Washington: The International Monetary Fund’s executive board has approved a four-year $US15.6 billion ($23.3 billion) loan program for Ukraine, part of a global $US115 billion ($172 billion) package to support the country’s economy as it battles Russia’s 13-month-old invasion.
Ukraine must meet certain conditions over the next two years, including steps to boost tax revenue, maintain exchange rate stability, preserve central bank independence and strengthen anti-corruption efforts.
Ukrainian President Volodymyr Zelensky at the Bucha Summit on Friday. The leaders of Slovakia, Moldova, Slovenia and Croatia attended the meeting held on the first anniversary of the liberation of Bucha from Russian troops.Credit:AP
The decision formalises an agreement reached with Ukraine on March 21 that takes into consideration its path to accession to the European Union after the war.
The decision clears the way for an immediate disbursement of about $US2.7 billion to Kyiv, and requires Ukraine to carry out ambitious reforms, especially in the energy sector, the fund said.
The loan is the first major conventional financing program approved by the IMF for a country involved in a large-scale war.
Ukraine’s previous, $US5 billion long-term IMF program was cancelled in March 2022 when the fund provided $US1.4 billion in emergency financing with few conditions. It provided another $US1.3 billion under a “food shock window” program in October.
An IMF official said the new $US115 billion gap package included the IMF loan, $US80 billion in pledges for grants and concessional loans from multilateral institutions and other countries, and $US20 billion worth of debt relief commitments.
Pushed for the package: US Treasury Secretary Janet Yellen in Kyiv, Ukraine, in February.Credit:AP
Deeper reforms would be required in the second phase of the program to enhance stability and early post-war reconstruction, returning to pre-war fiscal and monetary policy frameworks, boosting competitiveness and addressing energy sector vulnerabilities, the IMF said.
A senior US Treasury official said the program was “really solid” and included commitments from Ukrainian authorities to achieve 19 structural benchmarks over the next year alone.
IMF First Deputy Managing Director Gita Gopinath said the program faced exceptionally high risks, and its success depended on the size, composition and timing of external financing to help close fiscal and external financing gaps and restore Ukraine’s debt sustainability.
A Ukrainian woman soldier, left, hugs her husband as they meet at a railway station close to the frontline in Kramatorsk, Donetsk region, Ukraine, on Wednesday.Credit:AP
“Russia’s invasion of Ukraine continues to have a devastating economic and social impact,” she said, lauding Ukrainian authorities for maintaining “overall macroeconomic and financial stability” despite the strains of the war.
Ukrainian President Volodymyr Zelensky welcomed the new funding.
“It is an important help in our fight against Russian aggression,” he said on Twitter. “Together we support the Ukrainian economy. And we are moving forward to victory!”
US Treasury Secretary Janet Yellen, who pushed hard to secure the package and paid a surprise visit to Ukraine in February, said it would help the country’s economic and financial stability and set the foundation for reconstruction.
“I call on all other official and private creditors to join this initiative to assist Ukraine as it defends itself from Russia’s unprovoked war,” she said in a statement. “The United States will continue to stand by Ukraine and its people for as long as it takes.”
IMF official Gavin Gray said the fund’s baseline scenario assumed the war would wind down in mid-2024.
The fund’s “downside scenario” has the war continuing through the end of 2025, opening a much larger $US140 billion financing gap that would require donors to dig deeper, he said.
Ukraine will face quarterly reviews beginning as early as June.
Reuters
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