The International Monetary Fund’s four-year extended EFF financing program for Ukraine also envisions the country receiving $80 billion from multilateral and bilateral donors during this period, including $20 billion in grants and $60 billion in concessional loans, as well as another $20 billion in debt flow relief, said Gavin Gray, head of the Fund mission.
At a press conference on Friday, after announcing the decision to approve the $15.6 billion EFF program, he recalled two announcements made last week: from a group of official Ukrainian creditors about their willingness to defer the country’s debt payments for the program period and about Ukraine’s intention to agree the same with the holders of Eurobonds and other external commercial debts.
The board of directors of the International Monetary Fund (IMF) on Friday approved a four-year, SDR11.6 billion ($15.6 billion) extended EFF program as part of a total support package for Ukraine of $115 billion, the Fund said in a statement.
“The Ukraine program (for 2023-2027), supported by the EFF, aims to anchor policies to maintain fiscal, external, price and financial stability and support economic recovery, while improving governance and strengthening institutions to promote long-term growth in the context of post-war recovery and Ukraine’s path to the EU,” the IMF said.
The Fund specified that the decision of the board of directors allows for immediate disbursement of about SDR2 billion (or $2.7 billion).
IMF mission chief Gavin Gray clarified to reporters that the first review of the program is expected in June-July this year, the second by the end of October, possibly in early November, and from 2024 will be quarterly.
According to the release, EFF approval is expected to attract large-scale concessional financing from international donors and Ukraine’s partners to help resolve Ukraine’s balance of payments problem, achieve medium-term external viability and restore debt sustainability on a prospective basis in both baseline and negative scenarios.
The IMF notes that in view of the exceptionally high uncertainty faced by Ukraine, the EFF program envisages a two-stage approach. In the first phase of the program, scheduled for 2023-2024, the focus will be on three goals. These include, among others, strengthening the 2023 budget and supporting revenue mobilization, including by avoiding new measures that could undermine tax revenues.
In addition, it is about sustainable disinflation and exchange rate stability, including by maintaining sufficient foreign exchange reserves, and promoting long-term financial stability, including by preparing a more in-depth assessment of the banking sector and further strengthening the independence of the central bank.
“Independent and effective anti-corruption institutions will help reduce corruption risks during martial law and build public and donor confidence in future reconstruction,” the Fund adds.
He also noted that the first phase of the program will protect social spending.
“The second phase of the program will shift the focus to more ambitious structural reforms to strengthen macroeconomic stability, support early post-war recovery, and enhance resilience and higher long-term growth, including in the context of Ukraine’s EU accession goals,” the IMF pointed out.
According to the release, Ukraine is expected to return to its pre-war policy fundamentals, mainly a flexible exchange rate and inflation targeting, while improving productivity and competitiveness, strengthening institutions and addressing financial and energy sector vulnerabilities.
In addition, fiscal policy will focus on critical structural reforms to guarantee medium-term revenues by implementing a national revenue strategy, along with improving public financial management and introducing public investment management reforms to support postwar recovery.
“The risks to the EFF program are exceptionally high. The success of the program depends on the size, composition and timing of concessional external financing to help close the budget deficit and external financing and restore debt sustainability on a forward-looking basis under baseline and negative scenarios,” said First Deputy Managing Director Gita Gopinath.
IMF Chief of Mission Gavin Gray specified that besides $15.6 billion from the Fund, the support package implies $80 billion from multilateral and bilateral donors, of which $20 billion in grants and $60 billion in concessional loans, as well as another $20 billion in deferred external debt payments.
According to him, the baseline scenario assumes the completion (winding down) of the war in mid-2024, while the negative scenario – by the end of 2025 with an increase in financing needs up to $240 billion.
At the same time, the IMF representative stressed that the program provides additional guarantees from a number of shareholders of the Fund, as preferred creditors, in particular the G7 countries, Belgium, Lithuania, the Netherlands, Poland, Slovakia and Spain.
