In its efforts to offer Ukraine the funds it needs as it continues to defend against Russia’s invasion, the International Monetary Fund (IMF) reached on Tuesday a staff-level agreement with Kyiv for a $15.6 billion-worth, four-year financing package.
IMF official Gavin Gray said in a statement announcing the agreement that its executive board was expected to discuss approval in the coming weeks – since the agreement, must still be ratified by the IMF’s board- but that the deal takes into consideration Ukraine’s post-war path to European Union membership.
This would be Ukraine’s biggest loan package since Russia invaded the country on February 24, 2022, and IMF’s board was supportive, a source familiar with the matter said.
Gray explained that the funds are intended to support Ukrainian authorities’ overarching goals to restore debt sustainability, sustain economic and financial stability in circumstances of exceptionally high uncertainty, and support in the post-war period the country’s recovery on the path toward EU accession.
Thanking the IMF for its support, Ukrainian Prime Minister Denys Shmyhal hailed the agreement, noting that, in conditions of a record budget deficit, it will help Ukraine finance all critical expenditures and ensure macroeconomic stability and strengthen Kyiv’s interaction with other international partners
As IMF loans typically unlock support from the World Bank and other lenders, IMF expects the agreement to help unleash large-scale financing for Ukraine from international donors and partners.
The global lender gave no details but noted that past calculations have estimated the cost of Ukraine’s reconstruction in the hundreds of billions of dollars.
Gray explained that despite the risk of further escalation in the conflict and the existence of headwinds, Ukraine can expect a gradual economic recovery over the coming quarters as activity recovers from the severe damage to critical infrastructure.
He added that IMF staff currently expected the change in Ukraine’s real GDP for 2023 to range from -3% to +1%.
After months of pushing for the IMF to move forward with a new financing package for Ukraine, the US Treasury Secretary Janet Yellen welcomed the deal stressing that its critical for underpinning Kyiv’s reform efforts to have an ambitious and appropriately conditioned IMF program.
Providing the much-needed financial support, the program will also help strengthen Ukraine’s good governance and address risks of corruption, said the representative of the US, which is the IMF’s largest shareholder.
