1 April: Ukraine has secured a $15.6 billion loan from the International Monetary Fund to cope with the economic fallout of Russia’s ongoing invasion. The loan is part of a broader $115 billion international support package that includes debt relief, grants and loans from other sources.
The IMF’s executive board approved the four-year loan program on Friday, which will allow an immediate release of $2.7 billion to Kyiv. The loan comes with conditions that require Ukraine to implement reforms in areas such as taxation, exchange rate, central bank independence and anti-corruption.
The loan is the first major conventional financing program approved by the IMF for a country involved in a large-scale war. The IMF had previously provided $2.7 billion in emergency assistance to Ukraine in 2022 under less stringent terms.
The IMF’s deputy managing director, Gita Gopinath, said the loan program faced “exceptionally high” risks and depended on the size and timing of external financing to close fiscal and external gaps and restore debt sustainability.
She praised Ukrainian authorities for maintaining “overall macroeconomic and financial stability” despite the devastating impact of Russia’s invasion, which has shrunk the economy by about 30 percent last year, destroyed infrastructure and increased poverty.
She said deeper reforms would be needed in the second phase of the program to enhance stability and post-war reconstruction, boost competitiveness and address energy sector vulnerabilities.
The IMF also said it had secured additional guarantees from some of its members in case the war lasts longer than expected. If the conflict continues into 2025, Ukraine’s financial needs would rise from $115 billion to around $140 billion, according to the IMF.
“She praised Ukraine’s authorities for keeping “overall macroeconomic and financial stability” in the face of the war’s economic and social toll. “Russia’s invasion of Ukraine continues to wreak havoc,” she said. The new funding was welcomed by Ukrainian President Volodymyr Zelensky. “It is an important help in our fight against Russian aggression,” he tweeted. “Together we support the Ukrainian economy.
And we are moving forward to victory!” US Treasury Secretary Janet Yellen, who made a surprise visit to Ukraine in February and worked hard to secure the package, said it would help Ukraine’s economic and financial stability and lay the groundwork for reconstruction.
“I urge all other official and private creditors to join this initiative to assist Ukraine as it defends itself from Russia’s unprovoked war,” she said in a statement. “The United States will continue to stand by Ukraine and its people for as long as it takes.”
IMF official Gavin Gray said the fund’s baseline scenario assumed the war would end in mid-2024. He said the fund’s “downside scenario” has the war lasting until the end of 2025, creating a much larger $US140 billion financing gap that would require donors to give more.”