Ukraine clinches $15.6 billion IMF loan, a first for nation at war

The program will be divided into two phases. In the first, lasting 12-18 months, Ukraine will take measures to “strengthen fiscal, external, price and financial stability,” including eliminating monetary financing.
 

Rupee

The second phase would shift to more expansive reforms to bolster macroeconomic stability and support the nation’s recovery and reconstruction, including in light of Ukraine’s goal of European Union accession. During this period, Ukraine “would be expected to revert to pre-war policy frameworks, including a flexible exchange rate and inflation targeting regime,” the IMF said.

IMF staff forecasts for Ukraine’s economy this year range from a 3% contraction to 1% expansion, after a slump of 30% in 2022.

‘Severe Damage’

“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, who led the IMF’s mission, said in a statement.

The unprecedented agreement required the IMF to change its policies. The Russian invasion, launched over a year ago, has laid waste to Ukraine’s export economy and infrastructure, killing thousands of people and driving more than a third of a pre-war population of 40 million from their homes.

The financing arrangement is an upgrade, with previous IMF funds distributed via rapid financing instruments that didn’t involve conditions. Kyiv began negotiating a full loan program with the lender in June, striking a four-month non-cash deal in an intermediary stage in December.

“In conditions of a record budget deficit, this program will help us finance all crucial expenditures, preserve microfinancial stability and enhance our cooperation with the other international partners,” Ukraine’s Prime Minister Denys Shmyhal said on his Telegram-channel.