1,000 1,000 1,032 472 3,504 End-December 2015 2,000 1,000 1,760 715 5,475 End-March 2016 2,000 1,000 2,489 715 6,204 End-June 2016 2,000 1,000 2,489 715 6,204 Table C. Purchases of Foreign Exchange from NBU for the Purposes of Critical Energy Imports: Projections for NIR Adjustment (Cumulative flows from end-December 2014, millions of U.S. dollars) Purchases of foreign exchange from the NBU for critical energy imports (incl. those of Naftogaz) End-March 2015 1,486 End-June 2015 1,686 End-September 2015 1,686 End-December 2015 1,686 End-March 2016 1,686 End-June 2016 1,686 Table D. Exceptional Financing: Projections for NIR/NDA Adjustment (Cumulative flows from end-December 2014, millions of U.S. dollars at program exchange rate) Exceptional Financing End-September 2015 500 End-December 2015 4,228 End-March 2016 4,228 End-June 2016 5,478 B. Ceiling on Cumulative Change in Net Domestic Assets of the NBU (Performance Criterion) Definition 9. Net domestic assets (NDA) of the NBU are defined as the difference between the monetary base (as defined below) and the NIR of the NBU (as defined above). For the purpose of computing the NDA target, the NIR is valued at the program exchange rates defined in paragraph 3 and expressed in hryvnia.

UKRAINE INTERNATIONAL MONETARY FUND 85 Adjustment mechanism ‚· Consistent with the NIR target adjustment mechanism (as defined above), NDA targets will be adjusted downward (upward) by the full amount of the cumulative excess (shortfall) in program disbursements relative to the baseline projection (Table B) and evaluated at the program exchange rates. ‚· Consistent with the NIR target adjustment mechanism (as defined above), NDA targets will be adjusted downward by the full amount of the cumulative shortfall in NBU purchases of T-bonds issued by government for Naftogaz recapitalization relative to the baseline projection (Table E). ‚· Consistent with the NIR target adjustment mechanism (as defined above), NDA targets will be adjusted upward by the hryvnia equivalent of the full amount of the cumulative excess in government purchases of foreign exchange from the NBU for the purpose of repaying the government-guaranteed part of a maturing external loan to Naftogaz (in case this loan is repaid ahead of schedule). The upward adjustment of the NDA target will be capped to hryvnia equivalent of US$500 million, calculated using the program exchange rate defined in paragraph 3. ‚· NDA targets will be adjusted upward by the full amount of the cumulative excess in the total amount of NBU loans to the Deposit Guarantee Fund (DGF) as well as total amount of NBU purchases of government bonds issued for the purposes of DGF financing, and NBU purchases of government bonds issued for bank recapitalization, relative to the baseline projection, and evaluated at the program exchange rates if provided in foreign exchange (Table E). ‚· In case another central bank uses the hryvnia provided under a central bank swap agreement with the NBU, a symmetric adjustor will be applied to NDA targets. NDA targets will be adjusted upward by the amount of hryvnia placed in a commercial bank's account at the NBU, when the central bank uses the hryvnia. NDA targets will be adjusted downward by the amount of hryvnia (both the principal and interest due), when the other central bank repays the used hryvnia. ‚· In the event of higher exceptional financing than envisaged under the baseline (Table D), either due to the discontinuation of payments or due to changes to the terms resulting from the issuance of new debt upon completion of the debt operation on general government direct and guaranteed debt included in the perimeter of the debt operation as published in the Cabinet of Minister's Resolution No. 318-p on April 4, 2015, NDA targets will be adjusted downward by the full amount of the cumulative excess in exceptional financing in foreign exchange relative to the baseline and evaluated at the program exchange rates.

UKRAINE 86 INTERNATIONAL MONETARY FUND Table E. NBU Loans to DGF and Purchases of Government Bonds Issued for DGF Financing or Banks Recapitalization and for Naftogaz Recapitalization: Projections for NDA/Monetary Base Adjustment (Cumulative flows from end-December 2014, millions of hryvnia) NBU loans to DGF and purchases of government bonds issued for DGF Financing or Bank Recapitalization NBU purchases of government bonds issued for Naftogaz recapitalization End-March 2015 25,000 17,200 End-June 2015 44,000 26,100 End-September 2015 53,000 28,300 End-December 2015 55,000 28,300 End-March 2016 55,000 28,300 End-June 2016 55,000 28,300 C. Ceiling on Cumulative Change in Monetary Base of the NBU (Base Money) (Indicative Target) Definition 10. The NBU's monetary base comprises domestic currency outside banks and banks' reserves, including cash in vault of commercial banks, and funds of customers at the NBU.4 Currency outside banks is defined as Currency'--banknotes and coins'--(NBU accounts 3000 (net)+3001 (net)-3007A-3009A-1001A-1004A-1007A-1008A-1009A) minus cash in vault at deposit money banks (DMBs) (DMB accounts 1001A:1005A, and 1007A). Banks' reserves are defined as cash in vault at deposit money banks (DMB accounts 1001A:1005A, and 1007A) plus DMB correspondent account deposits at the NBU in hryvnia (NBU liabilities accounts 3200, 3203, 3204, and 3206) plus funds of customers at the NBU in hryvnia (NBU liabilities accounts of groups 323,5 3250, 4731, 4732, 4735, 4736, 4738, 4739, and 4750), plus accrued interest on time deposits of DMBs in national currency (NBU accounts 3208L), plus accrued interest on client's current accounts in national currency. Adjustment mechanism ‚· Consistent with the NDA target adjustment mechanism (as defined above), monetary base targets will be adjusted upward by the full amount of the cumulative excess in the total amount 4 The definitions set out here will be modified to include any other accounts that may be identified or created in the future in connection with domestic currency issue and the deposit money banks' deposits at the NBU. 5 Includes accounts of following sectors: 2 - other financial intermediaries and other financial organizations; 6 - regional and local authorities; 7 - government nonfinancial corporations; 8 - private and foreign-controlled nonfinancial corporations; 9 - noncommercial organizations serving households.

UKRAINE INTERNATIONAL MONETARY FUND 87 of NBU loans to the Deposit Guarantee Fund (DGF) as well as total amount of NBU purchases of government bonds issued for the purposes of DGF financing or banks recapitalization, relative to the baseline projection (Table E), and evaluated at the program exchange rates if provided in foreign exchange. ‚· Consistent with the NDA target adjustment mechanism (as defined above), monetary base targets will be adjusted upward by the amount of hryvnia placed in a commercial bank's account at the NBU, when another central bank uses the hryvnia provided under a central banks swap agreement. Monetary base targets will be adjusted downward by the amount of hryvnia (both the principal and interest due), when the other central bank repays the used hryvnia. D. Ceiling on Cash Deficit of the General Government (Performance Criterion) Definition 11. The general government comprises the central (state) government, including the Road Fund (UkrAvtoDor), all local governments, and all extra budgetary funds, including the Pension Fund, Unemployment Fund, and the Fund for Social Insurance of Ukraine (formerly temporary disability insurance and occupational injury and disease insurance funds). The budget of the general government comprises (i) the state budget; (ii) all local government budgets; and (iii), if not already included in (i), the budgets of the extra budgetary funds listed above, as well as any other extra budgetary funds included in the monetary statistics compiled by the NBU. The government will inform the IMF staff of the creation or any pending reclassification of any new funds, programs, or entities, immediately. The cash deficit of the general government is measured by means of net financing flows as: ‚· total net treasury bill sales6 (in hryvnias and foreign currency) as measured by the information kept in the NBU registry of treasury bill sales (net treasury bill sales are defined as the cumulative total funds realized from the sales of treasury bills at the primary auction and government securities issued for recapitalization of banks and SOEs, less the cumulative total redemption of principal on treasury bills), excluding bonds issued to recapitalize Naftogaz7 and other SOEs; plus 6 From here on, treasury bills are defined as all treasury securities (including long-term instruments or treasury bonds). 7 These are included in the financing of Naftogaz' cash deficit when they are used (as collateral for a loan, or as an outright sale) by the latter to obtain financing.

UKRAINE 88 INTERNATIONAL MONETARY FUND ‚· other net domestic banking system credit to general government as measured by the monetary statistics provided by the NBU (this consists of all non-treasury-bill financing in either domestic or foreign currency extended to the general government by banks less the change in all government deposits in the banking system) as well as any other financing extended by entities not reflected by the monetary statistics provided by the NBU; plus ‚· total receipts from privatization received by the State Property Fund and local governments (including the change in the stock of refundable participation deposits and the net sale of nonfinancial assets); plus ‚· the difference between disbursements and amortization on any bond issued by the general government or the NBU to nonresidents for purposes of financing the deficit of the general government; plus ‚· the difference between disbursements of foreign credits to the general government (including project loans on lent to public enterprises) and the amortization of foreign credits by the general government (including on lent project loans); plus ‚· the net sales of SDR allocation in the SDR department; plus ‚· the net change in general government deposits in nonresident banks, or other nonresident institutions; plus ‚· net proceeds from any promissory note or other financial instruments issued by the general government. 12. For the purposes of measuring the deficit of the general government, all flows to/from the budget in foreign currency (including from the issuance of foreign currency denominated domestic financial instruments) will be accounted in hryvnias at the official exchange rate established as of the date of the transaction. Adjustment mechanism ‚· The ceiling on the cash deficit of the general government is subject to an automatic adjustor based on deviations of external project financing (defined as disbursements from bilateral and multilateral creditors to the consolidated general government for specific project expenditure) from program projections (Table F). Specifically, if the cumulative proceeds from external project financing (in hryvnia evaluated at actual exchange rates):

UKRAINE INTERNATIONAL MONETARY FUND 89 a. exceed program projections, the ceiling on the consolidated general government deficit will be adjusted upward by 100 percent of the excess in external project financing; and b. fall short of program projections, the ceiling on the consolidated general government deficit will be adjusted downward by 100 percent of the shortfall in external project financing. Table F. External Financing of General Government Projects'--Adjustment Cumulative flows from January 1, 2015 In millions of hryvnia External project financing (technical assumption for the adjustor purpose) End-March 2015 4,523 End-June 2015 11,064 End-September 2015 13,000 End-December 2015 14,937 End-March 2016 1/ 6,995 End-June 2016 1/ 15,107 1/ Cumulative flows from January 1, 2016. ‚· The ceilings on the cash deficit of the general government at end-September and end-December 2015 are subject to an automatic adjustor corresponding to the full amount of government bonds issued for the purposes of banks recapitalization and DGF-financing, up to a cumulative maximum of UAH 152 billion in 2015. (Table 2 of the MEFP). ‚· The ceiling on the cash deficit of the general government is subject to an automatic adjustor on the stock of budgetary arrears on social payments. Budgetary arrears on social payments comprise all arrears of the consolidated budget on wages, pensions, and social benefits owed by the Pension Fund, and the central or local governments. Budgetary arrears are defined as payments not made thirty days after they are due. Wages are defined to comprise all forms of remuneration for work performed for standard and overtime work. Pension obligations of the Pension Fund comprise all pension benefits and other obligations of the Pension Fund. This definition excludes unpaid pensions to individuals who resided or continue to reside on the territories that are temporarily outside the government control. ‚· The ceiling on the cash deficit of the general government at all 2015 test dates will be automatically adjusted downward by VAT refund arrears accumulated as defined in Section E from January 1, 2015. ‚· The ceilings on the cash deficit of the general government at end-September and end-December 2015 are subject to an upward adjustment for the full amount of government repaying government-guaranteed part of an external loan to Naftogaz, in case this loan is repaid ahead of schedule and the repayment is recorded as above-the-line transaction. The adjustment

UKRAINE 90 INTERNATIONAL MONETARY FUND will be equal to the actually repaid amount in US$ terms capped at US$500 million, and recalculated in hryvnia at the actual exchange rate at the time of repayment. 13. The ceilings on the cash deficit of the general government at end-September and end-December 2015 are subject to an automatic downward adjustor corresponding to the full savings on the budgetary interest bill resulting from any restructuring or reprofiling of existing government debt to NBU as of end-2014. Such savings will be determined as the difference between the actual and projected payments on government bonds held by the NBU. The projected payments are presented in Table G. Table G. Projected Payments of Interest on Government Bonds held by NBU Cumulative flows from January 1, 2015 In billions of hryvnia End-March 2015 7.1 End-June 2015 17.4 End-September 2015 30.3 End-December 2015 41.8 End-March 2016 1/ 10.6 End-June 2016 1/ 21.8 1/ Cumulative flows from January 1, 2016. E. Ceiling on VAT Refund Arrears (Indicative Target) 14. The ceiling on net accumulation of VAT refund arrears is set to UAH 0 billion. The stock of VAT refund arrears is defined as those claims that have not been settled (through a cash refund, netting out against obligations of taxpayers, payment with a government bond (VAT bond) or an official decision to reject the claim) within a specified time period after the VAT refund claim has been submitted to the State Fiscal Service (SFS). In 2015, this time period is 74 days, allowing for verification of the validity and payment processing of claims. According to this definition, the stock of VAT refund arrears as of March 31, 2015 was UAH 2.9 billion. F. Ceiling on Cash Deficit of the General Government and Naftogaz (Performance Criterion) Definition 15. The cash deficit of the General Government and Naftogaz is the cash deficit of the General Government as defined above plus the cash deficit of Naftogaz.

UKRAINE INTERNATIONAL MONETARY FUND 91 16. Naftogaz is defined as the national joint stock company ''Naftogaz of Ukraine.'' The cash deficit of Naftogaz is measured from below the line as: ‚· net domestic banking system credit to the company (this consists of all financing in either domestic or foreign currency extended to the company by banks less the change in company deposits in the banking system); plus ‚· the difference between disbursements of private foreign loans to Naftogaz (including private placements) and the amortization of private foreign loans (including private placements); plus ‚· the difference between disbursements of official foreign credits to Naftogaz (including project loans) and the amortization of official foreign credits (including project loans); plus ‚· the disbursements of trade credits to import gas; plus ‚· the difference between disbursements and amortization on any bonds issued by Naftogaz; plus ‚· the net change in deposits of Naftogaz in nonresident banks, or other nonresident institutions; plus ‚· net proceeds from any promissory note or other financial instruments issued by Naftogaz; plus ‚· net receipts from sale of financial assets (including recapitalization or other form of treasury securities issued to Naftogaz, irrespective of their issuance date); plus ‚· any other forms of financing of the company not identified above. 17. For the purposes of measuring the deficit of Naftogaz, all flows in foreign currency will be accounted in hryvnias at the official exchange rate as of the date of the transaction. When there are arrears outstanding as of the test date, the official exchange rate on the test date will apply to their valuation. Adjustment mechanism ‚· The ceiling on the cash deficit of the general government and Naftogaz will be adjusted upward by the amount of financing by multilateral institutions and official bilateral creditors disbursed to Naftogaz for investment projects.

UKRAINE 92 INTERNATIONAL MONETARY FUND ‚· The ceiling on the cash deficit of the general government and Naftogaz will be adjusted downward by the net transfers made by Gazprom (advance transit fee). These transfers are measured on a cumulative basis from the beginning of each calendar year. ‚· The ceiling on the cash deficit of the general government and Naftogaz will be adjusted by the net amount of accumulated domestic arrears by Naftogaz to Ukrgazvydobuvannya and Ukrtransgaz, measured on a cumulative basis from the beginning of each calendar year. G. Ceiling on Non-Accumulation of New External Debt Payments Arrears by the General Government (Continuous Performance Criterion) Definition 18. For the purposes of the program, an external debt payment arrear will be defined as a payment by the general government, which has not been made within seven days after falling due (including grace period, if any). The performance criterion will apply on a continuous basis throughout the program period. H. Ceiling on Publicly Guaranteed Debt (Performance Criterion) Definition 19. The ceiling on publicly guaranteed debt will apply to the amount of guarantees issued in 2015 by the central (state) government. The official exchange rate will apply to all non-UAH denominated debt. New state guarantees in 2015 will amount to no more than UAH 30 billion. This ceiling excludes guarantees issued by the Ministry of Finance for NBU borrowings from IMF. I. Other Continuous Performance Criteria 20. During the period of the Extended Arrangement, Ukraine will not (i) impose or intensify restrictions on the making of payments and transfers for current international transactions; (ii) introduce or modify multiple currency practices; (iii) conclude bilateral payments agreements that are inconsistent with Article VIII; and (iv) impose or intensify import restrictions for balance of payments reasons.

UKRAINE INTERNATIONAL MONETARY FUND 93 II. Official Exchange Rate Determination of the official exchange rate 21. The NBU will, on a daily basis, set the official rate calculated as a weighted average of the exchange rates of the interbank market deals on the same day. To calculate the official exchange rate, all deals concluded on the day will be considered regardless of the settlement date. Specifically, tod, tom and spot (T+2) deals will be included. NBU will make public its official exchange rate by no later than 18:00 of the day, preceding the one for which it is set. III. Reporting Requirements A. National Bank of Ukraine 22. The NBU will continue to provide to the IMF on a monthly basis, no later than the 25th day of the following month, a balance sheet for the NBU and a consolidated balance sheet for the deposit money banks. 23. The NBU will provide to the IMF, on a daily basis, with daily data the stock of net and gross international reserves, at both actual and program exchange rates. In addition, it will provide on a weekly and monthly basis, no later than the 25th of the following month, the full breakdown of NBU accounts included in net international reserves (defined in Table A above). 24. The NBU will provide the IMF on a daily basis with information on obligatory foreign exchange sales and approved foreign exchange demand in the interbank market, including Naftogaz foreign exchange purchases. The NBU will provide the IMF on a daily basis with information on official foreign exchange interventions and intervention quotations. In this context, it will also provide the results of any foreign exchange auctions. 25. The NBU will provide the IMF on a daily basis with information on balances held in the analytical accounts 2900 ''Accounts payable per transactions for the foreign exchange, banking and precious metals purchase and sale on behalf of banks' clients.'' 26. The NBU will continue to provide on its web site the daily holdings of treasury bills at primary market prices, at current exchange rates. The NBU will provide information on daily holdings of treasury bills broken down by type of holders (including state-owned banks and private banks) at primary market prices at the rate fixed on the day of auction information on t-bills sales, including in the foreign exchange, from the beginning of the year at the official rate as of the date of placement,

UKRAINE 94 INTERNATIONAL MONETARY FUND as well as the t-bills in circulation, by principal debt outstanding at the official exchange rate as of the date of placement (OP-2); reports on each treasury bill auction; and provide to the IMF the monthly report on treasury bills, in the format agreed with the IMF staff. 27. The NBU will provide information on daily transactions (volumes and yields) on the secondary market treasury bills (including over the counter transactions). 28. The NBU will provide to the IMF, on a daily basis, the information on the claims on banks provided and liabilities in the format agreed with the IMF staff. 29. The NBU will provide to the IMF its financial statements (income and expenses) for the current and, if available, for the following year, as approved by the NBU's Council. The IMF is to be notified immediately of any update. 30. The NBU will continue to provide to the IMF, on a monthly basis, general information on the NBU financing (as well as the refinancing) of the banks of Ukraine, and on the operations of mopping up (absorption) of the liquidity from the banking system (including through the CDs issuance) in the format agreed with the IMF staff. It will also provide, on a weekly basis, bank-by-bank information on the outstanding amount and weighted-average interest rates of loans from the NBU, reported by type of lending. On a monthly basis, the NBU will provide information on the collateral that has been pledged to the NBU for loans (by bank and loan type as well as by collateral type, haircut and currency). The weekly reporting of NBU loans and collateral will separately identify which banks are under temporary administration or liquidation. 31. The NBU will provide to the IMF, on a monthly basis but not later than 30 days after the expiration of the reporting month, the report on the banking sector financial stability indicators (FSIs) in the format agreed with the IMF staff. The NBU will also provide core FSIs, as defined in the IMF Compilation Guide, for the individual banks in Group I and Group II on a monthly basis. 32. On a daily basis, the NBU will continue to provide the IMF with the operational monetary survey of the NBU, including any additional information that is needed for the IMF staff to monitor monetary policy and developments in the banking sector. 33. The NBU will provide to the IMF, on a monthly basis, the net domestic assets data based on the monthly balance sheets within three weeks following the end of the month. 34. The NBU will continue to provide to the IMF the daily operational balance sheets of the NBU and commercial banks on a daily basis according to standard reporting forms, including detailed

UKRAINE INTERNATIONAL MONETARY FUND 95 information on loans of the banking sector provided to the general government, with detailed breakdown of this information by indebtedness of the central (state) government and local budgets, including in national and foreign currency, by loan and by security, as well as the information on the balances of the funds of the government held at the NBU, in particular, the balances of the Single Treasury Account denominated in the national currency (account 3240 A) and the funds of the Treasury denominated in foreign currency (account 3513 A). 35. The NBU will provide to the IMF, on a monthly basis, projections for external payments falling due in the next 12 months. The data on actual settlement of external obligations, reflecting separately principal and interest payments as well as actual outturns for both the public and private sectors, shall be provided on a quarterly basis, within 80 days following the end of the quarter. 36. The NBU will provide to the IMF, on a quarterly basis, the stock of short- and long-term external debt (including arrears) for both public and private sectors. 37. The NBU will provide to the IMF, on a daily basis, data on foreign exchange export proceeds and obligatory foreign exchange sales; data on import transactions for goods and services; data on amounts of foreign exchange transferred from abroad to the benefit of physical persons'--residents and nonresidents'--to be paid in cash without opening an account; data on foreign exchange wires from Ukraine abroad for current foreign exchange nontrade transactions on the basis of the orders of physical persons; data on sales and purchases of foreign exchange cash by individuals (incl. through banks, exchange offices, and Ukrposta); data summarizing the implementation of T+3 verification system, namely, the total number and volume of transactions screened and the total number and volume of transactions blocked, with separate information on imports. The NBU will provide to the IMF weekly data on the volumes of noncash foreign exchange purchases on behalf of banks' clients and banks broken down by reasons (form N 538). 38. The NBU will provide to the IMF, on a daily basis, data on foreign assets and liabilities of the overall banking system (excl. the NBU); data on banks' open foreign exchange positions by main groups of banks; data on deposits on the aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities, maturity, as well as by national and foreign currency; data on loans on the aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities as well as by national and foreign currency. In addition, the NBU will provide to the IMF, on a daily basis, data on deposits and credits on the aggregated basis for the overall banking system (excl. the NBU) without deposits and credits of banks in liquidation starting from the beginning of 2014 and broken down by households and legal entities, as well as by national and foreign currency. On a weekly basis, the NBU will provide the IMF

UKRAINE 96 INTERNATIONAL MONETARY FUND data on foreign (external) assets and foreign liabilities (broken down by domestic and foreign currency) for the individual banks in Group I and Group II. On a monthly basis, Foreign assets will be broken down by type (i.e., cash and deposits, government securities, nongovernment securities, loans, other) and foreign liabilities by type, holder (i.e., banks, other financial institutions, nonfinancial corporate, and individuals) and remaining maturity (less than one month, one to three months, three to 12 months and over 12 months). For foreign credit lines from banks and for securities, the rollover rates will also be provided. 39. The NBU will provide, on a daily basis, bank-by-bank data for the largest 35 banks and aggregate data for the Group III and IV banks separately on the liquidity ratio and amounts of cash and cash equivalents, available funds in NBU accounts (excl. reserve requirements), correspondent accounts with well-known international banks (excl. encumbered accounts), and deposits from customers; total assets and liabilities; loans and claims (by households, legal entities, and banks); and foreign exchange net open position. The data will be reported by domestic and foreign currency. The deposits data will be reported by households and legal entities and by maturity (current accounts, saving accounts, and time deposits). In addition, for the aggregate of the banking sector as well as Group III and IV banks, the NBU will provide data excluding those banks in liquidation since 2014. 40. The NBU will provide to the IMF on a daily basis aggregated data on main currency flows, including government foreign receipts and payments by currencies as well as currency breakdown of interbank market operations. The NBU will continue to provide daily information on exchange market transactions including the exchange rate. 41. The NBU will provide to the IMF reports N 381.25; 381.26 with information on reserve requirements. 42. The NBU will provide the IMF, on a two-weekly basis, with daily data on the total financing (including refinancing) issued by the NBU to commercial banks, broken down by types of instrument, maturity (average weighted), interest rate as well as transactions to absorb liquidity from the banking system. 43. The NBU will provide the IMF, on a weekly basis, bank-by-bank for Group I and Group II banks the average interest rate on deposits to customers (by domestic and foreign currency, and legal entities and households); and the average interest rate on interbank borrowings (by domestic and foreign currency).

