The International Monetary Fund (IMF) has reached an agreement with Ukraine on a funding package worth $15.6 billion, which is set to be approved in the coming weeks. This is the first loan by the IMF to a country at war, and it is also one of the largest financing packages Ukraine has received since Russia’s invasion. The IMF recently changed a rule to allow loans to countries facing “exceptionally high uncertainty.” IMF official Gavin Gray said that Russia’s invasion of Ukraine has had a devastating impact on the economy, with activity contracting by 30% in 2022 and poverty levels climbing. However, the IMF expects Ukraine’s economy to record a slight contraction this year.
The funding will help Ukraine “finance all critical expenditures, ensure macroeconomic stability, and strengthen our interaction with other international partners,” according to Ukrainian Prime Minister Denys Shmyhal. The program has been designed in line with the new fund’s policy on lending under exceptionally high uncertainty, and strong financing assurances are expected from donors, including the G7 and EU. Mr. Gray also said the agreement would “mobilize large-scale concessional financing” for Ukraine from international donors and partners, without giving further details.
Ukraine has been embroiled in a conflict with Russia since 2014, and the IMF loan is expected to help the country recover from the economic impacts of the conflict. The IMF’s loan agreement comes as Ukraine struggles with inflation, a weak currency, and declining foreign currency reserves. The funding is expected to help Ukraine pay for essential imports and support reforms aimed at improving economic governance, energy efficiency, and the banking sector.
The IMF’s loan to Ukraine marks a significant milestone, as it is the first time that the IMF has extended funding to a country at war. The IMF has recently changed its rules to allow loans to countries facing “exceptionally high uncertainty,” and this move could help other countries affected by conflicts and wars receive much-needed financial assistance. The funding is expected to provide Ukraine with much-needed stability and support to rebuild its economy and infrastructure in the aftermath of the conflict with Russia.