Fiscal Position To Improve, Challenges Remain

The expected signing of a new Stand-By Arrangement with the IMF will have a positive impact on Ukraine's budget dynamics. As well as plugging a potentially dangerous budget gap this year, it will enforce stringent spending cuts and tax increases through the medium term. That said, we believe that meeting the 2010 and 2011 deficit targets will be a major challenge, and also see risks of destabilising social and political protest in the short run.

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