WASHINGTON (Reuters) – The International Monetary Fund said on Friday its executive board approved a $15.6 billion four-year loan program for Ukraine, part of a $115 billion global package to support the country’s economy as Russia struggles for 13 months. ancient invasion.
The fund said in a statement that the decision paves the way for an immediate disbursement of about $2.7 billion to Kiev, and requires ambitious reforms from Ukrainian officials, especially in the energy sector.
The Extended Financial Facility (EFF) is the first major conventional financing program approved by the International Monetary Fund for a country embroiled in full-scale war. Sources said the size of the overall package is meant to signal the international community’s commitment to continuing to support Ukraine in the war.
The previous long-term, $5 billion IMF program in Ukraine was canceled in March 2022 when the Fund provided $1.4 billion in emergency financing with few conditions. It provided another $1.3 billion under the “food shock window” program last October.
The latest loan is expected to provide about $100 billion in additional international support for Ukraine. An IMF official said the $115 billion package includes an IMF loan, $80 billion in pledges 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 steps that could erode tax revenue, maintaining sufficient foreign exchange reserves to maintain exchange rate stability, strengthening central bank independence, and strengthening anti-corruption efforts.
The IMF said deeper reforms will be needed in the second phase of the program to promote stability and early post-war reconstruction, return to pre-war fiscal and monetary policy frameworks, enhance competitiveness and address weaknesses in the energy sector.
Gita Gopinath, IMF Senior Deputy Managing Director, said the program faced “exceptionally high” risks, and that its success depended on the volume, composition and timing of external financing to help close fiscal and external financing gaps and restore Ukraine’s debt sustainability.
It said that “the Russian invasion of Ukraine continues to have a devastating economic and social impact”, praising the Ukrainian authorities for maintaining “overall macroeconomic and financial stability”.
The decision formalizes an International Monetary Fund staff-level agreement reached with Ukraine on March 21, which takes into account Ukraine’s path to EU accession after the war.
Ukrainian President Volodymyr Zelensky welcomed the new funding.
“It is an important aid in our fight against Russian aggression,” he said on Twitter. “Together we support the Ukrainian economy. We are moving forward towards victory!”
US Treasury Secretary Janet Yellen said the financing package will help secure economic and financial stability and lay the foundation for long-term reconstruction.
“I call on all other official and private creditors to join this initiative to help Ukraine as it defends itself from Russia’s unjustified war,” Yellen said in a statement. The United States will continue to stand by Ukraine and its people for as long as we can.”
The IMF said that many stakeholders, including international financial institutions, private sector companies and most of Ukraine’s official bilateral creditors and donors support a two-step debt remediation process for Ukraine that includes adequate financing guarantees on debt relief and concessional financing during and after the programme.
The longest war scenario
An IMF official, Gavin Gray, told reporters that the fund’s baseline scenario assumes the war will end in mid-2024, leading to a projected financing gap of $115 billion, which will be covered by multilateral and bilateral donors and creditors.
He said the fund’s “downward trend scenario” saw the war continue through the end of 2025, opening up a much larger $140 billion funding gap that would require donors to dig deeper.
Gray said the program was designed to work, even if economic conditions were “much worse” than baseline. He said countries providing financing guarantees had agreed to work with the International Monetary Fund to ensure that Ukraine was able to service its debt to the IMF if larger sums were required.
He said Ukraine will face quarterly reviews starting in June.
(Covering) By Andrea Shalal and David Lauder in Washington; Editing by Tomasz Janowski and Matthew Lewis
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