UKRAINE INTERNATIONAL MONETARY FUND 97 44. The NBU will provide the IMF, on a two weekly basis, in an agreed format, data for the entire banking sector'--aggregate for Group III and IV and on a bank-by-bank basis for Group I and Group II banks'--risk weighted assets and other risk exposures (for ratio H2 calculation), including for the excess of long-term asset to funding and foreign exchange open position; total regulatory (Tier 1 and Tier 2) and core (Tier 1) capital; capital adequacy ratio for total regulatory (H2) capital; loans and claims by maturity buckets for households, legal entities, and banks in domestic and foreign currencies; deposits by maturity buckets for households, legal entities, and banks in domestic and foreign currencies; and foreign exchange net open position, split between total foreign exchange assets (long position) and foreign exchange liabilities (short position), and between on- and off- balance sheet. 45. The NBU will provide the IMF, on a monthly basis, in an agreed format, data for the entire banking sector (and aggregates for Group III and IV) as well as on a bank-by-bank basis for Group I and Group II banks the amount of loans and claims (by households in domestic and foreign currency, legal entities in domestic and foreign currency, banks in domestic and foreign currency, maturity, and by loan classification categories I, II, III, IV, and V); collateral for loans and claims (by type of collateral, legal entities in domestic and foreign currency, households in domestic and foreign currency, banks in domestic and foreign currency, and by loan classification categories I, II, III, IV, and V); provisions on loans and claims (by households in domestic and foreign currency, legal entities in domestic and foreign currency, banks in domestic and foreign currency, and by loan classification categories I, II, III, IV, and V); large exposures (loans equal to or greater than 10 percent of equity), refinanced loans, and restructured loans (by households, legal entities, and banks); the average interest rate on the outstanding stock of loans to customers (by legal entities and households; accrued interest on loans (by domestic and foreign currency); securities held for trading and available for sale, with government securities reported separately (by domestic and foreign currency); securities held to maturity and as investment, with government securities reported separately (by domestic and foreign currency). 46. The NBU will provide the IMF, on a monthly basis, in an agreed format, bank-by-bank for the Group I and Group II banks the amount of deposits of related parties (by domestic and foreign currencies, and households and legal entities); deposits of related parties pledged as (cash cover) collateral (by domestic and foreign currencies, and households and legal entities); other liabilities to related parties (by domestic and foreign currencies); related party loans (by households, legal entities, and banks); counterparty names and amounts of the largest 20 loans to related parties; collateral for loans and claims on related parties (by type of collateral, legal entities, households, and banks in domestic and foreign currencies, as well as by loan classification categories I, II, III, IV, and

UKRAINE 98 INTERNATIONAL MONETARY FUND V); provisions on loans and claims on related parties (by households, legal entities, and banks in domestic and foreign currencies, as well as by loan classification categories I, II, III, IV, and V). 47. The NBU will provide to the IMF, on a monthly basis, data bank-by-bank and by region loans and provisions (by households and legal entities, domestic and foreign currencies, and by loan classification categories I, II, III, IV, and V); deposits (by households and legal entities, and domestic and foreign currencies); due from banks (by domestic and foreign currencies). 48. The NBU will report to the IMF, on a monthly basis, data for the entire banking sector (and aggregates for Group III and IV) as well as on a bank-by-bank basis for Group I and Group II banks on cumulative income statements, including total revenues; interest revenues (from loans to households, loans to legal entities, interbank loans, placements with the NBU, securities); revenues from fees and commissions; total expenses; interest expenses (on deposits to legal entities, deposits to households, interbank borrowing, borrowing from NBU, securities issued); fees and commissions paid; salaries and other staff compensation; other operational expenses; net earnings before loan loss provisions; loan loss provisions; net earnings after loan loss provisions; taxes paid; net earnings. 49. The NBU will provide to the IMF the two-week projections of cash flows for the Group I and II banks. 50. The NBU will report to the IMF on a bi-weekly basis and bank-by-bank the amount by which the Group I and II banks' regulatory capital has been increased. The report will disclose the instrument or transactions by which the regulatory capital has been increased (e.g., capital injection, conversion of subordinated debt to equity etc.). 51. The NBU will, once a month, inform the IMF any regulatory and supervisory measures against banks violating the NBU regulations on capital adequacy, liquidity ration, large exposures, and connected lending, as well as about decisions on declaring a bank as problem or insolvent. 52. The NBU will continue to provide on a monthly basis, no later than 25 days after the end of the month, banking system monitoring indicators in an agreed format. This includes inter alia data on nonperforming loans (III, IV, and V category). 53. The NBU will continue to provide detailed quarterly balance of payments data in electronic format within 80 days after the end of the quarter. 54. The NBU will provide data on credit to nongovernment units that are guaranteed by the NBU on a monthly basis no later than 25 days after the end of the month.

UKRAINE INTERNATIONAL MONETARY FUND 99 55. The NBU will inform IMF staff if the Treasury does not pay interest or principal on domestic government bonds due to the NBU, deposit money banks, or nonbank entities and individuals. In such case, the NBU will provide information on outstanding interest and principal payments. 56. The NBU will inform IMF staff of any changes to reserve requirements for deposit money banks. 57. The NBU will communicate (electronically) to the IMF staff any changes in the accounting and valuation principles applicable to the balance sheet data and will notify the staff before introducing any changes to the Charts of Accounts and reporting forms of both the NBU and the commercial banks. 58. The NBU Internal Audit Department will continue to provide an assurance report to the Fund, no later than six weeks after each test date, confirming that (i) the monetary data are in accordance with program definitions and have been verified and reconciled to accounting records; and (ii) that there have been no changes to the chart of accounts or valuation methods that would impact the data reporting. 59. The NBU will continue to provide the Fund with a copy of the annual management letter from the external auditor within six weeks of completion of each audit. As required under the Fund's safeguard policy, this will remain in effect for the duration of the arrangement and for as long as credit remains outstanding. 60. The NBU will provide the Fund with data relative to the interest income received from January 1, 2015 on the portfolio of government bonds on a quarterly basis but no later than 15 days from the end of the reporting period. B. Deposit Guarantee Fund 61. The DGF will provide, on a monthly basis, data on the total number and volume of household deposits broken down in groups by deposit size. The data will be reported bank-by-bank for the largest 35 banks and on aggregate for the remaining banks. 62. The DGF will report to the IMF on a monthly basis and bank-by-bank for all banks in the banking system the amount of insured deposits and total household deposits. The data will be reported according to an agreed format, by domestic and foreign currency. 63. The DGF will report to the IMF on a monthly basis and bank-by-bank the total insured deposits and remaining insured deposits to be paid by the DGF for the banks under liquidation and

UKRAINE 100 INTERNATIONAL MONETARY FUND under provisional administration. The data will be reported according to an agreed format, by domestic and foreign currency. 64. The DGF will report to the IMF on a monthly basis the financial position of the DGF, including information about the cash balance, bond holdings, credit lines, and loans. The data will be reported according to an agreed format. 65. The DGF will report to the IMF on a monthly basis the financing arrangements of the DGF, including information about contracted financing from MoF. The data will be reported according to an agreed format. 66. The DGF will report to the IMF on a monthly basis a one-year forecast of the amount and type of financial resources that the DGF expects to receive from MoF, NBU and other entities, the amount that DGF expects to pay out to insured depositors in banks in liquidation, and the amount of asset recoveries expected by DGF. The data will be reported according to an agreed format. C. Ministry of Finance 67. The Ministry of Finance will provide the IMF with the monthly consolidated balances (end-month) of other non-general government entities, including SOEs, holding accounts at the Treasury no later than 25 days after the end of the month. 68. The Treasury will continue to provide to the IMF reports on daily operational budget execution indicators, daily inflow of borrowed funds (by currency of issuance) to the state budget and expenditures related to debt service (interest payments and principals), weekly balances of Treasury cash flow (outturn and forecast), including data on government foreign exchange deposits, in a format agreed with IMF staff, 10-day basis data on the execution of the state, local, and consolidated budgets on the revenue side and data on revenues from the social security contributions, monthly data on funds, deposited with the Single Treasury Account, on the registration accounts of the entities which are not included in the state sector, information on balance of funds as of the 1st day of the month on the account #3712 ''accounts of other clients of the Treasury of Ukraine,'' on inflow to the State budget from placing Treasury or any other liabilities to households in foreign and domestic currency and their redemption. 69. The Ministry of Finance will continue to provide to the IMF in electronic form monthly and quarterly treasury reports, no later than 25 and 35 days after the end of the period respectively. The Ministry of Finance will continue to provide to the IMF in electronic form the final fiscal accounts at the end of each fiscal year, no later than March of the following year. Inter alia, these reports will

UKRAINE INTERNATIONAL MONETARY FUND 101 provide expenditure data by programs and key spending units, as well as based on standard functional and economic classifications. In addition, quarterly reports will contain standard information on budget expenses to cover called government guarantees. 70. The Ministry of Finance will report monthly data on the public wage bill (excluding SOEs) in line with the template agreed with the IMF staff. It will also provide monthly reports on the borrowing (disbursements, interests, and amortization) of UrkAvtoDor in line with the format agreed with IMF staff. The Ministry of Finance will report to the IMF on a monthly basis information on municipal borrowing and amortization of debt in format agreed with IMF staff. 71. The Ministry of Finance will report to the IMF on a monthly basis, no later than 15 days after the end of the month, the cash deficit of the general government, with details on budget execution data for privatization receipts of the state and local governments; disbursements of external credits (including budget support and project loans for on lending) to the consolidated budget and amortization of external debt by the consolidated budget; net domestic borrowing of the general government, including net t-bill issuance, issuance of other government debt instruments, and change in government deposits. 72. The Ministry of Finance will provide data on the stock of all budgetary arrears on a monthly basis, no later than on the 1st day of the second subsequent month, including separate line items for wages, pensions, social benefits, energy, communal services, and all other arrears on goods and services. The Treasury will report monthly data on accounts payable for state and local budgets (economic classification of expenditures). The Pension Fund will provide monthly reports on net unpaid pensions to the individuals who resided or continue to reside in the territories that are temporarily outside the government control. 73. The Ministry of Finance will provide monthly information, no later than 25 days after the end of each month, on the amounts and terms of all external debt contracted or guaranteed by the central government. 74. The Ministry of Finance will provide to the IMF in electronic form on a monthly basis, no later than 25 days after the end of the month, (a) data on the outstanding stock of domestic and external debt of the state and local budgets (including general and special funds); (b) the standard files planned and actual external debt disbursement, amortization, and interest payments (including general and special funds), broken down in detail by creditor categories as agreed with Fund staff; and (c) the report on external debt amortization and interest payments by days and currencies. The

UKRAINE 102 INTERNATIONAL MONETARY FUND Ministry of Finance will also report the accumulation of any budgetary arrears on external and domestic debt service. 75. The Ministry of Finance will provide to the IMF monthly debt (domestic and external) amortization schedules updated on a weekly basis. 76. The Ministry of Finance will provide data on external and domestic credit to key budgetary spending units as well as nongovernment units (including Naftogaz, State Mortgage Institution, Deposit Guarantee Fund, and Agrarian Fund) that is guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients) on a monthly basis no later than 25 days after the end of the month. 77. The Ministry of Finance will provide data on the approved budgets and quarterly operational data (daily for the Pension Fund only) on the revenue, expenditures, and arrears, and balance sheets of the Pension Fund (detailed data on the breakdown of revenues and expenditure by main categories are expected for this Fund), the Fund for Social Insurance, Employment Fund (detailed data on the breakdown of revenues and expenditure by main categories are expected for this Fund), and any other extra budgetary funds managed at the state level no later than 50 days after the end of each quarter (each month in case of the Pension Fund). Any within-year amendments to the budgets of these funds will be reported within a week after their approval. The Ministry of Finance will also report the annual financial statement including the final fiscal accounts of those funds at the end of each fiscal year, no later than April of the following year. 78. The Ministry of Finance will report semi-annual data on the number of employees of budgetary institutions financed from the central (state) and local budgets, starting from January 2010. After any public sector wage increase, the Ministry of Finance will provide an estimate of its costs for the current and two subsequent fiscal years, for the state and local government budgets. 79. The Ministry of Finance will provide, no later than 15 days after the end of each month, monthly data on the budgetary costs associated with the recapitalization of banks and SOEs. This cost includes the upfront impact on the cash deficit of the general government of the recapitalization of banks and SOEs as well as the costs associated with the payment of interests, including the respective changes as a result of supplementary budgets. 80. The Ministry of Finance will provide monthly data on their expenditure plans (ROSPIS) for state budget.

UKRAINE INTERNATIONAL MONETARY FUND 103 81. SFS will provide monthly data, no later than 25 days after the end of the month, on tax arrears, inclusive of deferred payments, interest and penalties outstanding, in the following format: Beginning Stock Netting out during month Deferrals during month Write- -offs (arrears written off during month) Collections of outstanding debt at beginning of month New Arrears (tax liabilities becoming overdue during month) Ending Stock Total Principal Interest Penalties Tax arrears 82. The SFS will continue to provide on a quarterly basis, no later than two months after the end of the quarter, a listing of all tax exemptions granted, specifying the beneficiary the exemption provided, the duration, and the estimated subsequent revenue loss for the current fiscal year. 83. The SFS will continue to provide monthly information, no later than 25 days after the end of the month, on VAT refunds in the following format: (i) beginning stock of refund requests; (ii) refund requests paid in cash; (iii) refunds netted out against obligations of the taxpayer; (iv) denied requests; (v) new refund requests; (vi) end-of-period stock of requests; and (vii) stock of VAT refund arrears according to the definition in paragraph 11 (unsettled VAT refund claims submitted to the SFS more than 74 days before the end of period. 84. The SFS will continue to provide monthly reports 1.P0 on actual tax revenue and 1.P6 on tax arrears, no later than 25 days after the end of each month. 85. The SFS will provide on a quarterly basis but no later than 25 days after the end of each quarter information on the number of tax appeals and the associated disputed amounts received by the SFS in each reporting period, the number of internally resolved appeals indicating the number of appeals resolved in favor of the controlling body, in favor of taxpayer and partial satisfaction.

UKRAINE 104 INTERNATIONAL MONETARY FUND D. Ministry of Economy, Ministry of Energy and Coal Industry, Ministry of Housing and Municipal Economy of Ukraine, and National Commission in Charge of State Regulation in Energy and Utilities (NCSREU) 86. The Ministry of Economy will provide quarterly information on actual levels of communal service tariffs in all regions for major services (heating, water supply, sewage and rent) and their level of cost recovery. In addition, the Ministry of Economy, the Ministry of Housing and Municipal Economy of Ukraine, and the NCSREU will provide the methodology underlying the tariff calculations for full cost recovery, including heating and gas. 87. For each month, no later than the 25th of the following month, the government (based on information by the Ministry of Energy and Coal Industry, the Ministry of Economy, SFS/SCS, MoF, NCSREU, and Naftogaz) will provide IMF staff with information in electronic form (in an agreed format defined as ''Ukraine: The Financial Position of Gas Sector'') on financial indicators in the gas and heating sectors, including prices and volumes of domestically produced (by production entity) and imported (by sources of imports) gas, sales, tariffs, arrears, payments to the budget, subsidies, and debt. On a monthly basis, Naftogaz will provide to IMF staff updated information on the company's financial liabilities, with a schedule of loan-by-loan interest and principal payments. 88. For each month, no later than the 25th of the following month, the Ministry of Energy and Coal Industry (based on information by Naftogaz) will provide IMF staff with information in electronic form (in an agreed format) on the cash flows and deficit of the company, as defined above. This report will break down the total cash outlays for gas imports from Gazprom by month in a separate table mutually agreed with IMF staff. 89. For each month, no later than the 25th of the following month, the Ministry of Energy and Coal Industry (based on information by Naftogaz) will provide IMF staff with information in electronic form in an agreed format on the domestic gas used by Naftogaz for sales to households, heating utilities, budget institutions, and industries, including gas produced by SC ''Ukrgasvydobuvannya,'' and OJSC ''Ukrnafta.'' 90. For each quarter, no later than the 25th of the following month, the Ministry of Housing and Municipal Economy will provide IMF staff with information of the quantity of heating energy meters installed at a building level measured also as a ratio to the applicable buildings. 91. The National Commission for State Energy and Public Utilities Regulation will provide information with a breakdown by its licensees regarding the levels of tariffs for heat energy for the

UKRAINE INTERNATIONAL MONETARY FUND 105 households, centralized heating services and centralized hot water supply to the households in the event of their changes with the definition of average tariff levels (net of VAT and VAT included). 92. The National Commission for State Energy and Public Utilities Regulation will inform in advance (10 days before the day of the meeting at which it is planned to adopt such a decision) about any amendments that can be made to the Commission's decisions regulating the distribution accounts for companies in the natural gas sector. The National Commission for State Energy and Public Utilities Regulation on the day following the adoption of the Resolution on the approval of Register of norms for the transfer of funds received as payment for provided heat and / or utilities including centralized heating, centralized hot water supply to all categories of consumers and as a payment of heat supplying enterprises for heat produced by heat generating enterprises for respective month and on the changes to the Register of norms, will inform about them in the electronic format. 93. The Ministry of Energy and Coal Industry (based on information by Naftogaz) will report on a weekly basis data on Naftogaz daily market purchases of foreign exchange. 94. The Ministry of Economy will provide on a quarterly basis, but no later than 80 days after the end of each quarter consolidated information from the financial statements of 50 largest SOEs (excluding Naftogaz). Specifically, the information will include data on (a) gross profit/losses; (b) net financial results; (c) subsidies received from the budget; (d) guarantees granted from the budget; (e) stock of debt, broken down by domestic and foreign; (f) taxes and dividends paid; (g) wage arrears; and (h) other payment arrears. The report will also include information on the number of all SOE (a) making profits, (b) making loss or (c) balanced with aggregated financial results for each of these groups. E. State Statistics Service 95. In case of any revisions of gross domestic products, the State Statistics Service will provide to the IMF revised quarterly data on gross domestic product (nominal, real, deflator) and their components (economic activities, expenditure, income), no later than 10 days after any revisions have been made. F. Ministry of Social Policy 96. The Ministry of Social Policy will collect and submit to IMF and World Bank staff on a monthly basis data on HUS and privileges for energy consumption. The data, which will be presented in an agreed excel format, will show for each program (a) the number of households

UKRAINE 106 INTERNATIONAL MONETARY FUND which applied for HUS; (b) number of approvals ex tended to such HUS applications; (c) number of households-recipients of HUS and privileges in the reporting month; (d) total value of transfers; (e) number of refusals extended to such applications; (f) income per capita of participants, both for HUS and privileges; (g) number of household memb ers; and (h) main reasons for refusal for HUS application (e.g., lack of residency information) and are to be presented by overall, by region and for rural/urban areas.

UKRAINE FIRST REVIEW UNDER THE EXTENDED ARRANGEMENT'--SUPPLEMENTARY INFORMATION Approved By Thanos Arvanitis and Mark Flanagan Prepared By the European Department 1. This supplement provides information that has become available since the Staff Report (EBS/15/84) was circulated to the Executive Board on July 22, 2015. This information does not alter the thrust of the staff appraisal. 2. All prior actions have been completed and all end-June PCs have been met. On July 25, Law 2956 became effective after its official publication. The Law lifted the 2001 moratorium on enforcement proceedings for companies with at least 25 percent state ownership that are debtors to Naftogaz and its subsidiary companies. Final data for end-June performance criteria (PCs) also show that all PCs have been met (Table 1). 3. High frequency data through June suggest that that economic activity may have troughed. Following the severe contraction in Q1, indicators of activity through June point to a stabilization of economic activity, albeit at a low level. Supported by some revival in manufacturing and mining activity, industrial production experienced mild growth m-o-m (seasonally adjusted) in both May and June. Construction and retail trade picked up as well. On the other hand, agricultural output remained weak, largely owing to a weather-related shifting in the timing of the harvest. Underpinning these developments, both consumer and investor confidence bounced back significantly in Q2. July 29, 2015

UKRAINE 2 INTERNATIONAL MONETARY FUND 4.The NBU re cently modified its op erational framework for absorbingliquidity . The NBU amended its operational framework by aligning interest rates on certificates of deposits (CDs, the NBU's liquidity absorbing instrument) with their effective maturity and by introducing quantitative tenders for CDs at longer maturities (30 and 89 days) where the NBU acts as a price taker. In line with Fund TA recommendations, this new liquidity managem ent framework is expected to help the NBU manage its net domestic assets in line with program targets. To ensure sufficient demand across the yield curve, the NBU also re duced the effective fixed interest rates on shorter-maturity CDs by 200''400 basis poin ts to 18''20 percent and successfully conducted quantitative long-term CD tenders at 22''23 percent. As inflation expectations have fallen rapidly, the CD rates remain positi ve in real terms on forward-looking basis. The NBU's discount rate and all rates on liquidity-providing instruments remained unchanged at 30''33 percent. Staff and the aut horities will continue to monitor the effectiveness of this framework in mopping up excess liquidity and the authorities stand ready to adjust it as needed to continue to advance the disinflation process. 5. The first disbursement under the EC's Macro-Financial Assistance (MFA)operation took place on July 23 . The disbursement, in the amount of '‚¬600 million, is the first installment under the third MFA plan, which totals '‚¬1.8 billion.

