Ukraine and the International Monetary Fund have agreed on a $15.6 billion loan package aimed at shoring up government finances severely strained by Russia’s invasion and at leveraging even more support by reassuring allies that Ukraine is pursuing strong economic policies.
Ukraine’s finance ministry said Wednesday that the program will “help to mobilize financing from Ukraine’s international partners, as well as to maintain macrofinancial stability and ensure the path to post-war reconstruction after Ukrainian victory in the war against the aggressor.”
The loan program will run for four years, with the first 12 to 18 months focusing on helping Ukraine close its massive budget deficit and alleviating pressure to finance spending through printing money at the central bank, the IMF said in a statement Tuesday.
The remainder of the program will focus on supporting Ukraine’s bid for European Union membership and post-war reconstruction.
The IMF deal is expected to leverage even more money for Ukraine since it provides evidence to potential donor governments, including in the Group of Seven democracies and the European Union, that Ukraine’s government is following sound economic policies.
The agreement, which still needs approval from the IMF’s executive board, “is expected to help mobilize large-scale concessional financing from Ukraine’s international donors and partners over the duration of the program,” Gavin Gray, the IMF”s mission chief for Ukraine, said in a statement.
The Washington-based IMF said that the Ukrainian authorities demonstrated their commitment to healthy economic policy and met all agreed upon goals during a preliminary consultation. The loan program goes beyond previous IMF practice by lending to a country that is at war, under new rules that permitted assistance under circumstances of “exceptionally high uncertainty.”
Ukraine massively increased military spending while the economy shrank by around 30% in 2022, hitting tax revenues. (CTV)