The International Monetary Fund (IMF) on Tuesday reached an agreement with Ukrainian authorities on a loan package worth around $15.6 billion, to support the war-torn country's economic recovery.
The IMF and the government in Kyiv reached a staff-level agreement on a comprehensive loan program over four years. When approved this would be the first loan to a nation at war in the IMF’s 77-year history.
“The Ukrainian authorities and IMF staff have reached a staff-level agreement on a set of macroeconomic and financial policies that would be supported by a new 48-month Extended Fund Facility (EFF) Arrangement,” IMF said in a statement on Tuesday.
According to IMF, the program will be divided into two phases. The first phase, lasting 12-18 months “will build on the PMB, to strengthen fiscal, external, price and financial stability by bolstering revenue mobilization, eliminating monetary financing and aiming at net positive financing from domestic debt markets, and contributing to long-term financial stability.”
The second phase would focus on “more expansive reforms to entrench macroeconomic stability, support recovery and early reconstruction, and enhance resilience and higher long-term growth, including in the context of Ukraine’s EU accession goals.”
The agreement is expected to be finalized with the approval of the IMF board in the coming weeks.
At the request of the Ukrainian authorities, an IMF team led by Gavin Gray, held discussions in Warsaw with Ukrainian officials, during March 8-15, 2023.
IMF staff forecasts for Ukraine’s economy this year range from a 3% contraction to 1% expansion, after a slump of 30% in 2022.
“A gradual economic recovery is expected over the coming quarters, as activity recovers from the severe damage to critical infrastructure, although headwinds persist, including the risk of further escalation in the conflict,” Gavin Gray said in a statement.
“The staff-level agreement reflects the IMF’s continued commitment to support Ukraine and is expected to help mobilize large-scale concessional financing from Ukraine’s international donors and partners,” Gray said.
In more than a year the Russian invasion of Ukraine has destroyed the country's infrastructure and export industry, killing thousands of people and uprooting more than a third of its pre-war population of 40 million.
According to a Bloomberg report the unprecedented agreement required the IMF to change its policies. The financing arrangement is an advancement above earlier IMF funding, which was dispersed through quick financing instruments without constraints.