A key International Monetary Fund staffer Wednesday suggested that Ukraine has the flexibility to use the third $3.3 billion tranche of its IMF loan to pay Russia for natural gas supplies.
"What the agreement basically says is that the government can use this tranche to honor its external obligations," IMF Mission chief to Ukraine Ceyla Pazarbasioglu told reporters on a conference call Wednesday. She was responding specifically to a question about whether Ukraine can use the $3.3 billion loan to pay Russia for gas.
"Exactly for which purpose they use it, is their own decision," she continued.
She added that the IMF did take into account Ukraine's balance of payment needs, including relevant contracts and the gas bills it needs to pay.
On Tuesday, the IMF announced that it approved the immediate release of the $3.3 billion to Ukraine as part of a broader $16.4 billion loan package announced last year. The fund noted that it would modify terms to allow for a broader deficit target that would include the deficit of Naftogaz, Ukraine's state gas company.
"To cushion the impact of the sharper economic contraction and to reflect the imbalances of the state gas company Naftogaz, the revised economic program targets a broadened fiscal deficit," the IMF said in the Tuesday news release.
But it was still unclear if Ukraine would be able to use the loan to pay Russia for gas, a critical question amid a lingering natural gas dispute between Kiev and Moscow. Russia's gas monopoly, OAO Gazprom (GAZP.RS), earlier this month said Naftogaz submitted full payment for June deliveries. But Naftogaz has another critical bill to pay in August.
Pazarbasioglu noted that Ukraine does have external obligations and the loan would support those obligations.