WASHINGTON: The International Monetary Fund on Thursday said its board would review a staff-level agreement on an $8.1 billion lending program for Ukraine in coming days, paving the way for approval of a package that will help unlock other international support.
If approved, as widely expected, the program would replace an existing $15.5 billion IMF facility, helping Kyiv maintain economic stability and public spending as the war with Russia grinds into a fifth year. Ukraine has said it faces a near $140 billion budget shortfall over the next few years.
The four-year anniversary of the war is February 24. Since Moscow’s invasion, Ukraine has required hundreds of billions of dollars of support from Western governments and institutions and a more than $20 billion sovereign debt restructuring.
IMF spokeswoman Julie Kozack said Ukrainian authorities ⁠had now completed the ⁠prior actions needed to move forward with their request for a new IMF program, including submission of a draft law on the labor code and adoption of a budget. She told a briefing that Ukraine’s economic growth in 2025 was likely to come in under 2 percent. After four years of war, the country’s economy had settled into a slower growth path with larger fiscal and current account balances, she said, noting that the IMF continues to monitor the situation closely.
“Russia’s invasion continues to take a ⁠heavy toll on Ukraine’s people and its economy,” Kozack said. Intensified aerial attacks by Russia had damaged critical energy and logistics infrastructure, causing disruptions to economic activity, she said.
As of January, she said, 5 million Ukrainian refugees remained in Europe and 3.7 million Ukrainians were displaced inside the country. The World Bank, Ukrainian government and European Union are finalizing a new estimate for the cost to rebuild Ukraine that should be released next week, with experts predicting a significant jump from last year’s $524-billion estimate, given the severity of Russian attacks on energy infrastructure.
IMF Managing Director
Kristalina Georgieva
met with top Ukrainian officials in Kyiv in a surprise visit last month, telling Reuters she expected to submit the new lending program to the Fund’s board for approval in coming weeks.
At the time, she said the situation in Ukraine had ⁠clearly worsened since officials signed ⁠a preliminary lending agreement in November, requiring some changes, but the thrust of the program’s requirements would remain the same.
She said the IMF would assess which measures agreed in November were easily implemented and which needed to be “calibrated” more carefully. For instance, she said the Fund was looking at giving Ukraine a year to drum up support in parliament for passage of a controversial VAT measure.
Ukrainian Prime Minister
Yulia Svyrydenko
on Saturday said Kyiv had agreed with the IMF to ease some conditions for the program, including plans for sensitive tax increases affecting individual entrepreneurs.
The government had agreed to introduce a value-added tax for them, raising the revenue threshold to 4 million hryvnias ($92,592.59) from 1 million hryvnias ($23,148.15). Analysts now expect about 250,000 entrepreneurs to be affected by the increase, instead of over 600,000 in earlier plans.
The preliminary staff agreement assumes the war will end this year but includes a “downside scenario” that the war winds down slowly and does not end until 2028, according to IMF officials.