Table 1. Ukraine: Quantitative Program Targets and Projected Performance 1/ (End of period; millions of Ukrainian hryvnias, unless otherwise indicated) 2014December SeptemberDecember March JunePC Adj. PC Actua l PC Ad j. PC Actual PC PC IT ITI. Quantitative performance criteria Ceiling on the cash deficit of the general government (- implies a surplus) 2/ - 20,400 13,357 -14,536 32,700 35,530 10,133 43,100 82,70 0 12,700 32,400Ceiling on the cash deficit of the general government and Naftogaz (- implies a surplus) 2/ - 36,500 29,457 -243 62,000 59,192 31,422 9 7,100 144,600 5,700 37,100Flo o r o n cumula tive cha ng e in ne t inte r na tio na l r e s e r ves (in millions of U.S. dollars) 3/ 4/ 1,827 -2,502 -2,639 -2,125 -1,448 -2,528 -1,492 -284 2,098 2,224 2,545Ceiling on cumulative change in net domestic assets of the NBU 3/ 4/ 304,385 57,704 62,490 32,303 76,176 103,878 20,713 84,571 57,720 54, 520 69,445Ceiling on publicly gua ra nteed debt 2/ - 30,000 30,000 0 30,000 30,000 0 30,000 30,000 20,000 20,000II. Continuous performance criterion N o n-a ccumula tio n o f ne w e xte r na l d e b t p a yme nts a r r e a r s b y the g e ne r a l g o ve r nme nt 2/ 0 0 0 0 0 0 0 0 0III. Indicative TargetsCeiling on cumulative change in base money 2/ 333,194 18,256 18,256 -1,203 53,350 53,350 -2,815 80,086 90,796 89,584 109,578Ceiling on net accumulation of VAT refund arrears 2/ 697 0 2,942 0 7,075 0 0 0 0IV. Memorandum Items Naftogaz deficit 87,301 16,100 16,100 14,293 29,300 23,662 21,289 54,000 61,900 -7,000 4,700E xter na l p r o ject fina ncing 2/ - 4,523 441 11,064 2,992 13,000 14,937 6,995 15,107N BU lo ans to DGF a nd o per a tio ns with Go ver nment b o nds is s ued fo r DGF fina ncing o r ba nks r eca pita liza tio n 3/ - 25,000 7,950 44,000 24 ,750 53,000 55,000 55,000 55,000Government bonds issued for banks recapitalization and DGF financing 2/ 26,716 29,000 0 59,500 18,004 59,500 152,000 0 0Programmed disbursements of international assistance except IMF (millions of U.S. dollars) 3/ 4/ - 476 173 3,233 1,476 3,504 5,475 6,204 6,204Percent of it applied to adjustment 100 100 100 100 100 100 100 100Conver s io n of a non-r es er ve cur r ency under a centr al ba nk s wa p line into a r es er ve cur r ency thr ough a n outright s ale 4/ -- 0 581Exceptional financing (millions of U.S. dollars ) 3/ 4/ - --500 4,228 4,228 5,478Purchases of foreign exchange from the NBU for the purposes of critical energy imports (incl. those of Naftogaz, millions of US dollars) 3/ 4/ - 1,486 1,320 1,686 1,590 1,686 1,686 1,686 1,686NBU purchases of T-bonds Issued by Government for Naftogaz recapitalization 3/ - 17,200 17,200 26,100 26,100 28,300 28,300 28,300 28,300Projected Payments of Interest on government bonds held by NBU 2/ - 7,100 7,100 17,400 17,400 30,300 41,800 10,600 21,800Program exchange rate, Hryvnia per U.S. dollar 15. 7686 15.7686 15.7686 15.7686 15.7686 15.7686 15.7686 15.7686 15.7686 Sources: Ukrainian authorities; and IMF staff estimates and projections. 1/ Definitio ns a nd a d jus to r s a r e s p e cifie d in the T echnica l M e mo r a nd um o f Und e r s ta nd ing (T M U). 2/ Targets and projections are cumulative flows from January 1, 2015. Data for December 2014 are stocks as of end-December, 2014. For 2016, cumulative flows from January 1, 2016. 3/ Targets and projections are cumulative flows from January 1, 2015. Data for December 2014 are stocks as of end-December, 2014. 4/ Calculated using program exchange rates specified in the TMU. 2015 2016March JuneUKRAINE INTERNATIONAL MONETARY FUND 3

Statement by Menno Snel, Executive Director for Ukraine and Oleksandr Petryk, Alternate Executive Director July 31, 2015 With the unresolved conflict in the East, the situation in Ukraine remains extremely difficult. Due to the uncertainty surrounding this conflict, the economy substantially contracted in the first quarter of 2015 and the Hryvnia sharply depreciated. Nevertheless, despite these challenges, the authorities did everything in their power to implement the program reforms aimed at restoring stability, strengthening the fundamentals of the economy and bringing back sustainable growth. The policies focus on ensuring price and financial stability under the flexible exchange rate, a sound and prudent banking system, sustainable public finance and deep and comprehensive structural reforms, including anti-corruption measures. Due to the steadfast implementation of the program, signs of stabilization are emerging. All performance criteria (PC) for end-March were met, as well as the PC and structural benchmarks for end-June 2015. The prior actions were fulfilled. The remaining prior actions that will trigger the disbursement of the two Development Policy Loans (DPLs) from the World Bank were adopted as well. The authorities are strongly committed to continue with program implementation. They regret the unfortunate misunderstanding that led to a misreporting on the prior action regarding retail heating prices, and want to reassure the Board that mistakes like this will not be repeated. The authorities worked very hard to make progress with the debt operation. Despite their strong efforts, the process is advancing slower than expected. In joint statements with the Ad Hoc Creditor Committee, the authorities confirm their objective to reach an agreement on the broader sovereign debt restructuring as soon as possible and in line with the agreed program objectives. That said, a consensual reprofiling of the notes of the state-owned Ukreximbank's US$1.5 billion Eurobonds was completed on July 8 and the state-owned Oschadbank launched a consent solicitation for a reprofiling of its US$1.2 billion Eurobonds. Macroeconomic outlook The authorities broadly share staff's analysis of the macroeconomic outlook. GDP contracted faster than expected in the first quarter of 2015 and is now estimated to be around -9 percent for 2015, mainly due to high uncertainty and reduced demand as a result of the conflict. The Hryvnia sharply depreciated in January and February which led to a significant increase in headline inflation in March and April due to high pass-through effects and increases in regulated energy prices. However, after the EFF was put in place, the Hryvnia started to stabilize and inflation is coming down. The depreciation of the Hryvnia in the first months of 2015, in combination with the introduction of additional import duties and weak domestic demand, led to current account improvements turning into surplus in March 2015 (US$0.3 billion, 1.3 percent of GDP).

2 However, export performance remains weak because of the conflict, low commodity prices and the trade restrictions imposed by Russia. The financial account in the balance of payments remains in deficit (US$1.8 billion, 7.5 percent of estimated GDP over January''April) as the recovery of foreign investment and capital inflows were hindered by high risks and uncertainty. The overall balance of payments remains in line with the program. Gross reserves increased to US$10.3 billion at the end of June 2015, compared to US$5.6 billion before the start of the EFF end-February 2015. This was mainly because of the disbursement of the first tranche under the EFF and support from other official creditors, as well as foreign currency purchases by the NBU from the market (US$726 million in the first quarter and US$556 million in the second quarter). Moreover, the agreed swap line is very helpful to increase reserves and confidence. The authorities are thankful to the People's Bank of China and welcome the ongoing talks with some other central banks. Reserves are expected to further increase to over US$18 billion by year-end or 3.7 months of future imports. Fiscal policy The end-March general government deficit target was met with a large margin, resulting in a budget surplus of UAH 3.1 billion or 0.8 percent of GDP in the first quarter. Because of higher-than-projected inflation and exchange rate depreciation, but also due to a widening of the tax base and changes in the tax legislation, revenues overperformed. Spending was lower than planned because of liquidity constraints early in the year. The additional space will be used to finance national security needs, allocate funds for pensions and social assistance for displaced persons, clearing VAT refund arrears and support ongoing judicial and civil service reforms. The authorities are determined to further reduce the fiscal deficit to ensure debt sustainability. The adjustment will be an expenditure-led consolidation with a smaller and more efficient government. The tax system will be reformed to make it more growth-friendly, efficient, and fair. A restructuring of Naftogaz will make it financially sustainable and independent from government support by 2017. The government is working on structural reforms of the fiscal framework. The revenue administration is undergoing a major overhaul which will increase tax revenues by at least 0.3 percent of GDP in 2016. The authorities have presented amendments to the tax code to Parliament, aiming to reduce the tax rates on royalties for gas and petroleum extracting companies and increase taxes on profits, which should preserve revenues while encouraging investments in the industry. Coming September, the government will submit amendments to the tax code to Parliament which will introduce a general VAT regime for the agriculture sector. Reforms to the pension, health and education systems will also contribute to the fiscal adjustment path.

3 Monetary and exchange rate policy and financial stability In early June 2015, the NBU took initial steps to liberalize the monetary and currency markets. Some administrative restrictions were eased and the control over individual transactions of residents was simplified. The authorities, together with the Fund, developed a road map for further gradual and controlled removal of the administrative measures. This process will start as soon as the debt operation is completed, the bank recapitalization is fully implemented, net international reserves reach the established target and the transition of Naftogaz to the interbank market has been finalized. Parliament adopted the amendments to the NBU law in June 2015. These amendments will substantially increase the effectiveness of the NBU by strengthening its institutional and financial independence. The law envisages that the NBU no longer transfers advanced profits to the state budget. Furthermore, the role of the NBU's Executive Board is strengthened and its autonomy enhanced. The NBU now has the right to base monetary policy on its own macroeconomic forecast. There is a clear division of responsibilities of the NBU Council and the Executive Board. Moreover, the accountability of the NBU is enhanced by making the NBU Council responsible for the audit. A key objective of the program is a well supervised, sound, and solid banking system. As the liquidity in the banking sector was high in the first half of 2015, the NBU eased its liquidity support to banks. The NBU's supervision has strengthened with the help of Fund technical assistance. A comprehensive bank recapitalization and resolution plan was launched. Since early 2014, already around 54 out of the 180 banks were transferred to the Deposit Guarantee Fund (DGF) as a result of consistent efforts to make the banking sector more resilient. Capital requirements were increased and the closing of ''pocket banks'' was accelerated. Measures are being taken to combat related party lending as well as to ensure a transparent ownership structure of the banking sector. Structural reforms and anti-corruption program Although reforms in the energy sector are only in an initial stage, the impact on the economy is already noticeable. All contracts now exclude intermediaries. The gas market was liberalized and aligned with the European Third Energy Package. Over 60 percent of gas imports are now coming from European reverse flow contracts. This is a significant change from the earlier exclusive reliance on a single supplier. The reduction in subsidies and the more than tripling of the gas prices, with well-targeted compensation for vulnerable families, is unprecedented in Ukraine's history. As a result, the Naftogaz deficit is reduced from US$10 billion to less than US$2 billion. It is expected that by end-2017, the deficit will be completely eliminated. A key element of the reform program is to eradicate corruption. In order to implement the late 2014 package of anti-corruption legislation, the government approved in April 2015 a national anti-corruption program for 2015''17. Among other elements, it introduces an

4 electronic declaration system for public officials, monitoring of the transactions of state employees and related persons, measures to prevent conflict of interest and protection of whistleblowers of corruption. The management of the independent National Anti-Corruption Bureau was appointed in April 2015 using open procedures. Many public services and institutions underwent a thorough clean-up. The road patrol service in Kiev was eliminated and replaced by an entirely new traffic police service. The authorities have launched an ambitious deregulation program containing more than 70 initiatives. The Ministry of Economic Affairs estimated US$2.5''3 billion in savings for the business community. Moreover, it could lead to a further improvement in Ukraine's ranking in the World Bank's Doing Business indicators. Ukraine already advanced by 56 positions since 2012. Final remarks Despite the challenging environment, including a divided political landscape, the authorities have proven to be able to deliver on the so crucial reforms. They are fully aware that this is the only way forward and are strongly committed to continue on this decisive path. The authorities are grateful for the continued support from the Fund, other IFIs and the international community in this very difficult period.

Link to Article

Archived Version

Sun, 05 Mar 2017 07:56

The latest tranche of $1 billion was contingent on Ukraine passing an IMF-backed 2017 budget and implementing banking system reforms.

The International Monetary Fund said on Saturday it had reached an agreement with Ukraine on an updated memorandum under a US$17.5 billion program, paving the way for its board to consider the disbursement of the fourth loan tranche later in March.

"The IMF staff has reached agreement with the Ukrainian authorities on an updated memorandum of economic and financial policies," Ron van Rooden, the IMF's Ukraine mission chief, said in a statement.

Disbursements under the program have been delayed repeatedly over the past two years due to stop-start progress on reforms. The latest tranche of $1 billion was contingent on Ukraine passing an IMF-backed 2017 budget and implementing banking system reforms.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:03

A UK university has been accused of censoring free speech for banning phrases such as ''right-hand man'' and ''gentleman's agreement'' in favour of more inclusive, gender neutral language.

Cardiff Metropolitan University's revised code of practice states more appropriate terms should be used where possible, adding that students should not allow their ''cultural background'' to affect their choice of words on campus.

''Forefathers'', ''mankind'' and ''sportsmanship'' are also on the list of 34 words and phrases to be avoided as part of efforts to ''embrace cultural diversity'' by the university.

Students and staff could face disciplinary procedures if they fail to adhere to the language policy, but some have accused Cardiff Metropolitan of restricting their free speech, labelling the policy an ''insulting'' attempt to dictate their choice of words.

Dr Joanna Williams, an academic freedom advocate and University of Kent lecturer, told The Telegraph the ban was ''unnecessary''.

''The idea that in a university people need to be dictated to in this way is really insulting to students and academics, we should be able to cope with words.

''These words have evolved over a long period of time and they don't have sexist associations.''

The policy also dictates that the phrases ''homosexual'' and ''heterosexual'' should not be used as they are ''laden with the values of a previous time''.

''Referring to 'same-sex' and 'other-sex' relationships is a good option,'' the document reads.

''Nobody likes being lumped together in a group, so try to avoid generalised terms such as 'the disabled', 'the blind','' it continues.

'''Disabled people' is preferable to 'the disabled' or 'people with disabilities' as it emphasises that the people are disabled by a society which doesn't accommodate them.

''Don't be too anxious about the use of language, though,'' the policy adds.

Students protest at university over Breitbart lecture

''Blind people do use terms like 'see you later' and being too careful can make conversation difficult for both parties.''

A report published last month detailing UK universities' no-platforming and safe-space policies found nine in 10 institutions to be restrictive of free speech.

Analysis by Spiked magazine suggested campus censorship had increased steadily over the past three years '' with a growing number of institutions actively clamping down on ideas, literature and guest speakers that are not in keeping with their own values.

A spokesperson for Cardiff Metropolitan University said of the new policy: ''The University is committed unreservedly to the principle of academic freedom within the law.

''It is also committed to providing an environment where everyone is valued and treated with dignity and respect. These two commitments are cornerstones of academic life at the University.

''The Code of Practice on Using Inclusive Language sets out a broad approach to promoting fairness and equality through raising awareness about the effects of potentially discriminatory vocabulary.

''In particular, it includes some suggestions to support gender equality; these are consistent with other guidance (e.g., British Sociological Association's information on Equality and Diversity).''

Cardiff Metropolitan University's Guide to Inclusive Language:Term '' Suggested alternative"Best man for the job" '' Best person for the job"Businessman/woman" '' Businessperson, manager, executive"Chairman/woman" '' Chair, chairperson, convenor, head"Charwoman, cleaning lady" '' Cleaner"Craftsman/woman" '' Craftsperson, craft worker"Delivery man" '' Delivery clerk, courier"Dear Sirs" '' Dear Sir/Madam (or Madam/Sir)"Fireman" '' Fire-fighter"Forefathers" '' Ancestors, forebears"Foreman/woman" '' Supervisor, head juror"Gentleman's agreement" '' Unwritten agreement, agreement based on trust"Girls" (for adults) '' Women"Headmaster/mistress" '' Head teacher"Housewife" '' Shopper, consumer, homemaker (depends on context)"Layman" '' Lay person"Man" or "mankind" '' Humanity, humankind, human race, people"Man" (verb) eg man the desk '' Operate, staff, work at"Man in the street", "common man" '' Average/ordinary/typical citizen/person '' but is there such a person?"Man-hour" '' Work-hour, labour time"Man-made" '' Artificial, manufactured, synthetic"Manpower" '' Human resources, labour force, staff, personnel, workers, workforce"Miss/Mrs" '' Ms unless a specific preference has been stated '' though its common not to use titles at all these days"Policeman/woman" '' Police Officer"Right-hand man" '' Chief assistant"Salesman/girl/woman" '' Sales assistant/agent/clerk/representative/staff/worker"Spokesman/woman" '' Spokesperson, representative"Sportsmanship" '' Fairmess, good humour, sense of fair play"Steward/ess" '' Airline staff, flight attendant, cabin crew"Tax man" '' Tax officer/inspector"Waitress" '' Waiter, server"Woman doctor" (or feminine forms of nouns eg actress, poetess) '' Doctor (actor, poet etc)"Working man", "working mother/wife" '' Wage-earner/taxpayer/worker"Workman" '' Worker/operative/trades person"Workmanlike" '' Efficient/proficient/skilful/thorough

Reuse content

Link to Article

Archived Version

Sun, 05 Mar 2017 06:59

Russian ministers are urging government officials to ban Disney's new live action remake of Beauty and the Beast if it breaches the country's controversial ''gay propaganda'' law.

Culture minister Vladimir Medinsky is facing mounting pressure to assess whether the film, which contains Disney's first ever overtly gay character and love scene, violates a law prohibiting children from material "advocating for a denial of traditional family values".

One Russian MP, Vitaly Milonov, of the United Russia party, described the film as ''shameless propaganda of sin'', and asked Mr Medinsky to ''take measures to totally ban'' the film if it contains ''elements of propaganda of homosexuality,'' according to the BBC.

His colleague, Alexander Sholokhov, said that if the scenes violated the law, the film should be banned from cinemas, while Russian actor Pavel Derevyanko told state-run TV Russia 24: ''I will not take my kid to this movie.''

Following the outcry, Mr Medinsky reportedly pledged to consider whether it breached the law, saying: ''As soon as we get a copy of the film with relevant paperwork for distribution, we will consider it according to the law.''

Beauty and the Beast, a live-action remake of the 1991 Disney animation set to be released on 16 March, contains what the film's director described as an ''exclusively gay moment''. The scene involves male character LeFou, who in a side-plot to the main story tries to come to terms with his feelings for the film's male antagonist, Gaston.

Beauty And The Beast Social - Exclusive Teaser Launch Event with Cast & Crew

Mr Milonov argued the scene may be in breach of Russian legislation passed in 2013, which prohibits the spreading of ''gay propaganda'' among minors. The law, which angers human rights activists and the international gay community, suggests homosexuality is alien to life in Russia.

It is not the first time the 2017 remake of Beauty and the Beast has provoked anger over its inclusion of a gay character.

Earlier this week, a cinema in America's Deep South cancelled screenings of the film, saying they would only show ''family-oriented films'' so that its customers were ''free to come watch wholesome movies without worrying about sex, nudity, homosexuality and foul language''.

Reuse content

Link to Article

Archived Version

Source: The Intercept

Sun, 05 Mar 2017 14:35

We were horrified to learn this morning that Juan Thompson, a former employee of The Intercept, has been arrested in connection with bomb threats against the ADL and multiple Jewish Community Centers in addition to cyberstalking. These actions are heinous and should be fully investigated and prosecuted. We have no information about the charges against Thompson other than what is included in the criminal complaint. Thompson worked for The Intercept from November 2014 to January 2016, when he was fired after we discovered that he had fabricated sources and quotes in his articles.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:22

Juan Thompson was charged with cyberstalking for allegedly communicating threats to Jewish Community Centers to harass a woman. (Thomas Johnson,Jenny Starrs/The Washington Post)

A former journalist allegedly carried out at least some of the recent bomb threats against Jewish institutions across the country, according to the FBI, which described the menacing calls as part of the man's campaign to harass a woman.

Law enforcement officials said Friday that they do not believe the man they arrested '-- Juan Thompson, 31 '-- is responsible for all of the calls to scores of Jewish centers and schools in recent months, nor do they think he was behind the vandalism of headstones at Jewish cemeteries in Missouri, Pennsylvania and, most recently, Upstate New York.

The arrest of a onetime reporter, fired last year for fabricating quotes, was a bizarre twist in the threats against Jewish facilities, which have forced people from dozens of Jewish Community Centers, schools, offices and day cares, contributing to heightened anxiety about anti-Semitism nationwide. Even after Thompson was taken into custody in St. Louis, Jewish groups and officials remained on edge about the threats that are still unsolved.

''There are many more JCC bomb threats that have not been solved, and communities are hurting,'' Evan Bernstein, the New York regional director at the Anti-Defamation League, told reporters Friday. ''We hope all law enforcement will continue to be diligent.''

There have been more than 100 threats, according to the ADL. The FBI on Friday called its ongoing investigation into the threats ''a top priority'' for the bureau.

''Agents and analysts across the country are working to identify and stop those responsible,'' the bureau said in a statement. ''The FBI is committed to ensuring that people of all races and religions feel safe in their communities and places of worship.''

FBI Director James B. Comey met Friday morning with Jewish community leaders to discuss the threats. In a statement, the Jewish groups said they ''expressed the deep gratitude of the entire community for the extraordinary effort that the FBI is applying to the ongoing investigation.''

[Trump questions who is really behind anti-Semitic threats and vandalism]

Federal agents arrested Thompson on Friday morning, according to the U.S. Attorney's Office in the Southern District of New York. Thompson '-- whose Twitter page is full of rants about white people and President Trump '-- was charged with cyberstalking and is accused of communicating at least eight threats to Jewish Community Centers, which an FBI complaint said were ''part of a sustained campaign to harass and intimidate'' a woman with whom he had been romantically involved.

Thompson previously drew national attention when he was fired a little more than a year ago from the Intercept, an investigative journalism website, for fabricating quotes and misleading colleagues to cover his tracks. In an editor's note, the publication said Thompson had engaged in ''a pattern of deception'' and wrote that he created fake email accounts to impersonate people.

''We were horrified to learn this morning that Juan Thompson, a former employee of The Intercept, has been arrested in connection with bomb threats against the ADL and multiple Jewish Community Centers in addition to cyberstalking,'' Charlotte Greensit, the Intercept's managing editor, said in a statement Friday. ''These actions are heinous and should be fully investigated and prosecuted.''

Thompson appeared in federal court Friday wearing handcuffs and leg chains along with a faded blue denim shirt and beige jeans. He was accompanied by a U.S. marshal and a public defender. His mother, along with several other family members and friends, sat in the galley.

After the hearing, Thompson was remanded to federal custody. When approached by a reporter, his mother and other relatives declined comment.

An FBI spokeswoman said Thompson is not believed to be responsible for all of the threats to Jewish Community Centers across the country. Thompson was arrested in St. Louis, not far from a Jewish cemetery in suburban University City, Mo., where 150 headstones were recently vandalized, but the spokeswoman said agents do not think he is responsible for that incident.

Doron Krakow, chief executive of the Jewish Community Center Association of North America, said the group is ''gratified'' by Thompson's arrest, though they hope officials will find those responsible for the other threats.

''It's a good thing they got this guy, but this indictment brings us no closer to identifying the source of the broader campaign aimed at Jewish centers, with around 100 threats still unaccounted for, not to mention the numerous incidents of vandalism,'' J.M. Berger, a fellow with the International Centre for Counter-Terrorism at The Hague and an expert on extremism, wrote in an email Friday.

According to the complaint, after Thompson's relationship with the woman ended, he began sending defamatory emails and faxes to her workplace, falsely reporting that she was involved in criminal activity and making threats to the Jewish centers in her name.

Last year, speaking to the Riverfront Times, an alt-weekly in St. Louis, Thompson disputed the Intercept's characterization of his firing and said he would ''come through on this.'' The story described Thompson as a young, handsome journalist who is ''maddeningly elusive'' and acted cagey when asked for evidence of claims about having cancer and being accepted to law school.

The Intercept's account of Thompson's fabrications is echoed in the criminal complaint filed Friday. The complaint says that after he and the woman he dated broke up in July 2016, Thompson began emailing and faxing her company defamatory messages about her.

In one, for example, a person claiming to be a TV producer for a national news organization said the woman had been pulled over for drunk driving and was being sued for spreading a sexually transmitted disease. The woman also received a series of bizarre texts and emails related to Thompson from someone claiming to be his friend. One said '-- falsely '-- that Thompson had been the victim of a robbery and shooting, and was on life support.

The woman obtained a protective order against Thompson in August 2016 and renewed it in October and December. Law enforcement confronted Thompson in November 2016, after someone from his IP address reported to the National Center for Missing and Exploited Children that the woman possessed child pornography. A New York police detective eventually got in touch with Thompson '-- who claimed his email accounts had been hacked '-- and told him he should not attempt to contact the victim.

Attempts to reach the woman Friday were not successful.

In the months that followed, Thompson began making threats to Jewish Community Centers, sometimes in the woman's name and sometimes in his own, though he claimed the woman was trying to frame him, according to authorities.

''People can leverage a climate of hate to have much more magnified effect than they otherwise could've,'' Andrew Rehfeld, president of the Jewish Federation of St. Louis, said in an interview Friday.

Thompson seemed to be aware of the news coverage of threats. Using an apparently hacked email address, he sent a message to the Anti-Defamation League in February 2017 saying the woman was ''behind the bomb threats against jews. She lives in nyc and is making more bomb threats tomorrow.''

The next day, the ADL received a call that said someone would detonate an explosive at the group's New York headquarters. Police searched and did not find a bomb.

