WASHINGTON, March 31 (Portal) – The International Monetary Fund said on Friday that its board had approved a four-year, $15.6 billion lending program.
The decision paves the way for an immediate disbursement of about $2.7 billion to Kyiv and requires ambitious reforms by Ukrainian officials, particularly in the energy sector, the fund said in a statement.
The Extended Fund Facility (EFF) loan is the first major conventional financing program approved by the IMF for a country engaged in a full-scale war. The size of the package is intended to signal the global community’s commitment to continuing to support Ukraine in the war, sources said.
Ukraine’s previous long-term $5 billion IMF program was shut down in March 2022, when the fund provided $1.4 billion in emergency financing with few strings attached. It committed an additional $1.3 billion under a “Food Shock Window” program in October last year.
The latest loan is expected to unlock approximately $100 billion worth of additional international support for Ukraine. An IMF official said the $115 billion package included the IMF loan, $80 billion in commitments for grants and concessional loans from multilateral institutions and other countries, and $20 billion in debt relief commitments.
Ukraine must meet certain conditions over the next two years, including avoiding moves that could erode tax revenues, maintaining adequate foreign exchange reserves to maintain exchange rate stability, promoting central bank independence and stepping up anti-corruption efforts.
Deeper reforms will be needed in the second phase of the program to improve stability and early post-war reconstruction, return to pre-war fiscal and monetary conditions, boost competitiveness and address vulnerabilities in the energy sector, the IMF said .
Gita Gopinath, the IMF’s first deputy managing director, said the program faces “extraordinarily high” risks and its success depends on the size, composition and timing of external funding to help fill fiscal and external funding gaps close and restore Ukraine’s debt sustainability.
“Russia’s invasion of Ukraine continues to have devastating economic and social repercussions,” she said, praising the Ukrainian authorities for maintaining “overall macroeconomic and financial stability.”
The decision formalizes an IMF staff-level agreement reached with Ukraine on March 21, which takes into account Ukraine’s post-war path to joining the European Union.
Ukrainian President Volodymyr Zelenskyy welcomed the new funding.
“This is an important help in our fight against Russian aggression,” he said on Twitter. “Together we support the Ukrainian economy. And we are moving towards victory!”
US Treasury Secretary Janet Yellen said the financing package will help ensure economic and financial stability and lay the foundation for long-term recovery.
“I call on all other official and private creditors to join this initiative to support Ukraine’s defense against Russia’s unprovoked war,” Yellen said in a statement. “The United States will stand by Ukraine and her people for as long as is necessary.”
The IMF said several stakeholders, including international financial institutions, private companies, most of Ukraine’s official bilateral creditors and donors, support a two-tier debt treatment process for Ukraine that includes adequate funding pledges for debt relief and concessional financing during and after the program.
EXTENDED WAR SCENARIO
IMF official Gavin Gray told reporters the fund’s baseline scenario assumes the war will end in mid-2024, leading to the projected $115 billion funding gap to be filled by multilateral and bilateral donors and creditors .
The fund’s “downside scenario” called for the war to last through late 2025, opening up a much larger $140 billion funding gap that would require donors to dig deeper, he said.
Gray said the program was designed to work even when economic conditions are “significantly worse” than where they started. He said the countries providing funding pledges had agreed to work with the IMF to ensure Ukraine was able to service its debt to the IMF, larger sums if necessary.
Ukraine will face quarterly reviews as early as June, he said.
Reporting by Andrea Shalal and David Lawder in Washington Editing by Tomasz Janowski and Matthew Lewis
Our standards: The Thomson Portal Trust Principles.