(Bloomberg) -- Ukraine must improve the corporate governance of state-run banks and companies and show its anti-graft policy is being implemented to keep foreign aid flowing, the International Monetary Fund said in a memorandum.

The release of the document on Tuesday followed the IMF board’s approval of a $699-million disbursement to the former Soviet nation and an extension of its $5 billion loan program. The loan tranche was released after months of wrangling and criticism that Ukraine has backtracked on its commitments to its foreign lenders. 

The IMF laid out benchmarks that include improvements in the selection of supervisory board members in state-run banks and the approval of a sound 2022 budget with a fiscal deficit not exceeding 3.5% of output.

Central bank monetary policy should be focused on returning consumer inflation to its official target, and it must improve bank supervision, the IMF said. At the same time, it called on the government to uphold the independence of the central bank, which has been a particular focus after its government departed last year while complaining of political meddling.

The progress toward those milestones will be reviewed in March, based on end-December results, the IMF said. 

The approval and extension of the IMF program follows criticism from Ukraine’s western lenders over corporate governance concerns at state-run companies including Naftogaz Ukrainy and lender Ukreximbank. The IMF demanded that fully operational supervisory boards be established at state-run energy utility NPC Ukrenergo by end-December, at Naftogaz by end-January and at nuclear power producer Energoatom by end-May. 

Next year a national strategy to recover assets of shut-down banks must be adopted and published along with a roadmap for the partial or full privatization of state lenders Oshchadbank and Privatbank, according to the IMF document. 

The Prosecutor-General’s Office will also have to publish half-year reports on the outcomes of criminal proceedings against former bank owners, managers and other related parties in each resolved bank since 2014, with the first due before the end of this year, the IMF said.

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