Similar threats were relayed in various ways toward Jewish centers in Dallas and San Diego, a Jewish school in Farmington Hills, Mich., as well as the Jewish History Museum in Manhattan. A Jewish school in Manhattan received two separate threats, one of which said Thompson wanted ''to create Jewish newtown tomorrow,'' a reference to the mass shooting of 20 children at a school in Newtown, Conn.

Thompson claimed on Twitter that the woman was stalking and harassing him, and that law enforcement had questioned him unfairly because of her. He also tweeted about the threats, seeming to condemn them. ''Another week, another round of threats against Jewish ppl. In the middle of the day, you know who's at a JCC? Kids. KIDS.''

Oren Segal, director of the ADL's Center on Extremism, said in a conference call with reporters Friday that while he could not speculate about what was in Thompson's mind, ''threatening Jewish institutions is an anti-Semitic act.''

The criminal complaint filed in federal court points to his Twitter page, where he rails about an ex-girlfriend he describes as a ''nasty/racist #whitegirl.'' Thompson's page also expresses disdain for Trump and white people generally. ''White folk are trash,'' he wrote in a tweet about the Oscars. He praised black women for their opposition to Trump. ''The only person to call Trump a fascist in the #dncdebate is a black woman,'' he wrote. ''Of course. Black women are the root of left mvmnts.''

Earlier this week, Trump condemned the recent anti-Semitic threats and vandalism, his second such condemnation, but in a meeting with attorneys general he also questioned who was behind it. His remarks appearing to suggest that it may have been the work of his political opponents disturbed some of those in the room.

Trump said that while the threats were reprehensible, sometimes it's ''the reverse,'' according to two attorneys general at the meeting. He also said last month that some bigoted public sentiments could be traced to his opponents and ''it won't be my people,'' but will be done to make his supporters look bad.

ADL leaders said Friday that law enforcement officials informed them that the arrest was made in the case of a bomb threat against its offices as well as ''several other'' facilities.

''The defendant allegedly caused havoc, expending hundreds of hours of police and law enforcement resources to respond and investigate these threats,'' James P. O'Neill, the New York police commissioner, said in a statement. ''We will continue to pursue those who peddle fear, making false claims about serious crimes.''

Homeland Security Secretary John Kelly recently pledged additional support to Jewish communities after ''unacceptable and escalating threats and actual harassment directed at faith-based communities around the country, with a particular focus on threats to Jewish Community Centers.''

In a statement, Kelly had said he was directing the agency ''to heighten our outreach and support to enhance public safety.'' As part of that, a branch of Homeland Security spoke with executive directors of the JCC association to offer more help with training and protective measures, he said.

[Philadelphia police investigate 'reprehensible' toppling of 100 headstones at Jewish cemetery]

The ADL said Thursay that at least 16 headstones were toppled at a cemetery in Rochester, N.Y., that has been used by the Jewish community there for nearly a century, the third such act of vandalism in recent weeks.

''A number of headstones were recently vandalized and toppled over at Waad Hakolel Cemetery in Rochester,'' New York Gov. Andrew M. Cuomo (D) said in a statement. ''Given the wave of bomb threats targeting Jewish community centers and disturbing vandalism at Jewish cemeteries nationwide, I am directing the state police to immediately launch a full investigation into this matter.''

Julie Tate in Washington and Kurt Shillinger in St. Louis contributed to this report, which has been updated.

Further reading:

'Stand together against this bigotry': Another Jewish cemetery vandalized and again Muslims reach out to help

Jewish schools in the Washington region receive bomb threats

Link to Article

Archived Version

Sat, 04 Mar 2017 15:19

We were horrified to learn this morning that Juan Thompson, a former employee of The Intercept, has been arrested in connection with bomb threats against the ADL and multiple Jewish Community Centers in addition to cyberstalking. These actions are heinous and should be fully investigated and prosecuted. We have no information about the charges against Thompson other than what is included in the criminal complaint. Thompson worked for The Intercept from November 2014 to January 2016, when he was fired after we discovered that he had fabricated sources and quotes in his articles.

Link to Article

Archived Version

Sun, 05 Mar 2017 07:20

It's been called an attack on freedom of speech. An attempt to silence legitimate criticism of Islam. A move to give special rights to Muslims.Motion 103, a non-binding motion put forward in the House of Commons calling on Members of Parliament to condemn Islamophobia, has faced a maelstrom of unexpected opposition, just weeks after a mass shooting claimed the lives of six worshipers in a Quebec City mosque.Conservative pressure groups, columnists, and politicians have all come out fighting against the motion '-- but what does it actually do?M-103Private member's motions in the House of Commons rarely attract any attention at all, much less the intense focus that has dogged M-103.Introduced by Liberal Iqra Khalid '-- who is, herself, Muslim '-- the motion calls on the House of Commons to recognize a rise in hatred; condemn Islamophobia and all other forms of religious discrimination; and set up a committee to study an approach to combatting all racism and religious discrimination, including Islamophobia.It was introduced last year after an online petition from Canadians calling for such an action hit 70,000 signatures. Now, it has the backing of the Trudeau government.Here's the whole text of the motion:

That, in the opinion of the House, the government should: (a) recognize the need to quell the increasing public climate of hate and fear; (b) condemn Islamophobia and all forms of systemic racism and religious discrimination and take note of House of Commons' petition e-411 and the issues raised by it; and (c) request that the Standing Committee on Canadian Heritage undertake a study on how the government could (i) develop a whole-of-government approach to reducing or eliminating systemic racism and religious discrimination including Islamophobia, in Canada, while ensuring a community-centered focus with a holistic response through evidence-based policy-making, (ii) collect data to contextualize hate crime reports and to conduct needs assessments for impacted communities, and that the Committee should present its findings and recommendations to the House no later than 240 calendar days from the adoption of this motion, provided that in its report, the Committee should make recommendations that the government may use to better reflect the enshrined rights and freedoms in the Constitution Acts, including the Canadian Charter of Rights and Freedoms.

The Liberal motion comes after the Quebec City shooting which, according to police sources, was motivated at least in part by Islamophobia and as nationalist movements worldwide, from America to France and the Netherlands, take aim at Muslims.

But the extent of the problem is currently unknown in Canada, as police-reported hate crime data is now more than two years out of date '-- as of 2014, there were 99 reported instances of hate crimes committed against Muslims reported to the police, second only to the number of similar crimes targeting against Jewish Canadians. Khalid's motion, if adopted, would compel the government to collect more up-to-date data on all hate crimes, including ones targeting Muslims, within eight months.This is the sort of action it has already taken in response to hate crimes against Jewish communities, and a reported rise in anti-Semitism.The previous Conservative government signed onto the Ottawa Protocol on Combating Antisemitism '-- which calls on signatory governments to adopt a definition of antisemitism; do more to combat its spread, especially on university campuses; to ''create common indicators to identify and monitor anti-Semitism and other manifestations of hate online'' and to create ''frameworks to address these problems.''It's not even the first time that the House of Commons has condemned Islamophobia. Last October, NDP leader Thomas Mulcair moved a motion to ''join the 69,742 Canadian supporters of House of Commons e-petition (e-411) in condemning all forms of Islamophobia.'' While it initially faced opposition from some Conservative members, the entire House of Commons later supported it.What's the problem?Critics of the motion have interpreted it to be a threat to free speech and criticism of Islam as a religion, although they often have trouble pointing to how, exactly, the motion would do that.Nevertheless, the debate has split the House of Commons.Some Conservative members have pushed Khalid to drop the word 'Islamophobia' from the motion. MP David Anderson told the House that ''there are many in the radical community who are trying to use this phrase as a catch-all.''

''(The motion is) calling for a study, it's calling for a dialogue amongst Canadians.''

Khalid tried to allay concerns in a press conference, telling reporters that the motion is simply ''calling for a study, it's calling for a dialogue amongst Canadians.'' She added that ''if there is any doubt on what the definition is, this is something that the committee can discuss.''Ultimately, the government won't be backing down on the text of the motion. In a press conference this week in Ottawa, Heritage Minister Melanie Joly said nobody would gain from ''watering down'' the motion, adding: ''Islamophobia is a term that everybody understands.''The debate over the motion has been particularly fervent in the Conservative Party leadership race, which has pitted various factions within the party against each other.The only candidate to come out in support of the motion, thus far, is Michael Chong, who has modeled himself a moderate in the race. He released a statement denouncing false claims about the motion, and noting that ''the House of Commons has long had a tradition of passing motions denouncing discrimination and hatred against particular groups, especially religious minorities.''His competitors, all trying to distinguish themselves in a crowded race where money and media attention are spread thin, have taken another route. Chris Alexander, Maxime Bernier, Kellie Leitch, Pierre Lemieux, Erin O'toole, Andrew Scheer, and Brad Trost have all announced their opposition to the motion in one form or another, while the other candidates, including frontrunner Kevin O'Leary, have not indicated a stance.For some of the candidates, the opposition is a bit quixotic.As Bernier, a self-styled libertarian, acknowledged in an email to supporters, ''M-103 is not a bill: It's not going to change any of the country's laws or going to affect freedom of speech by itself. It's just a motion, which expresses an opinion of Members of Parliament.'' He insisted his opposition is to the fact that the motion mentions only Islam, and there is no definition for Islamophobia.Many have contended that M-103 makes Islam somehow unique '-- Leitch, for one, tweeted ''no religion should enjoy special privileges'' in denouncing the motion.Speaking at an event organized to oppose the motion, Alexander remarked ''I have a lot of trouble with a motion that talks about hatred this, phobia that and doesn't mention the number one threat in the world today which is Islamic jihadist terrorism.''Alexander did speak in favour of the Ottawa Protocol, telling the House of Commons that he was proud to be a member of a government that ''wants to monitor and end this kind of hatred on the Internet and elsewhere.''

Trost, the most ardent social conservative in the race, also released a statement against M-103, arguing that ''if anything, Muslim Canadians are the beneficiaries of extraordinary acts of accommodation, far beyond anything other faith groups in Canada enjoy'' and insisted that Muslims have more rights than other religious minorities in Canadian schools (though makes no mention of the numerous publicly-funded Catholic schools that dot the country.)

''If anything, Muslim Canadians are the beneficiaries of extraordinary acts of accommodation, far beyond anything other faith groups in Canada enjoy''

Meanwhile, Leitch, who has built a campaign on calling for stricter immigration controls, drafted a petition contending that ''no religion should be singled out for special consideration.'' Leitch was a minister when her government signed the Ottawa Protocol. She has also condemned a movement to boycott Israeli goods in protest of the occupation of Palestine as ''a thinly veiled anti-Semitism movement.''Even interim Conservative Party leader Rona Ambrose, seen as a more progressive and moderating force in the party, says she will oppose the motion in its current form out of fear that ''some of my work trying to empower women and girls in Muslim communities could be branded as 'Islamophobic' if I criticize practices that I believe are oppressive,'' she said in a Facebook post.Asked directly whether M-103 would criminalize or stigmatize those who criticize the niqab, Khalid was brief: ''No, that is not true.''Either way, the fight around the motion has gone beyond Parliament.At a rally against the motion organized by right-wing Rebel Media in Toronto, four Conservative leadership contenders joined polemicist Ezra Levant as he denounced M-103 and insisted that he would continue to talk ''about the real issues of Islam.''

On Thursday, The Rebel published an article entitled ''Islamophobia is justified,'' which posited that ''why would our government want to quell the hatred and fear of something that, in many ways, deserves hatred and fear?''The fate of M-103The motion has already received one day of debate, and it appears to be supported by the entire Liberal and New Democratic parties. It appears that some Conservative members, as well as the entire Bloc Quebecois, are opposed to the language.In an effort to hit back against criticism that they're ignoring the threat of discrimination against Muslims, the Conservatives have moved to introduce their own motion, Introduced by MP David Anderson, who is not Muslim.Here's the full text:

That the House: (a) recognize that Canadian society is not immune to the climate of hate and fear exemplified by the recent and senseless violent acts at a Quebec City mosque; (b) condemn all forms of systemic racism, religious intolerance, and discrimination of Muslims, Jews, Christians, Sikhs, Hindus, and other religious communities; and (c) instruct the Standing Committee on Canadian Heritage to undertake a study on how the government could (i) develop a whole-of-government approach to reducing or eliminating all types of discrimination in Canada, while ensuring a community-centered focus with a holistic response through evidence-based policy-making, (ii) collect data to contextualize hate crime reports and to conduct needs assessments for impacted communities; and that the Committee report its findings and recommendations to the House no later than 240 calendar days from the adoption of this motion, provided that in its report, the Committee should make recommendations that the government may use to better reflect the enshrined rights and freedoms in the Constitution Acts, including the Canadian Charter of Rights and Freedoms.

That motion hasn't impressed the Liberals, who have used the issue as a wedge to go after the Conservatives.In a press conference with reporters this morning, Joly directly attacked the opposition motion, saying: ''They're scared of denouncing Islamophobia. And by not denouncing Islamophobia, they're actually contributing to the problem.''

Cover: Ben Nelms/The Canadian Press

Link to Article

Archived Version

Sat, 04 Mar 2017 17:27

HARRISBURG, Pa. '-- For some residents of this small city, there was something familiar about Foxconn's recently announced plan to hire up to 50,000 U.S. workers, one of the many hiring pledges from companies rounded up by President Trump in the first weeks of his administration.

The only difference was the scale.

In 2013, Foxconn's chairman sent a jolt through this state capital when he said his company '-- best known for making Apple iPhones in China '-- would invest $30 million and hire 500 workers for a new high-tech factory in central Pennsylvania.

Locals were giddy. Foxconn had a small office here, but this seemed like the start of an entire new industry. Pennsylvania's governor boasted about the deal. The Brookings Institution think tank hailed Foxconn's decision as a sign of U.S. manufacturing's strength.

But the factory was never built. The jobs never came. ''It just seemed to fade to black'' after the announcement, recalled a local official. It was the start of a mystery, created by a chief executive known to promise projects all over the world that never quite pan out. Yet few people seem to notice. Foxconn and others continue to get credit for deals that never take place. In December, Pennsylvania's economic development staff was still touting the $30 million factory that never was.

What happened in Harrisburg provides a skeptical lens for viewing the waves of corporate investment promises being used by Trump as evidence that he is following through on his campaign pledge to reinvigorate U.S. manufacturing. ''I'm delivering on everything we promised,'' Trump said last month during a meeting with manufacturing executives at the White House, noting how firms have announced new hiring and factories. ''People are saying they've never seen so much happen in 30 days of a presidency.''

Foxconn, for example, announced shortly after Trump's election that it plans to invest $7 billion and hire up to 50,000 workers in the United States. Such a hiring spree would catapult Foxconn from a couple thousand U.S. workers to a major employer on par with Chrysler.

Other companies, too, including SoftBank, Alibaba, Intel and IBM, have made an unusual display of loudly announcing their intentions to invest in the United States '-- all with price tags in the billions of dollars and the promise of tens of thousands of jobs '-- much to Trump's delight.

''Foxconn is going to spend a tremendous amount of money on building a massive plant,'' Trump said the day after the investment was revealed, ''and probably more than one.''

But, as Harrisburg learned, the gulf between these eye-popping announcements and what takes place on the ground can be huge '-- and frequently overlooked.

''They are scrambling to look good,'' Mark Selden, senior research associate at Cornell University's East Asian program, said. ''It's a sign of the pressure that Trump is placing on everyone in the world to deliver on his agenda.''

Companies tend to view these announcements as an opening bid in a negotiation, said Alberto Moel, a senior analyst with Bernstein Research in Hong Kong. Firms know politicians like the splashy headlines. And if everything falls into place '-- the business climate improves, they extract enough concessions such as tax breaks and free land '-- they might be able to make it happen.

''It actually puts the onus on the U.S. in a way,'' Moel said. ''They are saying: 'I'm along for the ride. Here's my proposal.''‰''

If the deal falls apart, as it often does, no one is going to talk about it.

''The government themselves aren't going to remind you of that, Trump has no intention of helping you remember that,'' Moel said. ''What's the downside?''

Trump is far from alone in using corporate announcements as political backdrops. It's why ribbon-cuttings and ceremonial shovels exist.

In 2012, President Barack Obama visited a new $5 billion Intel computer chip plant in Chandler, Ariz., citing it as ''an example of an America that is within our reach.'' But the facility, known as Fab 42, was never completed. Last week, Intel chief executive Brian Krzanich stood in the Oval Office with Trump to announce a $7 billion investment '-- essentially, Fab 42 was back on track, with a new price tag and a new president. Trump tweeted his praise.

(Video: Reuters / Photo: AP)

Even before he was sworn in, it was clear Trump placed greater importance on these job announcements than past administrations.

Among the first signs came in December when Tokyo-based SoftBank's chief executive, Masayoshi Son, stood with the president-elect to announce a plan to invest $50 billion and create 50,000 new U.S. jobs.

Two days after Trump's inauguration, Foxconn chief executive Terry Gou told reporters in Taiwan that his company planned to spend $7 billion on a U.S. factory to make computer displays. It wasn't iPhones '-- which Trump has said he wants to be ''Made in the USA'' '-- but Gou said the factory could create 30,000 to 50,000 U.S. jobs. Details were few, but one clue seized on was the presence of a Pennsylvania state trade representative at Gou's talk.

Foxconn said in a statement that it is ''exploring a potential investment that would represent an expansion of our current U.S. operations.'' But the company could not confirm ''the number of jobs that might be created.''

Foxconn is a coveted hardware manufacturer because of its size. Last year, it reported $136 billion in revenue. It has more than 1 million employees, mostly in China. A single factory making iPhones or LCD screens can employ tens of thousands of workers. When Foxconn says it will invest in a new plant, the decision can transform a region. That's why countries all over the world are eager to lure Foxconn to their shores.

Gou, Foxconn's founder, for years has described the United States as a ''must-go market.''

In 2014, as the Pennsylvania deal was quietly dying, Gou teased the opening of a LCD display factory in the states. His company talked with officials in Colorado and Arizona. Nothing happened.

That same year, the company signed a letter of intent to invest up to $1 billion in Indonesia. That investment still has not occurred.

Foxconn said it would invest $5 billion over five years in India as part of an ambitious expansion in 2014. The deal would create up to 50,000 jobs, Gou said. But Foxconn's investment in India has amounted to only a small fraction of what it originally promised.

Similar results were seen in Vietnam, where Foxconn committed to a $5 billion investment in 2007, and in Brazil, where Foxconn spoke of a $10 billion plan in 2011. The company made its first major foray in Vietnam only last year. In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of expectations.

''There's a pattern here,'' said Moel, the analyst.

Gou's plans for Harrisburg were revealed in 2013 while he was in the United States on a tour with other Taiwanese business officials to, in part, drum up support for Taiwan's bid to join the Trans-Pacific Partnership, known as TPP. (Coincidentally, Trump pulled the United States out of the trade treaty in his first days in office.)

It was a surprise when Gou said Foxconn planned to invest $30 million over two years in a factory to make technology equipment and servers. Gou noted his company's history in Harrisburg. He said the goal was to create ''high-precision, high-tech, high value-added manufacturing in the U.S.''

Gou also said Foxconn would donate $10 million to Carnegie Mellon University in Pittsburgh for robotics research.

''IPhone maker Foxconn to invest $40 million in the US,'' wrote the China Post. ''Foxconn to build plant in Pennsylvania,'' CNN said. Local media quoted state officials as saying Gou would sign a memorandum of understanding and the company was busy scouting sites.

''There was this intense buzz,'' recalled David Black, president of the Harrisburg Regional Chamber.

''Lots of us were excited by the opportunity,'' said Bub Manning, who at the time co-owned a local construction firm. ''Anytime something of that size comes along in central Pennsylvania, that's a big deal.''

For years, Foxconn has maintained an office with about 50 workers in Harrisburg, a hub of the computer connector industry. The office is in an old brick warehouse. On a recent visit, the building was filled by a half-empty warren of cubicles. A worker declined to comment to a reporter with The Washington Post. According to local government officials, Foxconn has not done any permitted alterations to the building in 15 years.

Manning recalled how his firm tried to chase down information about the planned $30 million factory.

''It felt like I was grabbing Jell-O. It never got any traction,'' Manning said.

The $30 million factory faded from view.

Foxconn said its $10 million donation to Carnegie Mellon was ''moving forward very successfully,'' with half of the funds having been spent four years later. The school declined to comment.

None of this has stopped the praise for Foxconn's investment in Pennsylvania. Recent stories have referred to the phantom factory as a sign of Foxconn's U.S. beachhead. A state economic development official wrote about Foxconn's $30 million factory as evidence of foreign companies that operate in the Keystone State. (The piece was fixed after The Washington Post inquired about it.)

State officials toured potential sites with Foxconn representatives, the state Department of Community and Economic Development said in a statement. ''Unfortunately, a project did not come to fruition.'' Foxconn attributed the failure to ''material changes to the business and operating climate at that time.''

''The proof is always in the pudding,'' said Scott Andes, a senior policy analyst at Brookings.

The assumption is that companies follow through on major announcements. ''But it is important to be skeptical,'' Andes said. ''I would hope it's not just smoke and mirrors with Foxconn or any other of these companies.''

Feeling burned by the fate of the $30 million factory, some in Harrisburg are cautious about getting their hopes up again.

''We learned something from that,'' said Black of the Harrisburg chamber.

But, Manning said, it would be hard to not be seduced by the size of Foxconn's ambition, real or not.

''If you smelled a project like that,'' he said, ''you'd get excited even though you know better.''

Read more:

What happened when a pro-Trump county discovered it was a 'sanctuary city'

If Trump wants pipes built in America, what does that mean?

The unanswered question in Trump's announcement of a $7 billion Intel investment

Link to Article

Archived Version

Sun, 05 Mar 2017 06:54

People around the world capture unexpected, entertaining, historical and newsworthy moments on their smartphones everyday.

Some of the most defining news footage and popular viral content of the past few years was filmed by an eyewitness.

These photographs and videos are utilised by broadcasters, publishers, creative agencies and brands who seek to feature them in their own reporting and storytelling.

They also provide educators and human rights organisations with valuable information and evidence.

There are many issues surrounding how these photographs and videos are captured, discovered and published, relating to protection, consent, verification and copyright.

Eyewitness Media Hub is here to help.

ResearchThrough our continuing research we endeavour to deepen understanding of the phenomenon of eyewitness media and its impact on the following groups:'¨'¨'¨'¨

creatorsaudiencespublishersbroadcastersRead Research

DevelopmentUsing our research as a foundation, we develop resources that provide practical guidance and training in the following areas:'¨'¨'¨'¨

permission and consentsharing graphic contentvicarious traumaverifying contentprotecting sourcesGuiding Principles

DistributionWe raise awareness through our outreach activities and aim to embed best practice principles through:

training workshopsmentoring schemesaudio and video broadcastsdigital packages summits and conferencesRead Articles

Claire WardleClaire Wardle is one of the world's leading experts on UGC, and sits on the World Economic Forum's Global Agenda Council on Social Media. She designed the discovery and verification training programme for BBC News and went on to work with social media news agency Storyful and UNHCR. Claire has a PhD in Communication from Annenberg School for Communication at the University of Pennsylvania. In April 2015 she was announced as the Research Director for Tow Center for Digital Journalism at Columbia University.

@cward1e

Sam DubberleySam has over ten years' experience in broadcast news.He headed the Eurovision News Exchange from 2010 to 2013, managing the world's largest exchange of television news content.He worked alongside Claire Wardle and Pete Brown to conduct research into UGC and broadcast news, published by the Tow Center for Digital Journalism at Columbia University. He is now based in Istanbul providing consultancy for a range of corporate, non-profit, governmental and academic institutions.

@samdubberley

Jenni SargentJenni Sargent is a director of Eyewitness Media Hub and part of the research team responsible for exploring audience attitudes and behaviour relating to how eyewitness media is handled by news organisations. Jenni specialises in creating bespoke online training and is working to develop a library of resources to address the logistical, ethical and legal issues surrounding eyewitness media. Her company Digital Skills Network created the first fully interactive verification course for journalists in 2013.

@jennisarge

Pete BrownPete Brown is co-founder and lead researcher at Eyewitness Media Hub. He has recently completed a study of eight major international newspapers to explore their usage of eyewitness media and has partnered with the Reuters Institutes for the Study of Journalism at the University of Oxford to complete a study exploring attitudes towards eyewitness media among UK audiences. Pete has a PhD from Cardiff University's School of Journalism, Media and Cultural Studies.

@beteprown

(C) 2017 Eyewitness Media Hub - a non-profit organisation established to support the creation, discovery, verification and publication of Eyewitness Media.

Link to Article

Archived Version

Sun, 05 Mar 2017 06:51

We provide practical and ethical guidance in how to find, verify and publish content sourced from the social web. The focus of our work includes:

Misattributed and manipulated images that circulate widely onlineEyewitness photographs and videos captured at the scene of a news eventClaims and content shared on social media and on private messaging appsHoaxes and fake stories generated for financial or political gainFirst Draft formed as a nonprofit coalition in June 2015 to raise awareness and address challenges relating to trust and truth in the digital age. These challenges are common to newsrooms, human rights organizations and social technology companies and also their audiences, communities and users.

Here on First Draft News we offer quick reference resources, case studies and best practice recommendations, authored by representatives from our nine founding partners.

Subscribe to our weekly newsletter to stay up to date with our continuing research, training programmes and collaborative projects.

Partner NetworkIn September 2016 we launched the First Draft Partner Network, the first of its kind to bring together the largest social platforms with global newsrooms, human rights organizations and other fact-checking and verification projects around the world.

The Partner Network is based on the idea that the scale of the challenges that society faces around filtering factual information and authentic content can only be tackled via a global collaboration of organizations working together to find solutions.

Core PartnersOur Core partners are journalism, human rights and technology organisations that have an international remit and work at the intersection of information distribution and social media.

They have been invited based on their capacity to actively contribute to relevant initiatives and their existing dedication to improving practices in the ethical sourcing, verification and reporting of stories that emerge online.

Each partner is committed to sharing knowledge, devising policies and contributing to the development of tools and training.

Core partners will work together on:

Recommendations for managing and monitoring information and images in real time, across multiple networks and in multiple languagesWays to streamline and embed a verification process to check that a photograph, video or story published online is original and genuineWays to promote debunks and prevent the spread of misinformationSolutions for how journalists can appropriately connect with a social media source to secure additional information and permission to use their contentRaising awareness of the rights and safety of eyewitnesses, victims and their families when reporting and publishing photographs and videos sourced onlineBuilding resilience amongst those frequently exposed to graphic and distressing imagery online to avoid vicarious trauma, which can lead to post-traumatic stress disorder.Increasing news literacy amongst social media usersUp to four representatives from each core partner organization will meet at regular in-person summits, share experiences and ideas in a private online community and participate in the real-time collaborative verification of socially sourced content in a dedicated First Draft Newsroom, hosted on Check.

Academic PartnersOur academic partners are institutions that have programs in journalism, communications, computer science or human rights with faculty dedicated to the issues and challenges addressed by First Draft.

Academic partners are invited to conduct and contribute to relevant research projects and will be granted access to a 15 week newsgathering and verification curriculum featuring teaching materials, learner guides, class activities, instructional videos and interactive resources.

Affiliate PartnersOur affiliate partners are nonprofits/NGOs, trade associations, commercial networks, coalitions or communities that are relevant to the issues and challenges addressed by First Draft.

We will work closely with our affiliate partners to support their existing newsgathering and verification initiatives, devise bespoke training programmes and provide best practice guidance and recommendations to disseminate amongst their own members and networks.

MembersMembers are small news organisations or individuals with an interest in following and amplifying the work of First Draft and its Partner Network.

This programme is in development and was created in response to the overwhelming interest we received following the launch of the partner network. Current members will be kept informed of Partner Network activities and receive invitations to regional in-person events and workshops.

Is First Draft a non-profit?First Draft launched in June 2015 as a non-profit project fiscally sponsored by Eyewitness Media Hub. We are in the process of officially incorporating as a non-profit organization in the US and hope to have an advisory council and full governing board in place by spring 2017.

First Draft receives project funding to coordinate initiatives such as the Partner Network and welcomes offers of additional sponsorship (either financial or in-kind) from any organization keen to support a related project or event.

As a founding partner, Google News Lab provided financial assistance to develop and maintain firstdraftnews.com, support the creation of new content and coordinate all coalition led initiatives.

Ethics policyOperational and editorial decisions (including recommended tools, platforms or services) are not influenced by funding partnerships, personal interest or the potential gain of any entities involved in or related to First Draft.

Firstdraftnews.com does not feature any advertising or sponsored content.

Founding PartnersClick the logos below to find out more about our founding partners.

Link to Article

Archived Version

Thu, 02 Mar 2017 21:22

According to former Attorney General Eric Holder, former president Barack Obama's about to make his political comeback. At a press junket on Wednesday, Holder said that Obama is "ready to roll" on new plans to support the Democratic party, presumably through '-- and potentially longer than '-- the 2020 presidential election. Get ready for Obama 2.0, the hero America needs to counter-balance Donald Trump.

Holder is the chair of the National Democratic Redistricting Committee, a recently formed, non-governmental political group that is seeking to reverse the effects of gerrymandering in the 2021 redistricting process. The unfair drawing of voting districts is one of the primary causes of Republican strongholds in both the state and national legislatures, so creating a more equal distribution of votes could significantly benefit the Democrats beyond 2021.

Working to dissolve that intentional imbalance of power could be one of the most useful ways Obama could spend his post-presidency political careers. However, Obama will also be well-suited to join campaign activities before that, since the 2018 midterm and 2020 general elections could decide Trump's political legacy.

Hopefully, Obama's long beach break was the restful remedy he needed to tackle Trump's regime. The Obamas spent several weeks hanging out with entrepreneur Richard Branson on his private island in the British Virgin Islands, before making a stealthy reappearance in the United States last week. He definitely deserved the break, but those who have been hyperventilating the last six weeks of Trump's presidency will be pretty happy to have him back. Hillary Clinton's general retreat from public life since the election has left the party feeling lost and in need of guidance, which Obama might be able to provide.

Source: Pool/Getty Images News/Getty Images

Few presidents have had particularly active political careers after their terms in office, but Obama's successor has changed countless political norms. Before he had even left office (but after the election), Obama announced that he was planning to open up an office in Washington, D.C., which wasn't unprecedented but still a little unusual. Given all that Trump has done in his term so far, Obama seems to be increasing his initially planned involvement and have an unprecedented role in the Democratic party for a past president.

Obama clearly still cares about making sure the country is headed in a progressive direction, because even though he's served his time, he's coming back for more. Obama had one of the most difficult presidencies in American history, yet he's still returning to contribute what he can during this tricky political moment. Even if you recognize the flaws in his administration, his return to politics is a noble use of his post-presidential time.

Link to Article

Archived Version

Fri, 03 Mar 2017 13:47

Donald Trump may soon find himself on the receiving end of a "visa war" that could have dire consequences for trans-Atlantic travel and European tourism. On Thuesday, EU lawmakers voted to force Americans to apply for visas when traveling to Europe in response to Washington refusing to allow all Europeans to travel to the States visa-free.

The vote by show of hands was the latest in an ongoing ''visa war'' between Brussels and Washington DC, which now looks set to come to a head after MEPs today agreed that US nationals crossing the Atlantic should require additional travel documents as long as citizens from five EU countries (Bulgaria, Croatia, Cyprus, Poland and Romania) are kept from entering America without a visa. A European Parliament source told Telegraph Travel this was a ''serious negative step in the EU-USA visa war''.

Following today's vote, the EU Commission now has two months to reintroduce visas for Americans wishing to travel to Europe, after MEPs agreed the EU is now ''legally obliged'' to suspend the Visa Waiver Programme (VWP) with the US for a year after the US administration failed to meet a deadline to respond something called visa reciprocity. Parliament and the European Council will have the chance to object to anything put forward by the Commission according to the Telegraph.

The resolution passed despite warnings from the European Travel Commission (ETC) of the damage a visa war with the US might have on the continent's tourism industry. ''We fully understand and respect the visa waiver reciprocity mechanism embedded in European legislation to ensure that all nationals of Member States part of Schengen can benefit on equal terms from exemption of visa requirement,'' said Eduardo Santander, executive director of the ETC, in a joint letter with Michael de Blust, secretariat of the Network for the European Private Sector in Tourism, to MEPs.

''However, we are very concerned about the economic and political impact of a suspension of visa waiver for US nationals.

''Making it more difficult for US citizens to travel to Europe would certainly deprive the European travel and tourism sector of essential revenue, and put thousands of European jobs at stake in one of the few sectors which experiences a strong growth in employment.''

As we reported at the time, it was in April 2014 that the European Commission was first made aware that the US - along with Australia, Brunei, Canada and Japan - was failing to ensure the same visa waiver rights for its citizens that Europe offered in return. The Commission then gave the countries a deadline of two years before retaliating. Since, Australia, Brunei and Japan have all lifted their visa requirements, with Canada set to do the same by the end of the year, but the US has failed to act.

There has not yet been a response to today's vote from the US but the State Department's Bureau of Consular Affairs has said in the past that Bulgaria, Croatia, Cyprus, Poland and Romania do not yet meet security requirements for the US VWP. Canada also imposes visa requirements on Bulgarian and Romanian citizens, but it has announced that they will be lifted in December.

Since the imposition of a visa regime is perceived as a major hurdle to free travel, the implementation of the MEP vote would likely lead to a dramatic drop in airline travel across the US and Europe, coupled with a plunge in tourism and associated reveue. As a country looking to boost its tourism industry will often look at loosening any existing visa requirements, the opposite may suggest that the European decision may have political overtones and be in response to Trump's aggressive anti-immigration regime.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:31

When an elusive cocaine-trafficking suspect was finally extradited to Miami in November, federal prosecutors portrayed Henry De Jesus Lopez Londo±o as one of Colombia's most ''prolific drug dealers.''

But what U.S. authorities did not mention was that Lopez Londo±o had been recruited as a confidential informant '-- or ''deep cover mole'' '-- for two federal agencies, his lawyers say in court documents unsealed Thursday.

The defense depicts Lopez Londo±o as a coveted government operative who made a deal with the feds and put his life on the line to help the war on drugs '-- including infiltrating a dangerous drug-trafficking cartel headed by Mexican kingpin Joaquin ''El Chapo'' Guzman, as well as paramilitary groups and members of the al-Qaida terrorist network in Colombia.

Saying he was promised ''favorable treatment'' by agents, Lopez Londo±o's attorneys contend he provided them with inside information on the organizations, production plants, drug routes and cocaine shipments and claim his tips led to at least two major U.S. seizures. Although he is known in the trafficking underworld as ''Mi Sangre'' (My Blood), the court filings say, agents called him by his code name, ''Assis.''

The filings from his defense team, which had been out of public view until now, claim Lopez Londo±o worked formally for U.S. Immigration and Customs Enforcement and the Drug Enforcement Administration as an undercover informant '-- for a period that covers most of the time he is accused of importing loads of cocaine into the United States.

The U.S. attorney's office in Miami confirmed that Lopez Londo±o was once a ''confidential source'' for ICE between August 2010 and February 2011, in a response also unsealed Thursday. But prosecutors said the DEA ''never'' formally used him as an informant. Prosecutors also dispute that he helped the feds throughout the time frame of his narco-trafficking indictment.

Lopez Londo±o, charged with a half-dozen others on a single conspiracy charge of importing and distributing more than five kilos of cocaine between October 2006 and February 2012, is scheduled for trial in late October of this year. Four of his co-conspirators have already pleaded guilty and are cooperating as witnesses.

His lawyers say he signed agreements with ICE and then the DEA during meetings in Cartagena, Colombia, in 2009 and 2010. The agencies, according to court documents, also promised to provide his family with possible asylum in America '-- along with ''favorable treatment for him once he came to the United States.''

As a result of Lopez Londo±o's ''arrangement with ICE, he undertook infiltration assignments among Colombia's paramilitary organizations, at great personal risk, in order to uncover money laundering, drug and weapons trafficking activities in Colombia during the relevant periods of [his] indictment,'' his lawyers assert in court documents.

Lopez Londo±o's lawyers have taken the strategic step of disclosing his once-secret role for the federal agencies in an effort to thwart his prosecution under a rare legal strategy known as the public authority defense. His lead defense attorney, Arturo V. Hernandez, argues in court papers that during the time his client is accused of breaking U.S. drug-trafficking laws, he was merely carrying out his assignments for government agents and therefore cannot be punished for any alleged misconduct.

Hernandez, who is seeking more government evidence about his client as well as federal grand jury minutes, asserts the indictment is ''defective'' and that the initial U.S. prosecutor on the case deliberately withheld the defendant's role as a government informant from that jury.

Asked about his client's disclosure on Thursday, Hernandez declined to comment, stating he ''would litigate this case through the filed pleadings, not in the press.''

An Argentine lawyer who represented Lopez Londo±o in his fight against extradition to the United States also criticized U.S. authorities for withholding information about his client's role as an informant for federal drug investigators. The defendant was arrested in Argentina in 2012.

''For four years, Mr. Lopez Londo±o fought the U.S. extradition request and the U.S. Government never once informed the Argentine judicial authorities that the defendant had, for a significant period of time, worked for the U.S. Government,'' attorney Daniel Fedel said in a statement. ''Had this been confirmed, Mr. Lopez Londo±o would not have been extradited to the U.S.''

According to his lawyers, Lopez Londo±o fled from Colombia to Argentina in 2008 and started working undercover for a series of federal agencies, requiring him to return to his homeland to infiltrate drug organizations.

They said he returned to Argentina a couple of months before he was indicted by a federal grand jury in February 2012, saying he feared for his life in his native country '-- not because of the conspiracy case in Miami. Prosecutors, however, said he absconded to Argentina after the indictment was filed in federal court.

Lopez Londo±o was a leader of the right-wing Colombian paramilitary group known as the AUC more than a decade ago, according to prosecutors. He later became a boss of the Urabe±os gang in northern Colombia.

When police in Argentina arrested him in October 2012, they said Lopez Londo±o held passports from seven countries to evade capture, and that he had entered the country with a false passport while posing as a Venezuelan businessman. He sought asylum, but his petition was rejected, and after a fierce legal fight he was extradited to the U.S. four years later.

In his Miami case, Lopez Londo±o filed an affidavit in which he said he first made contact with a U.S. agency in 2008 through a member of AUC. Agents with the Treasury Department, he said, wanted him to help investigate large drug trafficking and money laundering organizations in Colombia. He said the following year, he began his infiltration activities.

In 2009, he said he formalized his undercover work in meetings with agents from another U.S. agency, Immigration and Customs Enforcement, in Cartegena. ''I became a documented informant for the U.S. law enforcement agents, and signed two separate contracts,'' he said in his affidavit unsealed on Thursday.

Lopez Londo±o said during that period, he worked with five ICE agents and later with three DEA agents, while infiltrating and providing information on several targets '-- including the Guzman, Ubarbe±os and Los Rastrojos organizations.

As a confidential informant, Lopez Londo±o said he provided ''extensive intelligence'' on the structure of the organizations, cocaine production facilities, drug-trafficking routes, money-laundering activities, and the identities of high-ranking officials ''engaged in political corruption'' in Colombia, Venezuela and Argentina.

In addition, he said, ''I have provided information that has led to at least two seizures of large quantities of cocaine.''

Lopez Londo±o said he also became aware in 2010 of an ''internal conflict'' between ICE and the DEA agents over who would be supervising his activities as a confidential informant. He said ICE agents told him to stop working with the DEA.

''Due to the close partnership of DEA with the Colombian police, I had ongoing concerns that my activities would become known to the Colombian police that I believed were corrupt and in the pay of the large cartels,'' Lopez Londo±o said in the affidavit.

''If my activities on behalf of U.S. law enforcement had been leaked to the criminal cartels I was infiltrating,'' he said, ''it would have cost me my life and possibly that of my family.''

Link to Article

Archived Version

Thu, 02 Mar 2017 22:03

var _ndnq = _ndnq || []; _ndnq.push(['embed']);

SUNNYVALE '-- In a stinging rebuke, Yahoo slashed more than $12 million from CEO Marissa Mayer's compensation package as it took the first steps Wednesday to assign responsibility for the company's failures surrounding two record-setting hacks of customer data.

Mayer will lose her 2016 annual bonus and her 2017 equity grant after an independent investigation revealed that senior company executives knew the firm had suffered a major hack in 2014 but failed to properly investigate it.

Yahoo also accepted the resignation of general counsel Ronald Bell.

In a statement Wednesday, Mayer said that when she learned in September 2016 ''that a large number of our user database files had been stolen, I worked with the team to disclose the incident to users, regulators, and government agencies.''

It is not clear whether she had any knowledge of the attack when other executives learned about it in 2014.

''I am the CEO of the company and since this incident happened during my tenure, I have agreed to forgo my annual bonus and my annual equity grant this year and have expressed my desire that my bonus be redistributed to our company's hardworking employees, who contributed so much to Yahoo's success in 2016,'' Mayer said in her statement.

Yahoo's hacking troubles came to public light last year just as Verizon was inking a deal to buy the storied web company. The revelations about the data breaches jeopardized the deal, but last month the two firms announced they would go ahead with a reduced sales price of $4.48 billion, with Verizon getting a $350 million discount as a result of the scandal.

Mayer has an annual ''target bonus'' of $2 million, double her annual salary. The actual amount paid depends on her performance and that of the firm. The amount that she would have received for 2016 had not yet been approved by the firm's compensation committee, a person close to the situation said.

Her annual equity grant is determined by the board, but it's no less than $12 million a year in restricted stock and stock options.

Tim Bajarin, president of Creative Strategies, said that the financial hit to Mayer makes sense given that the hack happened under her leadership.

The buck stops with the CEO, Bajarin said, and executives have to take responsibility for whatever happens during their tenure.

''I think the financial world and the customers view it that way, and as a result it's being treated that way,'' he said.

Still, there are questions swirling about whether Mayer will keep her job. In 2014, Target CEO, president and chairman Gregg Steinhafel stepped down after a massive data breach hit the retailer.

''At this stage of the game, we don't know how the board is going to react to that and what they want to do,'' he said.

Yahoo did not make public the 2014 breach of at least a half-billion user accounts until late last year. That hack, along with one in 2013 of more than a billion accounts, have led to at least two dozen class-action lawsuits.

Also in the fallout from the investigation, Bell, Yahoo's lawyer and secretary, resigned Wednesday.

''No payments are being made to Mr. Bell in connection with his resignation,'' Yahoo said.

The probe found that in late 2014, ''senior executives and relevant legal staff were aware that a state-sponsored actor had accessed certain user accounts by exploiting the company's account management tool,'' Yahoo said in a news release.

''While significant additional security measures were implemented in response to those incidents, it appears certain senior executives did not properly comprehend or investigate, and therefore failed to act sufficiently upon, the full extent of knowledge known internally by the company's information security team,'' the company said.

The security team was aware that the same attackers also forged Yahoo system cookies in 2015 and 2016, information that was not publicly released until late last year and this year.

Twenty-six Yahoo users had been particularly targeted by hackers, and were notified, as was law enforcement, Yahoo said.

The investigators from an independent committee found no ''intentional suppression of relevant information'' but that ''the relevant legal team had sufficient information to warrant substantial further inquiry in 2014, and they did not sufficiently pursue it.''

Findings from the investigation were contained in Yahoo's 2016 annual report, filed Wednesday.

Although Mayer said she ''agreed to forgo'' her annual bonus, the company said its board stripped Mayer of her 2016 annual cash bonus, and that she volunteered to give up her 2017 annual equity grant. The board accepted her offer.

Avivah Litan, a Gartner analyst who covers cybersecurity, said that security is often not on the top of a company's agenda because it isn't directly tied to revenue growth.

''Really the only concrete damage to the company '... is reputation loss, eventual lawsuits and shareholder anger,'' she said.

Yahoo's board has ordered the company to revise security-incident response policies to help ensure senior executives and the board know about them, and to conduct rigorous investigation of any future cybersecurity incidents, bringing in forensic experts as required.

The sale to Verizon is expected to close between April and June.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:39

It's ''simply more fun'' and will give you ''extra cool points,'' Vox (12/14/16) declares of the latest gadget from its corporate cousin.

Vox Media has had disclosure problems in the past (FAIR.org, 9/9/15), but a survey of its overlapping interests'--and some strangely PR-sounding articles'--highlights how glaring and extensive these conflicts have become.

One of Vox's major investors'--second only to Comcast'--is General Atlantic. The New York''based private equity firm invested $46.5 million in Vox Media in December 2014, roughly six months after the flagship website Vox.com launched. As part of the deal, General Atlantic VP Zachary Kaplan got a seat on Vox Media's corporate board (as is common in large investment rounds). General Atlantic also invests in several technology and media companies Vox Media covers, without Vox disclosing this fact.

For example, General Atlantic was one investor in a recent $1.8 billion fundraising round for Snap, Inc., the company formerly known as SnapChat that makes the popular social media photo app by the same name. Vox's coverage of Snapchat since General Atlantic's May 2016 investment has been glossy and favorable, primarily in its New Money section launched in October:

Snapchat's $25 Billion Initial Public Offering, Explained for People Over 30 (10/6/16)The Snapchat Spectacles Craze, Explained (12/14/16)Nowhere in these flattering articles is it mentioned that Vox Media shares a sizable investor and board member with a private equity firm invested in Snap, Inc. The October article is an explainer on why Snapchat's large IPO is justified, and the December post is indistinguishable from a Snap, Inc. press release:

With each holiday season comes a new hard-to-get item. This year Snapchat's spectacles hold that crown'...

Getting my hands on a pair of Snapchat Spectacles last month wasn't easy. The glasses are made available in random locations at any given moment. Luckily for me and the rest of New York City, Snapchat's opened a store in the Big Apple for the holidays. Still, I had to wait in line for five hours to get my pair.

Why are people so excited?'...

Activities in which Spectacles make sense are numerous: rock-climbing, concert-going, playing with a baby, etc.

The same day, Vox Media's tech vertical, The Verge, also ran something that read like an ad with no disclosure:

You Can Get Prescription Lenses for Your Spectacles for as Little as $29 (12/14/16)It's common for tech websites to run puff copy for products, but in the context of a shared investor and Vox's corresponding post, the lack of clear disclosure does a disservice to Vox's readers.

General Atlantic was also one of three lead investors in a $1.5 billion fundraising round for AirBnb in December 2015. While Vox has been critical of AirBnb's high-profile problems with racist users, the New Money vertical was quick to defend the San Fransisco room-sharing giant after New York state passed restrictive legislation'--again, without any disclosure of General Atlantic's investment: ''New York's Crackdown on 'Commercial' Airbnb Listings Is Misguided'' (11/18/16).

When asked for comment on their disclosure policy, Vox managing editor Lauren Williams wrote back, ''That's something we've been thinking about, and we plan to post one in the new year.'' A follow-up email asking whether Vox covering companies owned by its major investors was a potential problem has had no response so far.

Vox Media's ReCode (12/19/16) brings readers the news that ''BuzzFeed is positioned to lead the industry forward and help the world catch up to the digital future.''

Vox Media also shares a major investor, Comcast (via the cable giant's NBCUniversal subsidiary), with BuzzFeed. The cable giant gave both companies $200 million in August 2015, and gave Buzzfeed another $200 million in October 2016. On Monday, Vox Media's ReCode (12/19/16) published what was literally a press release from BuzzFeed CEO Jonah Peretti without disclosing this shared investor.

Vox has also frequently written directly on Comcast without any disclosure that it is its primary investor. One explainer from last year (4/24/15) detailing the failed Comcast/Time Warner merger didn't mention this fact at all'--a stark omission even by the most liberal standards of disclosure.

While it's not as journalistically problematic, Vox's television writers frequently give fawning reviews of NBC shows (e.g., ''NBC Is the Internet's TV Network Punching Bag. But Its Fall Schedule Is Its Best in Years,''8/16/16) without disclosing NBCUniversal is its primary investor (though, it should be noted, Vox did panNBC's Olympics coverage).

More dubiously, Vox has writtenarticles embedded with ''exclusive'' episodes of SeeSo shows:

Curious how Vox got such a scoop? Probably because SeeSo is a subscription service owned by NBCUniversal'--a fact not disclosed in these puff pieces, or any of Vox's television coverage.

Vox's Todd VanDerWerff doesn't think he needs to mention that Hulu is co-owned by the company that put up two-thirds of Vox Media's cash.

Indeed, the closest one can get to disclosure guidelines comes from a rather defensive post last year (10/27/15) from TV and culture writer Todd VanDerWerff after Zaid Jilani (AlterNet, 10/26/15) and others brought up the fact that VanDerWerff wrote a glowing endorsement of Hulu without disclosing that the video streaming service and Vox shared an investor in NBCUniversal. Basically, VanDerWerff insisted that NBCUniversal is a ''minority shareholder'' in Vox Media (and therefore beneath mention), despite the fact that two-thirds of the cash Vox has raised to date has come from the media giant. Because Vox Media is a private company, shareholder breakdown is impossible to determine, but insisting it's ''minor'' is misleading to the average SEC-illiterate reader.

While Vox coverage of its corporate parents, siblings and cousins isn't uniformly positive, all too often it is. Even in stories that aren't more or less verbatim PR copy, disclosures ought to be mandatory'--especially when it's as direct as covering Comcast and NBC corporate. For startups, major investors are tantamount to ownership in every sense of the word, and since traditional media companies disclose ownership, there's no reason why this same standard wouldn't apply to venture capital and private equity-backed New Media outfits.

Complexity is no excuse for not disclosing obvious conflicts, nor does it justify running a major media site for two-and-a-half years without a public, clearly worded code of ethics. Vox Media has raised over $300 million and has a staff reportedly of over 400 people. With all those resources, perhaps they can take a week off and hash out a coherent ethics guide that reflects the economic realities of PE- and corporate-backed ''disruptive'' media.

Adam Johnson is a contributing analyst for FAIR.org.You can find him on Twitter at @AdamJohnsonNYC.

You can contact Voxhere (or via Twitter: @VoxMediaInc). Please remember that respectful communication is the most effective.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:53

Thanks for checking out IPOs on Robinhood!

We currently offer this feature for Snap Inc., but hope to expand it to more IPOs in the future. Here are some things to know as you place your order:

How Does It Work?

Robinhood allows you to place orders for certain IPOs in advance of the listing date. These orders arelimit orders, which means you set the price you're willing to pay for the stock. We'll send your limit order to the execution venue on the morning of the IPO. You aren't guaranteed the order will execute''instead, if we can execute your order at or below the price you set, we will! You don't have to worry about paying more than you indicated because your order won't execute above your limit. At any time, you're welcome to cancel your order and/or place another order in the app as you normally would.

Are these Private Placements?

Please keep in mind these are not pre-IPO stocks or private placements and you're not participating in the IPO. We're simply providing you the convenience of entering your orders before the morning of the IPO. Your order won't actually be executable until the day of the stock begins trading.

What is the "Estimated Price"?

The estimated price we provide is just that''an estimate based on preliminary SEC filings from the company going public. The information in the preliminary filings is not necessarily complete and may be changed. The estimate is not meant to be used as a guideline for the market value of the company. You can find relevant SEC filingshere.

When Will My Order Be Filled?

As past experience shows, stocks don't always begin trading at market open on the day of their IPO. Please expect delays as the exchange processes all of the orders relating to the offered stock. This means you may not have your order filled until later in the day, so don't be alarmed if your order isn't filled right at market open.

Newly public stocks are often more volatile than mature stocks. Prices may change quickly and your order may not be filled even if your order's limit price is at or above the displayed price. Because of this volatility, you can't use Robinhood Gold Buying Power on recent IPOs because they have a 100% maintenance requirement for up to 30 days.

Thank you for using the new Robinhood IPO feature! Happy Trading!

Robinhood does not offer private placements or participation in initial public offerings. Pre-IPO orders are limit orders that are queued for transmission to an executing venue on the morning of the initial public offering. These orders may be cancelled at any time.

Pre-IPO queued orders are not guaranteed to execute. Executions depend on several factors including but not limited to market conditions, network latencies, volatility, and share availability. Orders may not be filled even where the quoted or displayed bid and/or offer prices are below the limit price. The time of an IPO may not be decided until the morning of the IPO and the IPO may not be tradeable when the market opens.The estimated price information and date for pre-IPO securities comes from public filings with the SEC, including the S-1 registration statement and prospectus. SEC filings can be accessedhere. Neither estimated price information nor Robinhood's pre-IPO queueing are recommendations, solicitations, or analyses to buy or sell the pre-IPO security. Investments in new public offerings involve substantial risk. SEC filings related to the initial public offering can and may be revised, potentially after orders are queued for the security. Robinhood is not responsible for any such changes and does not guarantee or warrant the estimated price information, date of IPO, or any other information contained in SEC filings for the pre-IPO security. Investors should consider their investment objectives and risks carefully before queueing orders for pre-IPO securities.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:51

When investors reminisce about the height of the 1990s dot-com bubble, they often reference a now-iconic image of market euphoria, of taxi drivers turning into day traders and handing out stock tips to passengers. That's how you know'--the saying goes'--it's time to get out.

In 2017, the picture is apparently not so different, except now, of course, instead of cabbies we have Uber drivers, and people can buy stocks on a whim with the tap of a smartphone screen. They can even pick up shares of mega-hot stock Snap, the parent company of Snapchat, on the day of its IPO.

Read more!

So when Snap stock popped 44% on its first day trading on Thursday (profits and shareholder rights be damned), telltale indications of a bubble were seemingly everywhere you looked'--if you were looking.

But the clearest sign of the loftiness of our current atmosphere hit me that afternoon in the form of a video, which in just seven seconds, perfectly encapsulates a microcosm of the millennial-driven unicorn zeitgeist. Posted on Twitter twtr by the CEO of a Los Angeles startup, the brief clip features the entrepreneur in the back of an Uber. And the Uber driver tells the CEO he just bought one share of Snap snap for $25'--on his phone, while he was driving:

You can imagine a world filled with self-driving cars where the idea of trading and driving is the least worrisome element of this scenario. And fortunately, the inefficiency of buying just a single share of a company is alleviated by the fact that the Uber driver used the brokerage startup Robinhood, which charges no trading commissions.

Still, the symbolic parallels to the dot-com era tech boom are undeniable. At a purchase price of $25 per Snap share, the Uber driver has already lost money'--albeit less than $1. (Snap stock closed at $24.48 a share Thursday.) Robinhood, which has one million total users, says 43% of those who traded on Thursday bought Snap. The median age of those Snap investors: 26 years old, the same as Snap CEO Evan Spiegel.

While disappearing-photo app Snapchat may be most popular with millennials 25 and younger, it's hard to believe that such rookie investors would be equipped to successfully trade a stock like Snap, which has the richest valuation in tech IPO history.

In 2014, my colleague Adam Lashinsky, wrote of being convinced that we were in the midst of a tech bubble when the company Arista Networks anet called him'--a full-time journalist'--to directly offer him a slice of its impending IPO. Now, almost three years later, tech stocks are at all-time highs, Arista Networks stock has nearly tripled from its IPO price, and Lashinsky doesn't own any of it.

So even when evidence of frothiness mounts to the point where you're not sure if your head or the bubble will burst first, things have a way of getting even frothier. But lest we forget, we already know how this will end'--we've seen it happen before.

Link to Article

Archived Version

Sun, 05 Mar 2017 14:29

Link to Article

Archived Version

Sun, 05 Mar 2017 13:39

WASHINGTON '' The Obama administration's former Attorney General Loretta Lynch has made an impassioned video plea for more marching, blood and death on the streets '' a video that was later posted on the Facebook page of Senate Democrats as ''words of inspiration.''

The video is less than a minute long and begins by stating that people are experiencing ''great fear and uncertainty,'' with the unstated implication it is due to Donald Trump's takeover of the White House.

Without offering any specifics, Lynch goes on to say that ''our rights'' are ''being assailed, being trampled on and even being rolled back.''

But the strongest words come in a statement that seems to suggest the answer is street action that will inevitably turn bloody and deadly.

''I know that this is a time of great fear and uncertainty for so many people,'' Lynch says. ''I know it's a time of concern for people, who see our rights being assailed, being trampled on and even being rolled back. I know that this is difficult, but I remind you that this has never been easy. We have always had to work to move this country forward to achieve the great ideals of our Founding Fathers.''

''Subversion, Inc.'' outs the radical thugs who've always been part of the Obama apparatus.

Lynch, who is scheduled to receive the Thomas Jefferson Foundation Medal of Law from the University of Virginia, goes on to say: ''It has been people, individuals who have banded together, ordinary people who simply saw what needed to be done and came together and supported those ideals who have made the difference. They've marched, they've bled and yes, some of them died. This is hard. Every good thing is. We have done this before. We can do this again.''

Lynch succeeded Eric Holder as Barack Obama's attorney general in 2014.

Lynch is most well-remembered for her famous private meeting with Bill Clinton, her former boss, on her airplane while a federal investigation into his wife, Hillary Clinton, and the private email server she maintained as secretary of state was under way. Obama stood behind her when the news leaked out about the secret meeting on her plane sitting on the tarmac of Phoenix airport.

Lynch said her conversation with Bill Clinton did not touch on the FBI's investigation into his wife's private email setup at State.

Get the hottest, most important news stories on the Internet '' delivered FREE to your inbox as soon as they break! Take just 30 seconds and sign up for WND's Email News Alerts!

Lesser known about Lynch's history is that she was the prosecutor assigned to the biggest bank scandal in history '' the probe of HSBC's involvement in money laundering for terrorists and drug cartels lodged in 2012 and a scandal revealed first in WND, long before she was nominated for the post of attorney general.

While large fines were levied against the biggest bank in the world, no officials were charged or prosecuted by Lynch. While the subject was raised in Senate confirmation hearings, 10 Republicans approved her nomination '-- Kelly Ayotte, Ron Johnson, Mark Kirk, Rob Portman, Thad Cochran, Susan Collins, Jeff Flake, Lindsey Graham, Orrin Hatch and Mitch McConnell.

When WND revealed the evidence provided by a whistleblower inside the giant global bank, HSBC used its immense power to persuade bandwidth providers to take WND offline '' a situation that was remediated within hours.

Click here for reuse options!

Link to Article

Archived Version

Sun, 05 Mar 2017 13:32

Prime Minister Justin Trudeau and U.S. President Donald Trump held their first face-to-face meeting at the White House on Feb. 13, 2017. Months of talks, bonding happened behind the scenes leading up to the event.

The handshake was yank-free...

Trudeau participated in a roundtable discussion with female executives, including Ivanka Trump.

A stroll down the West Wing Colonnade of the White House.

Trudeau did not criticize Trump's controversial travel ban during an afternoon press conference, but suggested he disagreed.

The president may have "shown his hand" when it comes to NAFTA.

UP NEXT: Trudeau-Obama State Dinner

Prime Minister Justin Trudeau and U.S. President Barack Obama chat during the state dinner.

Prime Minister Justin Trudeau and U.S. President Barack Obama hug it out during the state dinner.

Prime Minister Trudeau and Sophie are welcomed to the White House State Dinner by President Obama and Mrs. Obama.

Prime Minister Trudeau speaks with Ryan Reynolds during the State Dinner at the White House in Washington.

Prime Minister Trudeau speaks with Sandra Oh during the State Dinner at the White House in Washington.

Prime Minister Trudeau speaks with Mike Myers during the State Dinner at the White House in Washington.

Prime Minister Trudeau speaks with Michael J. Fox during the State Dinner at the White House in Washington.

Prime Minister Trudeau and President Obama hold a joint press conference in the Rose Garden at the White House.

Prime Minister Trudeau and Sophie introduce Xavier, Ella-Grace and Hadrien to President Obama and Mrs. Obama.

Prime Minister Trudeau and Sophie introduce Xavier, Ella-Grace and Hadrien to President Obama and Mrs. Obama.

Prime Minister Trudeau and President Obama work the rope line during the welcome ceremony on the south lawn of the White House.

Prime Minister Trudeau and President Obama stand together during the playing of the two nation's anthems during the Prime Minister's arrival at the White House.

Prime Minister Trudeau, Minister McKenna, and Xavier meet The Weeknd at Blair House in Washington.

U.S. President Barack Obama and first lady Michelle Obama pose for a photo with Canadian Prime Minister Justin Trudeau and Sophie Gregoire Trudeau at the North Portico of the White House in Washington, Thursday, March 10, 2016, as they arrive for a state dinner.

President Barack Obama and Canadian Prime Minister Justin Trudeau walk into the White House in Washington, Thursday, March 10, 2016, as they arrive for a state dinner.

Prime Minister Justin Trudeau does the sign of the cross after laying a wreath at the Tomb of the Unknown Soldier at the Arlington Cemetery Friday, March 11, 2016 in Arlington, Virginia.

U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau walk into the White House in Washington, Thursday, March 10, 2016, as they arrive for a state dinner.

U.S. President Barack Obama smiles during his meeting with Prime Minister Justin Trudeau, Thursday, March 10, 2016, in the Oval Office of the White House in Washington.

Canadian Prime Minister Justin Trudeau listens as President Barack Obama speaks during a bilateral news conference in the Rose Garden of the White House in Washington, Thursday, March 10, 2016.

President Barack Obama and Canadian Prime Minister Justin Trudeau conclude their news conference in the Rose Garden of White House in Washington, Thursday, March 10, 2016.

President Barack Obama and Canadian Prime Minister Justin shake hands following the conclusion of their joint news conference, Thursday, March 10, 2016, in the Rose Garden of the White House in Washington.

Prime Minister Justin Trudeau listens as U.S. President Barack Obama speaks at a state arrival ceremony on the South Lawn of the White House in Washington, D.C., on Thursday, March 10, 2016.

U.S. President Barack Obama and first lady Michelle Obama wave with Canadian Prime Minister Justin Trudeau, and his wife Sophie Gregoire, on the Truman Balcony during an arrival ceremony on the South Lawn of the White House in Washington, Thursday, March 10, 2016.

U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau review the troops on the South Lawn of the White House, Thursday March 10, 2016 in Washington. Trudeau hopes to strengthen US-Canada ties during his visit to the White House.

U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau review the troops on the South Lawn of the White House, Thursday March 10, 2016 in Washington. Trudeau hopes to strengthen US-Canada ties during his visit to the White House.

U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau, stand for the playing of national anthems during an arrival ceremony on the South Lawn of the White House in Washington, Thursday, March 10, 2016.

Prime Minister Justin Trudeau, arrives at the White House and is greeted by President Barack Obama and first lady Michelle Obama, Thursday March 10, 2016 in Washington.

Prime Minister Justin Trudeau holds his son Hadrian as he and his wife Sophie Gregoire-Trudeau son Xavier, right and daughter Ella-Grace, back, step off the plane at Andrews Air Force Base, Md., Wednesday, March 9, 2016.

Prime Minister Justin Trudeau greets students from D.C.'s Patterson Elementary School after he arrived at Andrews Air Force Base, Md., Wednesday, March 9, 2016.

Prime Minister Justin Trudeau walks towards a group of school children during a welcome ceremony at Andrews Air Force Base, Md., Wednesday, March 9, 2016.

Sophie Gr(C)goire-Trudeau looks on as her husband Canadian Prime Minister Justin Trudeau, and their youngest son Hadrien Gr(C)goire, greet students from D.C.'s Patterson Elementary School, after their arrival at Andrews Air Force Base, Md., Wednesday, March 9, 2016.

Prime Minister Justin Trudeau arrives for a state visit with his wife Sophie Gregoire-Trudeau, left, and their children Xavier James, Ella-Grace and Hadrian, right, at Andrews Air Force Base, Md., Wednesday, March 9, 2016.

Prime Minister Justin Trudeau addresses a packed room for Canada 2020's reception event at the Renwick Gallery in Washington, D.C. on March 9, 2016. Trudeau is in the U.S. capital for a historic state visit with President Barack Obama. (Photo: (C) Hannah Thomson for Canada 2020)

Trudeau and Grammy-winning, Oscar-nominated The Weeknd share a laugh at Canada 2020's reception event at the Renwick Gallery. (Photo: (C) Hannah Thomson for Canada 2020)

Two Mounties in full red serge stand guard outside Canada 2020's event with cabinet ministers St(C)phane Dion, Hunter Tootoo, Catherine McKenna, and Harjit Sajjan. (Photo: (C) Hannah Thomson for Canada 2020)

(Photo: (C) Hannah Thomson for Canada 2020)

The prime minister, right, and Sophie Gregoire-Trudeau, left, pose with The Weeknd. (Photo: (C) Hannah Thomson for Canada 2020)

Ambassador Susan Rice, Senator Tim Kaine (D-VA) and chief of staff to the First Lady Tina Tchen mingle at the Canada 2020 reception. (Photo: (C) Hannah Thomson for Canada 2020)

The prime minister and his wife meet U.S. Senators Al Franken and Debbie Stabenow. (Photo: (C) Hannah Thomson for Canada 2020)

Prime Minister Justin Trudeau and Sophie Gregoire-Trudeau pose outside of Canada 2020's reception at the Renwick Gallery in Washington. (Photo: (C) Hannah Thomson for Canada 2020)

Link to Article

Archived Version

Sun, 05 Mar 2017 07:41

Link to Article

Archived Version

Sun, 05 Mar 2017 06:41

Link to Article

Archived Version

Sun, 05 Mar 2017 06:20

Link to Article

Archived Version

Sun, 05 Mar 2017 05:50

Link to Article

Archived Version

Sun, 05 Mar 2017 05:35

Link to Article

Archived Version

Sun, 05 Mar 2017 05:22

Link to Article

Archived Version

Sun, 05 Mar 2017 05:14

Link to Article

Archived Version

Sun, 05 Mar 2017 05:13

Link to Article

Archived Version

Sun, 05 Mar 2017 04:50

Link to Article

Archived Version

Sun, 05 Mar 2017 04:40

[See NewsBusters for more.] CBS This Morning co-host Gayle King could barely hide excitement on Friday as she talked about Jeff Sessions recusing himself from any investigation into Russia's connections with the 2016 election. Talking to Face the Nation's John Dickerson, she enthused, ''It is like a song out of Empire. That drip, drip dripity drop where we just heard the President say, 'No one I know has had contact.''' King, it should be reminded, is a Democratic donor. Earlier, she asked Dickerson how the President could put the story behind him. After allowing that one way would be for Trump to pass his agenda, he seemed to convict: ''For there to stop being situations where you have people connected to the administration saying things that are at odds with the truth.''

Link to Article

Archived Version

Sat, 04 Mar 2017 20:29

About Joseph P. FarrellJoseph P. Farrell has a doctorate in patristics from the University of Oxford, and pursues research in physics, alternative history and science, and "strange stuff". His book The Giza DeathStar, for which the Giza Community is named, was published in the spring of 2002, and was his first venture into "alternative history and science".

Link to Article

Archived Version

Sat, 04 Mar 2017 17:48

Alexander Dugin was a fan of Donald Trump even when the rest of the world thought he was a lunatic with little chance of winning the primaries '' let alone the US election. Now the ultra-nationalist that Breitbart dubbed 'Putin's Rasputin' has a message for the White House: "Call me."

Dugin, 55, already has fans in the US; White House Chief Strategist Steve Bannon in 2014 defended his political theory, which fuses Martin Heidegger with Orthodox mysticism and a vitriolic hatred of liberals and 'globalists'. In regular tirades on his pro-Kremlin TV show, Dugin rails against a "corrupt, perverted, greedy gang of banksters and destroyers of cultures, traditions and identities".

The admiration goes both ways. As far back as Super Tuesday, Dugin was lauding Donald Trump as a revolutionary force in American politics and took up the billionaire's call to 'drain the swamp'.

For Dugin, that swamp stretches across Europe and the US, including everyone from Angela Merkel and George Soros to Syrian refugees and immigrants, that be says threaten European identity and society in general.

Sadly for Dugin, there is a fly in the ointment of what would otherwise be a burgeoning love affair: he is banned from the US for aiding the pro-Russian insurgency in eastern Ukraine.

What is Eurasianism?

Alexander Dugin founded the Eurasia Party in 2001 to promote his concept of Russian-led alliance that brings together European and Middle Eastern states against what he calls 'Atlantacism' - or the imperialism and colonialism of the US. But he has recently suggested that the election of Donald Trump could bring an end to anti-Americanism, providing that Trump reverses the interventionism of previous US administrations.

An avowed supporter of Putin's annexation of Crimea, Dugin infamously lost his job at Moscow State University for a tirade in which he said Ukrainians should be "killed, killed and killed".

So, for now, can only watch from afar.

"I am following with great interest the development of the situation in the United States," he told IBTimes UK over the phone from Moscow.

"I was invited to Washington [and] visited the state department, but that was in 2005 '' more than 12 years ago. Now I have no contacts [...] with the American establishment. But I have my sympathy for some people around Trump and if the sanctions [on me] will be lifted I would visit the United States with great pleasure.

"I think that I now have the ear of the people who are interested in my writings, from right, from left, on the populist side. But I have not yet had contacts with the White House."

Those fans include white supremacist Richard B. Spencer and many others on the alt-right, including the right wing publishing house Arktos, which is currently translating and publishing four of Dugin's books. He is a regular contributor to Spencer's website, alt-right.com, and Spencer's wife, Nina Kouprianova, has reportedly translated his works into English.

These links '' as well as his long history of contentious and inflammatory outbursts '' have frequently led to the accusation that he is a fascist, but it is one he firmly denies. He said that while the American far right may have been drawn to his writings, attempts to paint him as either a fascist or a racist are efforts on the part of the liberal establishment to discredit both him and Putin.

"It is completely wrong. I am conservative Russian and I am anti-racist, anti-fascist, anti-liberal [and] anti-communist. This is a defamation campaign directed against myself, against Russia, against our president," he said.

He is, however, a traditionalist and his work has heavily influenced the so-called 'identitarianism' movement promoted by Spencer and the alt-right. "I am anti-racist. I affirm that very culture '' black, yellow, red, white '' has the right to affirm its identity," he said.

LISTEN: In the Field Podcast: What next for northern Syria as Isis is pushed out of al-Bab?

But while Dugin speaks of the organic mix of cultures that makes up Russia '' including Muslims, Christians and Tartars '' he also criticised immigration as an attempt on the part of liberals and globalists to destroy European culture: "Immigrants [...] are imposed on European society to destroy the identities of the people of Europe. The reason to promote a future civil war in Europe or the United States," he said.

Alexander Dugin, Eurasianism and Turkey

Dugin has previously claimed that he was the architect of renewed ties between Russia and Turkey, following the shooting down of a Russian plane over Syria in 2015. Turkey fits in well to Dugin's 'Eurasian' ideal, which has at its heart a 'Slavic-Turkic' alliance in central Europe.

"Liberalism denies the existence of identity, it tries to destroy identity, to mix them and destroy them."

Six weeks after Donald Trump's inauguration, Dugin has not been disappointed by the new president. He considers Trump and Putin (who he once described as "Everywhere, everything, absolute, and indispensable.") as two sides of the same coin, both political realists, strongmen and opponents of liberalism and globalism. "They are tough guys, both of them," he said.

At a time when questions are being asked about the links between Trump's administration and Moscow, Dugin sees Trump's election in November as the opportunity to end Russian anti-Americanism and for a new alliance between Russia and America. He was buoyed by Trump's commitment during his campaign to turn away from the interventionism of previous administrations, especially with regard to Syria.

I hardly can believe that the serious American people could believe such conspiracy theories.

Dugin believes that America could align with Russia, Turkey and Bashar al-Assad to end the war in Syria. Or as an alternative policy, Trump could withdraw from the conflict in Syria and allow Moscow, Tehran and Assad to beat Isis and end the conflict. His only concern is that Trump will row back on his election pledges and enter the war by backing anti-Assad rebels, which would be a disaster for the new president.

"If America continues as in the time of Obama to support by any means anti-Assad opposition then it will be difficult. Syria is the test for the real Trump. I would be very sad if Trump chose this way, conventional American interventionism and globalism. And support for radical Islamism. He was totally against that," he said.

A pedestrian walks past the store 'Army of Russia', located opposite the US embassy, with an image of US president Donald Trump seen on the advertising board, in Moscow, RussiaSergei Karpukhi/ReutersWhen asked about the allegations that Russia influenced the result of the US election, Dugin is scathing. Even if Russia had the means to do so, he said, there would have been no need for Putin to do so. The American people chose Donald Trump and would have done so without any help from Moscow.

"That is completely foolish fake news. [It]is a very stupid story I hardly can believe that the serious American people could believe such conspiracy theories. Before, that was the far right that was engaged in explanations of such kind," he said.

But Dugin waits in Moscow for the phone to ring. He believes that Trump could bring about the end of Russian anti-Americanism if it means the end of interventionism and colonialism. He believes that Trump could help destroy liberalism if he can reduce the power of international bankers and capitalists.

US President Donald Trump speaks on the phone with Russian President Vladimir Putin in the Oval Office of the White House in Washington, DC on 28 January 2017Drew Angerer/Getty ImagesHe believes that a new alliance between America and Russia '' with both acting primarily in their own best interests '' could change the world.

As for what Putin makes of all this, Dugin does not know. He may be frequently referred to as an adviser to the Russian president, but that is another myth, he claims. "I am a supporter of Putin. I am trying to define some power line of Russian politics but actually I was never adviser of Putin nor am I in the present," he said.

Has he even met the man? "There are some questions that I never respond to," he said. "Sorry."

Inside the alt-right

IBTimes UK has investigated the alt-right white nationalist movement.

World Editor Orlando Crowcroft and reporter Tom Porter profiled the movement's ideological inspirations, including Hindu philosopher and Nazi supporter Savitri Devi and Russian ideologue Alexander Dugin. They investigated the Swedish businessman bankrolling the movement's media empire, reported on attempts by the identitarian movement to recruit on UK campuses, and a new alliance forged between US and European white nationalists.

Reports in the series include:

Generation Identity: How the European alt-right is planning a British invasion

Meet Daniel Friberg, the Swedish mining tycoon bankrolling the alt-right's global media empire

Inside the alt-right: Stockholm conference brings together US and European white nationalists

Savitri Devi: The strange story of how a Hindu Hitler worshipper became an alt-right icon

Link to Article

Archived Version

Sat, 04 Mar 2017 17:40

WATCH PREVIEW

BECOME A MEMBER TO WATCH ALL 5 SEASONS

Uncover the Best of Cosmic DisclosureIn this anniversary special, we look back on the highlights of that journey and reflect upon how far we have come in understanding the clandestine efforts to establish thriving human civilizations throughout the cosmos. During this time, many secrets have been revealed as to the extent of the technological buildout of our solar system, the extraterrestrial races which have helped our progress, and the organizations responsible for these advancements.

EPISODE 1: THE MESSAGE FOR HUMANKINDCOSMIC DISCLOSURE: AnniversarySIGN UP FOR FREE VIDEOS AND THE LATEST NEWS FROM GAIA

ABOUT COREY GOODEWith an extensive knowledge of the Off World Colony & Exchange Program, Secret Earth Governments, MILAB & Black Ops Programs, Corey Goode is here to expose the details from his 20 years of experience as an Operations Support Specialist in Special Access Programs.

Three Great Offers. One Amazing Experience.

- Limited Time Offer -

3-Month Plan

$20

For 3 Months

One-Time Payment of $20.Monthly Payment of $9.95 thereafter

checkout

MONTHLY PLAN

99

FIRST MONTH

Monthly Paymentof $9.95 thereafter

checkout- Best Offer -

Annual Plan

$7.95

Per Month

Save 20%Annual Payment of $95.40

checkout''I watch every show and look forward to the next every week. I, like many others, have felt drawn to this information and as crazy as it sounds when reading it and watching I know intuitively that this is true.''

'' CHEFHESS21

The Shift Begins When You Press Play

ORIGINAL HOSTS

Join experts including David Wilcock, Regina Meredith, and George Noory every week to uncover knowledge you won't find in the mainstream.

CUTTING-EDGE CONTENT

Discover over 7,000 titles with our exclusive library on topics such as Ancient Origins, Metaphysics, Secrets & Cover-Ups, and the Unexplained.

EASY AVAILABILITY

Access uncensored and commercial-free streaming anytime, anywhere.

Link to Article

Archived Version

Sat, 04 Mar 2017 17:33

Former Congresswoman Cynthia McKinney

If there is one thing that's consistent about Donald Trump, it's that he is horribly inconsistent. Whether it be flip-flopping on states' rights for cannabis laws or praising NATO after promising to leave it, where Trump stands on the issues is a crap shoot. That being said, however, there is one issue on which Trump has remained steadfast, it is bipartisan, and everyone should agree on it '-- it's time to stop human trafficking. And a former Democrat congresswoman from Georgia agrees.It is important to note that human trafficking is not the same as working in the sex industry. Those who work in the sex trade, voluntarily, are not victims of human trafficking. However, they often find themselves victims of the government and the black market created by that government who pushes their line of work into dark alleys and shady places.

As corporate media writes off talk of 'pizzagate' as if it's some tinfoil conspiracy theory that couldn't possibly happen, recent busts of pedophilia rings are shattering their claims. In fact, after a massive bust in California, Los Angeles County Sheriff Jim McDonnell says the arrests represent a "very sad commentary on the condition we're dealing with."

"Pretending this issue doesn't exist only makes us more complicit in it," newly elected San Diego City Attorney Mara Elliott said last month.

However, it appears that Donald Trump has decided that he won't be party to those who deny the horrid reality that is the child sex trade.

Trump held a press conference last week in which he detailed his plans to go after the offenders of the "human trafficking epidemic," as he explained.

In most of these recent busts, however, many of those arrested were simply willing adults seeking a mutually beneficial arrangement for sex with another willing adult.These facts do not belittle the necessity to go after child traffickers. However, it does show how much money is squandered enforcing the government's version of morality on society. The funds allocated to go after the voluntary sex trade could help to expose the real monsters behind human trafficking.

Let there be no doubt, those who engage in the child sex trade are society's most vile '-- and many times, the most elite.

Former Congresswoman Cynthia McKinney also agrees with Trump. However, she takes it a step further, noting that going after child predators will lead to the downfall of both Republicans and Democrats '-- as this problem goes all the way to the top.

For those who don't remember McKinney, she is the Congresswoman who bravely questioned the elite '-- on the house floor '-- about their role in the child trafficking industry.As the Free Thought Project has pointed out, pedophilia among the elite is rampant. The problem has gotten so bad in England that officials issued an order last month to stop naming streets and landmarks after local heroes and politicians because they could later be exposed as pedophiles.In February, the Free Thought Project reported on the fact that the police chief recently came forward and confirmed that the former Prime Minister of England, Sir Edward Heath, had raped dozens of children. The department also noted how those within the government helped cover up these crimes.

In December, we reported on the massive child sex ring that was blown apart in Norway. That investigation quickly led to arrests of, "51 people, all men, (who) are so far involved in the case. 24 of them come from Hordaland and Sogn og Fjordane. 26 come from other areas of Norway, from Southeast to Finnmark in the north. Among the accused offenders, there is also one Swedish national. Two politicians, one Labor politician from Oslo and a former national Progress Party (FrP) politician from Eastern Norway are involved in the case." One is also a kindergarten teacher, and four of the 51 arrested were perpetrators in the video evidence collected.

Domestically, these higher level arrests are few and far between as anytime 'the elite' are mentioned alongside the term 'pedophile', the Praetorian guard, aka the corporate media, shout down all those who dare pose any questions.

However, even though the media won't report on it, these disgusting child predators are so vile they are hard to ignore.

In January, admitted child rapist and former speaker of the house who is currently in jail, Dennis Hastert came across our radar after he demanded one of the children he raped pay back the hush money given to him by Hastert '-- because he broke his silence about the rape.

When the victim, known only as 'Individial A', broke his silence, Hastert's child rapes were exposed '-- resulting in the subsequent prosecution.

"To the extent any contract existed between plaintiff [Individual A] and defendant [Hastert], plaintiff breached that contract," Hastert's lawyers wrote.

"Plaintiff's breach of conduct resulted in damages to defendant and plaintiff is accordingly required to return $1.7 million to defendant."

Individual A did not go public with this information '-- he merely spoke to the FBI after the transactions were uncovered by investigators. However, this sicko, couldn't care less about airing this repugnant grievance in the public forum as it was almost entirely ignored by the media.

There was also another massive pedophilia scandal in the United States in what became known as the Franklin child sex ring coverup. Once the FBI took over the investigation from state authorities, however, it turned into a witch hunt to persecute the child victims - going so far as to charge them with perjury in a successful attempt to scare the other 70+ victims to recant their testimony regarding the child sex ring.

It appears, at least for the time being, that Donald Trump is aware of this problem and intends to take it head on. However, we will have to wait to see.

Link to Article

Archived Version

Sat, 04 Mar 2017 17:03

AFP, AFP/Getty Images

AFP PHOTO / Robert MacPherson (Photo credit should read Robert MacPherson/AFP/Getty Images)

AFP PHOTO / Robert MacPherson (Photo credit should read Robert MacPherson/AFP/Getty Images) less

As tens of thousands of people from all over the world prepare to embark on Austin for South by Southwest, a long list of scheduled artists say they won't be attending anymore.

More than 50 bands have signed a letter saying they're backing out of SXSW. This comes after one musician said he was pulling out of the conference because he was upset over a clause in his contract.

Told Slant said on Twitter that after looking at his contract, he decided to cancel his performance at SXSW. He posted a photo of a portion of the contract that said the conference reserves the right to alert U.S. immigration authorities about international artists if they violate their performance agreement.

"This goes into a wacky extreme that I've never seen," said entertainment lawyer Brian Goldstein.

Goldstein said he has been working with international musicians, actors and live performers for more than 20 years and regularly looks over performing contracts for his clients.

"We're particularly known for international touring," Goldstein said. "That's something that we've sort of been at the forefront of for a long time. What's typical is, whether it's an opera company or an orchestra, to put something in the contract that says you're responsible for making sure you get your visa and you're legally authorized to perform and if we discover that you're not authorized we have the right to cancel the show with no damages. If they find out they have an illegal, they get rid of them. It's very rare, especially in the arts, that you say 'and we're going to rat you out.'"

SXSW released a statement saying the conference takes a public stance against President Trump's travel ban and Senate Bill 6. The release goes on to say the conference has never reported anyone to immigration authorities and that the clause has been in the contract since 2013.

"I think this is typical of a lot of organizations where the artistic administration has no idea what's in their own agreements," Goldstein said. "This was probably drafted by some corporate attorney that has no idea what they were talking about and no one has paid attention until now because everyone is up in arms, understandably, about the current immigration situation"

While it appears there will be no change to this year's artist contract, a SXSW representative said they will be reviewing it and amending it for 2018 and beyond.

Goldstein advises international artists to look at some of the websites, like artistsfromabroad.org and afm.org that give information and advice on contracts before signing one.

((C) 2017 KVUE)

Link to Article

Archived Version

Sat, 04 Mar 2017 16:49

President Trump on Saturday angrily accused former president Barack Obama of orchestrating a ''Nixon/Watergate'' plot to tap the phones at his Trump Tower headquarters last fall in the run-up to the election.

Citing no evidence to support his explosive allegation, Trump said in a series of five tweets sent Saturday morning that Obama was ''wire tapping'' his New York offices before the election in a move he compared to McCarthyism. ''Bad (or sick) guy!'' he said of his predecessor, adding that the surveillance resulted in ''nothing found.''

In a series of tweets, President Trump accused former President Barack Obama of wiretapping him in October during the late stages of the presidential election campaign, but offered no evidence to support the allegation. (Reuters)

Trump offered no citations nor did he point to any credible news report to back up his accusation, but he may have been referring to commentary on Breitbart and conservative talk radio suggesting that Obama and his administration used ''police state'' tactics last fall to monitor the Trump team. The Breitbart story, published Friday, has been circulating among Trump's senior staff, according to a White House official who described it as a useful catalogue of the Obama administration's activities.

A spokesman for Obama did not immediately reply to a request for comment.

Trump has been feuding with the intelligence community since before he took office, convinced that career officers as well as holdovers from the Obama administration have been trying to sabotage his presidency. He has ordered internal inquiries to find who leaked sensitive information regarding communications during the campaign between Russian officials and his campaign associates and allies, including Attorney General Jeff Sessions and ousted national security adviser Michael Flynn.

[Despite early denials, growing list of Trump camp contacts with Russians haunts White House]

Washington Post reporter Adam Entous breaks down Friday's intelligence report on Russian involvement in the 2016 election. (Dalton Bennett/The Washington Post)

Some current and former intelligence officials cast doubt on Trump's assertion.

''It's highly unlikely there was a wiretap,'' said one former senior intelligence official familiar with surveillance law who spoke candidly on the condition of anonymity. The former official continued: ''It seems unthinkable. If that were the case by some chance, that means that a federal judge would have found that there was either probable cause that he had committed a crime or was an agent of a foreign power.''

A wiretap cannot be directed at a U.S. facility, the official said, without finding probable cause that the phone lines or Internet addresses were being used by agents of a foreign power '-- or by someone spying for or acting on behalf of a foreign government. ''You can't just go around and tap buildings,'' the official said.

Trump sent the tweets from Palm Beach, Fla., where he is vacationing this weekend at his private Mar-a-Lago estate. It has long been his practice to stir up new controversies to deflect attention from a damaging news cycle, such as the one in recent days about Sessions and Russia.

Trump's tweets took numerous top White House aides by surprise, according to a second White House official who was not authorized to speak publicly. Saturday was expected to be a ''down day, pretty quiet,'' this official said, and there was little, if any, attempt to coordinate the president's message on the wiretapping allegations.

Here are Trump's tweets, in the order they were sent:

Trump did not stop tweeting there. About an hour later, the president revived one of his favorite feuds, this one with Arnold Schwarzenegger. The movie star-turned-California governor has been hosting ''The New Celebrity Apprentice,'' the NBC reality franchise that Trump helped found.

Schwarzenegger announced Friday that he would not return to the show for another season because, he said, the show had too much ''baggage.'' But Trump insisted on Twitter that there is more to the story than that.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:33

Maxine Waters Thinks She's A 'Millennial' [VIDEO] | The Daily Caller

Politics

Pinterest

Reddit

LinkedIn

5510902

Maxine Waters delivered a recent speech in which the 78-year-old Democratic congresswoman claimed to be a millennial.

The California Democrat was explaining how youth movements ''are a force.''

House Minority Leader Nancy Pelosi looks on as Rep. Maxine Waters speaks at a news conference criticizing President Donald Trump's Wall Street policies on Capitol Hill on February 6, 2017 in Washington, D.C. (Photo by Mario Tama/Getty Images)

''I recognize it,'' she stated. ''I was a millennial once. No longer of course, but I love what you're doing.''

WATCH:

It should be noted that while Waters was certainly at one point in her life a young woman, a millennial '-- based on the two birth decades (1980s, 1990s) officially attributed to said generation '-- she is not.

''Stay woke.''

Follow Datoc on Twitter and Facebook

Link to Article

Archived Version

Sat, 04 Mar 2017 15:28

In an interview on "The View," actor Patrick Stewart said he is applying to become a U.S. citizen in order to help fight back against President Trump.

While recounting a recent visit to Washington, D.C., Stewart said he had "the worst night's sleep for years and years and years," joking that Trump might have been to blame.

Had the worst sleep of my life last night. But I was sleeping less than 300 yds from where Donald TrumpDonald TrumpTrump met with Scarborough before speech to CongressTrump lawyers get 2-week extension in travel ban lawsuitTrump told GOP donors to press for 2018 Senate supermajority: reportMORE sleeps. Could there be a connection?

'-- Patrick Stewart (@SirPatStew) February 10, 2017Stewart referenced his tweet to "The View" hosts, calling it ''fairly innocent'' and saying he ''did not directly insult your president."

ADVERTISEMENT

''Not mine,'' Whoopi Goldberg said in response.When host Joy Behar asked if the English actor would be willing to take Trump off America's hands, Stewart joked, ''We have our own problems."

''I'm not a [U.S.] citizen,'' Stewart said. ''However, there is, maybe it's the only good thing, as the result of this election: I am now applying for citizenship. Because I want to be an American, too.''

''All of my friends in Washington said, 'There is one thing you can do. Fight, fight, oppose, oppose,' '' Stewart said.

Link to Article

Archived Version

Sat, 04 Mar 2017 15:25

The European Parliament has voted to end visa-free travel for Americans within the EU.

It comes after the US failed to agree visa-free travel for citizens of five EU countries '' Bulgaria, Croatia, Cyprus, Poland and Romania '' as part of a reciprocity agreement. US citizens can normally travel to all countries in the bloc without a visa.

The vote urges the revocation of the scheme within two months, meaning Americans will have to apply for extra documents for 12 months after the European Commission implements a ''delegated act'' to bring the change into effect.

The Commission discovered three years ago that the US was not meeting its obligations under the reciprocity agreement but has not yet taken any legal action. The latest vote, prepared by the civil liberties committee and approved by a plenary session of parliament, gives the Commission two months to act before MEPs can consider action in the European Court of Justice.

Australia, Brunei, Japan and Canada were also failing in their obligations, but all four have lifted, or are soon to lift, any visa restrictions on travel for EU citizens.

The Commission is legally obliged to act to suspend the visa waiver for Americans, but the European Parliament or the Council of the European Union have the chance to object to the ''delegated act'' it uses to do so.

In December, MEPs pressed for the move in order to ''encourage'' Washington to play its part, according to a statement by the parliament.

But Migration Commissioner Dimitris Avramopoulos warned of ''consequences'', including potential ''retaliation'' and a drop in visitor numbers precipitating substantial losses for the continent's tourism industry.

Just days ago the Council said it would liberalise the visa regime for citizens of Georgia travelling into the EU.

Georgians can now, subject to final approval of the regulation, stay in any EU country for 90 days in any period of 180 days without needing a visa.

Carmelo Abela, Malta's minister for national security, said: ''This agreement will bring the people of Georgia and the EU closer together and will strengthen tourism and business ties. It follows the completion of the necessary reforms by Georgia, addressing document security, border management, migration and asylum.''

Last month it was reported that the EU was considering the adoption of a US-style electronic travel permit scheme '' a move that could create a new administrative hurdle for British tourists after Brexit.

Immigration minister Robert Goodwill told Parliament the EU was discussing the possibility of introducing a version of America's Electronic System for Travel Authorisation (ESTA).

Currently foreign travellers must pay a fee of $14 (£11) when they complete ESTA, an automated online system that determines their eligibility to travel to the US.

''British people are now used to the US ESTA scheme and, therefore, we view with interest how the European scheme might develop and what similarities, and differences, there may be to the US scheme,'' Mr Goodwill said.

EU politician says women 'must earn less than men' because they are 'weaker and less intelligent'

''This type of scheme is generally there to help enhance security. To get to know as much as possible about the people who are intending to travel.

''It isn't just flights, it could be people using ferries, or other border crossings into the European Union.''

Alan Brown, an SNP member of the European Scrutiny Committee, pointed out that Leave advocates in the referendum campaign had said there would be no need for visa-like travel schemes after Brexit.

Reuse content

Link to Article

Archived Version

Sat, 04 Mar 2017 07:56

A man accused of making at least eight threats against Jewish community centers, Jewish schools, a Jewish museum and the Anti-Defamation League was arrested by the FBI in St. Louis, Missouri, this morning, though the man is not believed to be the main suspect behind this year's rash of bomb threats, two law enforcement officials told ABC News.

Juan Thompson, 31, is accused of what federal prosecutors called a ''campaign to harass and intimidate.'' He's charged in New York with cyberstalking a New York City woman by communicating threats in the woman's name. Prosecutors said Thompson, a former journalist, appears to have made those threats "as part of a sustained campaign to harass and intimidate'' the woman after their romantic relationship ended.

Officials told ABC News Juan Thompson, seen in a Twitter profile picture, is not believed to be the main suspect behind the recent rash of bomb threats; he appears to have tried to take advantage of the news coverage in order to exact revenge.He is accused of making threats over the course of Jan. 28 to Feb. 22 against the Anti-Defamation League office in New York, a Jewish history museum in New York, as well as JCCs and Jewish schools in New York, Michigan, Dallas and San Diego.

Law enforcement officials told ABC News Thompson appeared to take advantage of news coverage of the threats in order to exact revenge on a woman who had ended a romantic relationship.

Juan Thompson appeared on Bric TV's "From Ferguson to Freddie Gray, How the Media Covers Race" to talk about media and race in a video published May 26, 2015.Thompson made an initial appearance today in St. Louis and did not enter a plea. His next hearing is scheduled for March 8.

Meanwhile, FBI Director James Comey met with Jewish community leaders today to discuss the recent uptick in threats against Jewish institutions.

The FBI said in a statement that "the investigation into these threats is a top priority" and that "agents and analysts across the country are working to identify and stop those responsible."

"The FBI is committed to ensuring that people of all races and religions feel safe in their communities and places of worship," the FBI said.

After Thompson's arrest, New York City mayor Bill de Blasio released a statement, thanking law enforcement "for aggressively pursuing and arresting a suspect in a disgusting series of threats against Jewish Community Centers. When you attack someone because of who they are, how they worship or who they love, you are attacking our democracy."

New York City Police Commissioner James O'Neill added, "The defendant caused havoc, expending hundreds of hours of police and law enforcement resources to respond and investigate these threats. We will continue to pursue those who pedal fear, making false claims about serious crimes."

According to the NYPD, hate crimes are up this year in NYC, driven primarily by anti-Semitic bias crimes.

Thompson's arrest comes after five waves of bomb threats at JCCs and Jewish schools nationwide this year. The JCC Association of North America reported a total of 100 incidents this year alone. No bombs were found at any of the locations. The FBI and the Justice Department's civil rights division are investigating the incidents.

People evacuated because of a bomb threat return to the David Posnack Jewish Community Center and David Posnack Jewish Day School, Feb. 27, 2017, in Davie, Fla.Jonathan Greenblatt, the CEO of the Anti-Defamation League, told ABC News earlier this week that JCC threats created "terror" for the people evacuated from the facilities '-- including preschool children, the elderly and teenagers '-- as well as their family members.

"This is absolutely abnormal, and it is totally unacceptable that anyone, anywhere, at any time could be terrorized because of their faith," he said.

The most recent wave -- which did not include any of the threats Thompson is accused of making -- was this past Monday when 31 bomb threats were called into 23 JCCs and eight Jewish day schools in Alabama, Arizona, California, Delaware, Florida, Indiana, Maryland, Michigan, New Jersey, Nevada, New York, North Carolina, Pennsylvania, Rhode Island, Virginia, Washington state, and Canada, the JCC Association of North America said. All schools received the all clear from law enforcement, the JCC Association of North America said.

A security guard stands outside the entrance to the David Posnack Jewish Community Center and David Posnack Jewish Day School after people were evacuated because of a bomb threat, Feb. 27, 2017, in Davie, Fla.Karen Kolodny, executive director of the JCC of Mid-Westchester in Scarsdale, New York, one of the 31 centers to receive a threat, told ABC News today that she was expecting to eventually "be on the target list."

"We knew at some point it would be our turn," she said.

Once the JCC received the phone threat Monday morning, the center -- which includes early childhood programs, senior programs and after school programs -- was evacuated. Police cleared the building within hours and the center reopened. The center has been doing drills for years and teachers undergo training, Kolodny noted.

"We had no indications of fear from the kids, and that's because the teachers are trained to stay calm," she said.

To Kolodny, the bomb threat "was an attempt at harassment and an attempt to disturb the normal routine of average citizens, and we are not going to let it deter us in the operation of our building and in the programs we offer to community ... we won't be harassed."

She added, "JCCs are not just Jewish community centers. We are open to and we serve the entire community here. We don't ask for people's religions ... it's not our business. Our doors are open to everyone."

In the wake of these threats, "there's so much public outpouring of support for JCCs. If the goal was to destabilize the JCCS, we're still in business, and we're going to continue to be in business. This is a failed attempt at targeting the community and it just won't work," Kolodny emphasized.

The JCC in Indianapolis, Indiana, which also received a bomb threat, wrote on Instagram, "A neighbor stopped by today to say she was thinking of us. Brought dozens of roses for us to share with staff."

The uptick in anti-Semitism extends beyond bomb threats.

According to Greenblatt, there has been a graffiti at synagogues, a "tsunami of anti-Semitic slander on social media" and attacks at Jewish cemeteries.

Since Feb. 20, Jewish cemeteries have been desecrated in University City, Missouri; Philadelphia and Rochester, New York. Authorities are investigating all three cases.

Three men help re-set a tombstone at the Jewish Mount Carmel Cemetery, Feb. 26, 2017, in Philadelphia.Philadelphia Police walk through Mount Carmel Cemetery, Monday, Feb. 27, 2017, in Philadelphia.Evan Bernstein, New York regional director at the Anti-Defamation League -- one of the institutions Thompson is accused of targeting -- today thanked law enforcement for Thompson's arrest.

"Just because there's been an arrest ... does not mean the threats have disappeared or will stop," she said at a press conference. "Hate towards the Jewish community and other minority groups is very real and deeply concerning. There is a lot of work that still needs to be done."

David Posner, the director of strategic performance at the JCC Association of North America, in a statement Monday called on the FBI, the White House, the Justice Department, the Homeland Security Department, Congress and local officials to "speak out forcefully against this scourge of anti-Semitism" across the U.S. and to catch the "perpetrators, who are trying to instill anxiety and fear in our communities."

On Feb. 21, President Trump for the first time directly addressed recent incidents of anti-Semitism after he received backlash from various groups. Speaking at the National Museum of African American History and Culture in Washington, D.C., he called the JCC threats a "painful and a very sad reminder of the work that still must be done to root out hate and prejudice and evil."

Attorney General Jeff Sessions told reporters Monday, "I have seen the Jewish synagogue attacks, threats and things, which is a very serious and disruptive practice. This Department of Justice will do what it can to assist in pushing back against that and prosecuting anybody who was a part of it."

Link to Article

Archived Version

Sat, 04 Mar 2017 05:43

March 3, 2017

This Dick Morris Lunch Alert! sponsored by Live Cell Research.

(Today's video is a live format due to Dick's traveling schedule.)

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

How To Get Rid Of Deep Belly Fat. Watch The Shocking Presentation '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Starvation: The Venezuela Diet '' Dick Morris TV: Lunch Alert!

Trump: The Truest Conservative '' Dick Morris TV: Lunch Alert!

How Eisenhower Stopped Future Presidents From Using Nuclear Weapons '' Dick Morris TV: History Video!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

March 2, 2017

This Dick Morris Lunch Alert! sponsored by Live Cell Research.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

How To Get Rid Of Deep Belly Fat. Watch The Shocking Presentation '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Trump: The Truest Conservative '' Dick Morris TV: Lunch Alert!

How Eisenhower Stopped Future Presidents From Using Nuclear Weapons '' Dick Morris TV: History Video!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

March 1, 2017

This Dick Morris Lunch Alert! sponsored by Dr. Al Sears, M.D.

(Today's video is a live format due to Dick's traveling schedule.)

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

Discover A Supplement 2000% Better Than Tumeric. Get The Stunning Dicovery '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Trump: The Truest Conservative '' Dick Morris TV: Lunch Alert!

How Eisenhower Stopped Future Presidents From Using Nuclear Weapons '' Dick Morris TV: History Video!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

February 28, 2017

This Dick Morris Lunch Alert! sponsored by Dr. Al Sears, M.D.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

Discover A Supplement 2000% Better Than Tumeric. Get The Stunning Dicovery '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Trump: The Truest Conservative '' Dick Morris TV: Lunch Alert!

How Eisenhower Stopped Future Presidents From Using Nuclear Weapons '' Dick Morris TV: History Video!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

February 27, 2017

This Dick Morris Lunch Alert! sponsored by Dr. Al Sears, M.D.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

Discover A Supplement 2000% Better Than Tumeric. Get The Stunning Dicovery '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

How Eisenhower Stopped Future Presidents From Using Nuclear Weapons '' Dick Morris TV: History Video!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

How The Liberals Plan To Bring Trump Down '' Dick Morris TV: Lunch Alert!

February 25, 2017

This Dick Morris Lunch Alert! sponsored by Nucific.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

3 Foods That Have Been Killing You From The Inside. Watch the Video Big Food Had Been Hiding From You '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Why The Democrats Have Gone Crazy Left '' Dick Morris TV: Lunch Alert!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

How The Liberals Plan To Bring Trump Down '' Dick Morris TV: Lunch Alert!

In Defense Of Donald '' Dick Morris TV: Lunch Alert!

February 24, 2017

This Dick Morris Lunch Alert! sponsored by Nucific.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

3 Foods That Have Been Killing You From The Inside. Watch the Video Big Food Had Been Hiding From You '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

Media Exaggerating Trump Deportations '' Dick Morris TV: Lunch Alert!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

How The Liberals Plan To Bring Trump Down '' Dick Morris TV: Lunch Alert!

In Defense Of Donald '' Dick Morris TV: Lunch Alert!

James Buchanan: The Worst President Ever '' Dick Morris TV: History Video!

February 23, 2017

This Dick Morris Lunch Alert! sponsored by Nucific.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

3 Foods That Have Been Killing You From The Inside. Watch the Video Big Food Had Been Hiding From You '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

What's Hillary Up To? Dick Morris TV: Lunch Alert!

How The Liberals Plan To Bring Trump Down '' Dick Morris TV: Lunch Alert!

In Defense Of Donald '' Dick Morris TV: Lunch Alert!

James Buchanan: The Worst President Ever '' Dick Morris TV: History Video!

Trump's BIG Move On ObamaCare '' Dick Morris TV: Lunch Alert!

February 22, 2017

This Dick Morris Lunch Alert! sponsored by Gundry MD.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

The Truth About Probiotics. Watch The Shocking Video '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

How The Liberals Plan To Bring Trump Down '' Dick Morris TV: Lunch Alert!

In Defense Of Donald '' Dick Morris TV: Lunch Alert!

James Buchanan: The Worst President Ever '' Dick Morris TV: History Video!

Trump's BIG Move On ObamaCare '' Dick Morris TV: Lunch Alert!

Rogue Spooks: The Enemy Within '' Dick Morris TV: Lunch Alert!

February 21, 2017

This Dick Morris Lunch Alert! sponsored by Gundry MD.

Click Here to give me your thoughts and continue the discussion.

Please forward this email to any friends or family who may be interested in viewing my video commentary!

Thanks for watching,

Dick

The Truth About Probiotics. Watch The Shocking Video '-- CLICK HERE NOW!!!

View my most recent videos in case you missed them!

In Defense Of Donald '' Dick Morris TV: Lunch Alert!

James Buchanan: The Worst President Ever '' Dick Morris TV: History Video!

Trump's BIG Move On ObamaCare '' Dick Morris TV: Lunch Alert!

Rogue Spooks: The Enemy Within '' Dick Morris TV: Lunch Alert!

Flynn Was Forced Out By Obama Operatives '' Dick Morris TV: Lunch Alert!

Link to Article

Archived Version

Fri, 03 Mar 2017 13:06

The Brussels chief lost it with representatives of the EU parliament after they attacked his plans to consult ordinary European voters on which path eurocrats should take to save the bloc from collapsing.

His outburst came at the end of a gruelling hour and fifteen minute debate on the EU Commission's highly publicised white paper, during which MEPs repeatedly called on Mr Juncker to voice his personal opinions.

Eurocrats have outlined five ''pathways'' they believe the EU can take post-Brexit, ranging from reverting back to a simple trading bloc right through to the establishment of a full-blown United States of Europe.

Related articlesAnd whilst Mr Juncker dismissed the first of those options, saying the EU is ''more than a free trade area'', he has refused to be drawn on what he thinks of the other four saying that he does not want to pre-judge the public debate.

The Brussels chief said he wants discussions on the future of the bloc to take place across the continent at national and regional level, adding that the Commission would ''listen'' carefully before publishing its response.

He told a sitting of the European Parliament in Brussels yesterday that he was ''not a dictator'' and that the time when eurocrats could simply issue lofty decrees on hugely important political decisions was over.

GETTY

Jean-Claude Juncker was left less than impressed with MEPs yesterdayEbS

The EU boss had a face like thunder as he berated the EU ParliamentMr Juncker pointed out that Brussels had been repeatedly criticised for pressing ahead with sweeping reforms without consulting the public, and that given the project's popularity crisis the time had come for a new approach

But some MEPs were amazingly left unsatisfied by the listening exercise, saying that as EU boss he does not need to ask voters for their opinions and instead should express a preference on which path to follow and actively press ahead with it.

For many, especially those in left-wing parties, this would ideally be one of the two options presented in the white paper advocating more integration which would lead the bloc ever closer to becoming an effective superstate.

After listening to their rambling speeches a thunderous looking Mr Juncker replied: ''What I will say to those who think that the Commission has chosen poorly, is that in Europe you can't have enough innovation.

''There are many traditionalists, many conservatives, who cannot accept changing a method and my method has been criticised.

''The approach of making a number of proposals which have had thought put into them, but which have never been discussed with the broader public, that has been the approach that has been criticised."

Sh*t, what do you want me to do?

Jean-Claude Juncker

He added: ''So we are putting forward on this occasion a number of different scenarios. Not all of them have met with approval, I'm sure that you will understand that amongst the scenarios put forward there is one that I would like more than the other four.

''But if we were simply to put that forward then there wouldn't be any discussion and voices would be raised against us saying that we had stifled the debate and saying that we had not listened to the voices of our citizens.''

Finally losing his temper at the Catch-22 situation, he then raged: ''But sh*t, I would say sh*t if we weren't in the EU parliament. What do you want us to do?''

Instead of moaning, he urged left-wing politicians to discuss their favourite option amongst themselves and then to reach out to socialist prime ministers across the continent to gauge their views.

Conservative politicians and reformists meanwhile welcomed the significant change of heart from the EU boss and said the consultation demonstrated that eurocrats finally understood the need to consult ordinary people on the direction of the project.

Thu, March 2, 2017EPA

1 of 13

President of the EU commission Jean- Claude Juncker (L) embraces Slovenian Prime Minister Miro Cerar

Pieter Clieppe, from the think-tank Open Europe, said: ''For the first time ever, the European Commission has listed turning the EU into a mere platform to facilitate trade as an option for the EU's future.

''Of course it's unlikely that EU27 leaders would go for this but it's progress - ironically when UK just voted to leave.

''In reality I suspect they'll go for business as usual- but this would be a mistake.''

And Tory MEP Ashley Fox added: ''"I am pleased to see President Juncker laying out a series of options for the future of the EU rather than once again simply pushing his tired vision of a federal Europe. It is a little late, but he is finally acknowledging there is more than one way for the EU to proceed.

"I sincerely hope this important debate takes note of the clear call for change coming from people across the Union who have lost confidence in the EU as currently structured."

Related articles

Link to Article

Archived Version

Fri, 03 Mar 2017 08:24

Sir Patrick Stewart: I'm applying for US citizenship to 'fight and oppose' the Trump administration

'The fuse is lit': Dan Rather says Trump-Russia scandal is about to go off like a bomb

Colbert brilliantly mocks Sessions: 'You don't have to recuse yourself '' you've already f*cked yourself'

NEW BOMBSHELL: Jared Kushner and Mike Flynn met with the Russians in December

Seth Meyers kisses Trump's 'fresh start' good-bye as Jeff Sessions makes staff 'sh*t on themselves'

Jeff Sessions used campaign cash for RNC trip where he met Russian ambassador for 'official' reasons: WSJ

Did Trump reverse an Obama order last month because he knew there would be a Sessions-Russia investigation?

'Be careful': GOP Intel chair warns reporters could face investigation for persisting on Sessions

'The hypocrisy is staggering: Paul Begala slams Mike Pence for using an AOL email while criticizing Clinton

'I want to die': Heartbreaking diary reveals abuse 8-year-old faced before she was beaten to death

Link to Article

Archived Version

Fri, 03 Mar 2017 07:25

Link to Article

Archived Version

Thu, 02 Mar 2017 22:29

Advertisement - story continues below

First Lady Melania Trump visited a New York City hospital Thursday morning to read to sick children for ''Read Across America Day.''

She chose the book, Oh, the Places You'll Go! by Dr. Seuss, whose birthday marks the annual reading-awareness day.

Trump said the children's literary classic is one of her favorite books.

Advertisement - story continues below

''I came to encourage you to read '' and to think about what you want to achieve in life,'' the first lady told the children.

A White House official said Trump would read stories to children and then speak with their parents.

MOMENTS AGO: First Lady Melania Trump reads to children in New York City https://t.co/5Vm0uigWk5pic.twitter.com/5w0oATnx2W

'-- CBS News (@CBSNews) March 2, 2017

Advertisement - story continues below

''You'll be as famous as famous can be,'' she read aloud from one of her favourite books. ''With everyone watching you win on TV.'' pic.twitter.com/vJ7UEy06KE

'-- Tara McKelvey (@Tara_Mckelvey) March 2, 2017

Seated in a wooden chair, she appeared calm and collected as she read to the children.

''You go places where you feel better,'' the first lady read aloud, holding up the book to display the pictures.

''You'll be as famous as famous can be,'' she added, ''with the whole wide world watching you win on TV.''

Advertisement - story continues below

Meeting with children has been a routine duty for first ladies, in particular Laura Bush, who used to be a librarian.

Trump's hospital visits comes after visiting Children's National Medical Center in Washington, D.C. on Tuesday.

The first lady is still living in New York while her son, Barron, finishes his school year, but is expected to focus on women's issues and cyberbullying once she relocates to the White House.

What do you think?Scroll down to comment below.

Link to Article

Archived Version

Thu, 02 Mar 2017 22:04

NEW BOMBSHELL: Jared Kushner and Mike Flynn met with the Russians in December

'The fuse is lit': Dan Rather says Trump-Russia scandal is about to go off like a bomb

'Be careful': GOP Intel chair warns reporters could face investigation for persisting on Sessions

Sir Patrick Stewart: I'm applying for US citizenship to 'fight and oppose' the Trump administration

Arkansas Republican pushes bill to ban Howard Zinn books from public schools

Attorney General Jeff Sessions recuses himself from Russia investigation

Angela Rye confronts Van Jones over Trump's speech: 'I definitely don't think that this is presidential'

Sean Spicer: Anyone asking for Sessions to recuse himself from Russia case should be 'ashamed'

Ex-NSA analyst rips Trump for exploiting 'trapped' widow: 'She didn't want to stand up '-- we know why'

WATCH: Russian official rants about fake news while fleeing CNN questions about Trump

Link to Article

Archived Version

Thu, 02 Mar 2017 22:02

If there is one thing that's consistent about Donald Trump, it's that he is horribly inconsistent. Whether it be flip-flopping on states' rights for cannabis laws or praising NATO after promising to leave it, where Trump stands on the issues is a crap shoot. That being said, however, there is one issue on which Trump has remained steadfast, it is bipartisan, and everyone should agree on it '-- it's time to stop human trafficking. And a former Democratic congresswoman from Georgia agrees.

It is important to note that human trafficking is not the same as working in the sex industry. Those who work in the sex trade, voluntarily, are not victims of human trafficking. However, they often find themselves victims of the government and the black market created by that government who pushes their line of work into dark alleys and shady places.

As corporate media writes off talk of 'pizzagate' as if it's some tinfoil conspiracy theory that couldn't possibly happen, recent busts of pedophilia rings are shattering their claims. In fact, after a massive bust in California, Los Angeles County Sheriff Jim McDonnell says the arrests represent a ''very sad commentary on the condition we're dealing with.''

''Pretending this issue doesn't exist only makes us more complicit in it,'' newly elected San Diego City Attorney Mara Elliott said last month.

However, it appears that Donald Trump has decided that he won't be party to those who deny the horrid reality that is the child sex trade.

Trump held a press conference last week in which he detailed his plans to go after the victims of the ''human trafficking epidemic,'' as he explained.

READ MORE: VIDEO: In the "Land of the Free" a Man is Arrested for Drinking a Soft Drink in Public

In most of these recent busts, however, many of those arrested were simply willing adults seeking a mutually beneficial arrangement for sex with another willing adult.

These facts do not belittle the necessity to go after child traffickers. However, it does show how much money is squandered enforcing the government's version of morality on society. The funds allocated to go after the voluntary sex trade could help to expose the real monsters behind human trafficking.

Let there be no doubt, those who engage in the child sex trade are society's most vile '-- and many times, the most elite.

Former Congresswoman Cynthia McKinney also agrees with Trump. However, she takes it a step further, noting that going after child predators will lead to the downfall of both Republicans and Democrats '-- as this problem goes all the way to the top.

For those who don't remember McKinney, she is the Congresswoman who bravely questioned the elite '-- on the house floor '-- about their role in the child trafficking industry.

As the Free Thought Project has pointed out, pedophilia among the elite is rampant. The problem has gotten so bad in England that officials issued an order last month to stop naming streets and landmarks after local heroes and politicians because they could later be exposed as pedophiles.

In February, the Free Thought Project reported on the fact that the police chief recently came forward and confirmed that the former Prime Minister of England, Sir Edward Heath, had raped dozens of children. The department also noted how those within the government helped cover up these crimes.

READ MORE: A Half Dozen Cops Beat This Homeless Man to a Pulp Then Attempt to Steal Witness Phones

In December, we reported on the massive child sex ring that was blown apart in Norway. That investigation quickly led to arrests of ''51 people, all men, (who) are so far involved in the case. 24 of them come from Hordaland and Sogn og Fjordane. 26 come from other areas of Norway, from Southeast to Finnmark in the north. Among the accused offenders, there is also one Swedish national. Two politicians, one Labor politician from Oslo and a former national Progress Party (FrP) politician from Eastern Norway are involved in the case.'' One is also a kindergarten teacher, and four of the 51 arrested were perpetrators in the video evidence collected.

Domestically, these higher level arrests are few and far between as anytime 'the elite' are mentioned alongside the term 'pedophile,' the Praetorian guard, aka the corporate media, shout down all those who dare pose any questions.

However, even though the media won't report on it, these disgusting child predators are so vile they are hard to ignore.

In January, admitted child rapist and former speaker of the house who is currently in jail, Dennis Hastert came across our radar after he demanded one of the children he raped pay back the hush money given to him by Hastert '-- because he broke his silence about the rape.

When the victim, known only as 'Individial A,' broke his silence, Hastert's child rapes were exposed '-- resulting in the subsequent prosecution.

''To the extent any contract existed between plaintiff [Individual A] and defendant [Hastert], plaintiff breached that contract,'' Hastert's lawyers wrote.

READ MORE: 'I won't be as kind as Obama' '-- Trump Starts Off Day With Sinister Threat to Iran

''Plaintiff's breach of conduct resulted in damages to defendant and plaintiff is accordingly required to return $1.7 million to defendant.''

Individual A did not go public with this information '-- he merely spoke to the FBI after the transactions were uncovered by investigators. However, this sicko couldn't care less about airing this repugnant grievance in the public forum as it was almost entirely ignored by the media.

There was also another massive pedophilia scandal in the United States in what became known as the Franklin child sex ring coverup. Once the FBI took over the investigation from state authorities, however, it turned into a witch hunt to persecute the child victims '' going so far as to charge them with perjury in a successful attempt to scare the other 70+ victims to recant their testimony regarding the child sex ring.

It appears, at least for the time being, that Donald Trump is aware of this problem and intends to take it head on. However, we will have to wait to see.

Link to Article

Archived Version

Thu, 02 Mar 2017 21:51

On Wednesday morning, Netflix debuted the first trailer for its $60 million Brad Pitt-led film War Machine. But the 45-second promo raised one major question: What happened to Gen. Stanley A. McChrystal?

Pitt was supposed to play the infamous four-star general in the film, but the character has been reconfigured as the fictitious Gen. Glenn McMahon. A War Machine source says the project pivoted away from the real-life depiction in an effort to avoid potential legal headaches.

In 2013, Pitt's Plan B began developing the late Michael Hastings' controversial best-seller The Operators as a star vehicle. During its four-year journey to the screen, the David Michod-helmed film's title morphed into War Machine and shifted tonally from drama to Wag theDog-esque satire.

But it remained very much the story of McChrystal, whose unflattering remarks about Vice President Joe Biden in a Hastings Rolling Stone article led to his demise. After the Rolling Stone article published in 2010, then-President Barack Obama called McChrystal back to Washington and accepted his resignation as commander in Afghanistan. McChrystal was replaced by David Petraeus in the role.

Depicting a real-life person in a film can be tricky and has sparked legal action or bad press with numerous films from David Fincher's The Social Network (a leaked Sony email indicated that subject Mark Zuckerberg tried to stop the movie) to David O. Russell's Joy (entrepreneur Joy Mangano's differences with Joy were eventually resolved, and she received executive producer credit).

But if the War Machine filmmakers were looking to dodge those problems, they never bothered to ask McChrystal for his blessing. A source close to McChrystal says the general was never contacted by Netflix or Plan B nor did he ever threaten to take legal action over using his name in the film. But another source says that Michod, who also adapted the screenplay, wanted to be able to take creative liberties with the satire and could do so more easily with McChrystal not named.

War Machine still offers a behind-the-scenes portrait of military commanders and their high-stakes maneuvers, with the book's main elements, including McCrystal's ill-fated comments about a vice president, still intact.

The film is produced by Plan B's Jeremy Kleiner and Dede Gardner, who are coming off their best picture Oscar win for Moonlight, alongside Pitt and Ian Bryce.

Netflix declined to comment.

Link to Article

Archived Version

Thu, 02 Mar 2017 21:12

Snap Inc. - parent company of photo app Snapchat - made its initial public offering (or IPO) this Thursday. Trading is now underway at the New York Stock Exchange, but not everyone is happy with Snap's big move. We went out on the streets of Venice Beach (home of Snap's corporate headquarters) and talked to locals about Snapchat and why they love - or hate - one of the smartphone generation's defining apps.

Link to Article

Archived Version

Thu, 02 Mar 2017 21:09

Rep. Maxine Waters (D., Calif.) / AP

BY:Stephen ObregonMarch 2, 2017 11:20 am

Rep. Maxine Waters (D., Calif.) delivered a speech in which she reminded her audience that she was a "millennial" once, and told them to "stay woke."

Waters said that she developed a "huge" relationship with young people after her attempts to get her colleagues to recognize how "dangerous" President Donald Trump is.

"The recent fight I had that I've engaged in because of this new president, and trying to get my colleagues to understand how dangerous he is, has afforded me a really new and huge relationship with young people," Waters said.

Waters said she is learning new words from young people.

"And I want you to know how pleased I am to know that I'm now "Aunt Maxine" on the internet, and the tweets that I've been in that are teaching me all kinds of new words," she said.

Waters then said she was once a millennial.

"Our millennials are a force. I recognize it. And I was a millennial once," she said. "No longer of course, but I love what you're doing."

She concluded her speech saying, "Stay woke!"

Fusion tweeted a video of her speech, writing, "Aunt Maxine!! @MaxineWaters' surprise millennial #micdrop gives us life."