Reinstating the obligation for officials to file asset and income declarations in the coming months is one of the conditions of the $15.6 billion expanded EFF financing program approved by the International Monetary Fund (IMF) for Ukraine on Friday, Fund mission chief Gavin Gray said.
“Under the program, the authorities are committed to a targeted recovery of asset declarations even in the current circumstances. We see this as an important measure…,” he said at a briefing Friday.
Gray specified that the IMF will work with the authorities on this issue in order to resolve it by the first review of the program in June-July this year.
As reported, in February this year, the ambassadors of G7 countries in Ukraine expressed hope that the Verkhovna Rada will soon resume the system of electronic declaration of assets and income of officials, which was suspended during martial law, which “will prevent corruption and strengthen citizens’ trust in government.
Chairman of the National Agency for Combating Corruption (NACC) Oleksandr Novikov said in mid-March that he expects the resumption of declarations in the next two months, but believes that the public part of the register of declarations should remain hidden until the end of the war.
According to him, all public authorities have access to the data of the register of declarations and the data they need to perform their official duties.
Declarations for the year 2022 filed about 6% of declarants. For 2021 – up to 50%, including two deputy heads of the presidential office, the Minister of Education and Science, the Minister of Defense, 28 people’s deputies, five heads of regional military administrations and 163 judges.
The Board of Directors of the International Monetary Fund (IMF) at a meeting on Friday approved Ukraine’s request to open a new four-year extended financing program EFF for a total of SDR11.6 billion ($15.6 billion), an informed source told Interfax-Ukraine news agency.
According to him, the official announcement of the Fund is expected in the very near future on Friday.
According to the agenda published earlier on the Fund’s website, the board also summarized the results of the Monitoring Program for Ukraine with the involvement of the Board of Directors (PMB) opened in December.
As earlier reported, on March 21, the IMF reported reaching a staff-level agreement (SLA) on a new four-year EFF program for Ukraine worth SDR11.6 billion (about $15.6 billion). The fund specified that the final decision of the board of directors is expected in the coming weeks.
On March 24, the Cabinet of Ministers approved the draft Letter of Intent of the IMF and the National Bank of Ukraine and the draft Memorandum on Economic and Financial Policies. At this stage, the documents themselves are traditionally not published.
The program was supposed to be divided into two stages. The first one aims at maintaining stability, lasts 12-18 months and is based on the PMB, while the second phase, with more structural reforms, aims at growth and European integration.
Negotiations on the new EFF program were preceded by the PMB Monitoring Program. With the IMF unprepared to disburse significant funding immediately, Ukraine requested it from the Fund last fall for a period of four months and received approval from the Board of Directors on December 20.
On February 17, an IMF mission concluded in Warsaw, resulting in a statement on the SLA for early termination of the PMB program and the transition to the preparation of a new, expanded program involving financing.
Canada is going to provide a $1.8 billion loan to Ukraine through the International Monetary Fund (IMF) in budget year 2023, CBC TV channel reported with reference to the country’s draft budget.
“Canada will extend a $2.4 billion Canadian dollars ($1.8 billion) loan to Ukraine in the coming budget year. The measure is contained in the latest federal budget, tabled in Parliament on Tuesday by Finance Minister Chrystia Freeland,” the report said.
The loan for Ukraine will be distributed through the IMF. It is intended to cover the budget deficit and pay for social services, including medical services.
According to the TV channel, separately, the Canadian federal budget also announced CAD 84 million (almost $62 million) in additional direct humanitarian aid for Ukraine in the coming fiscal year – money which will be used for mental health services, the removal of mines and other measures. The money will come out of the existing budget at Global Affairs Canada.
An International Monetary Fund (IMF) mission on Wednesday begins discussions with Ukraine’s representatives on a new full-fledged support program involving funding from the Fund.
“The IMF mission led by Gavin Gray begins discussions today with representatives of the Ukrainian authorities on a potential program to be supported by the IMF,” Vahram Stepanian, IMF Resident Representative in Ukraine, said in a statement.
Earlier, Ukrainian Finance Minister Sergei Marchenko announced the work of the IMF mission from March 8 to 15 in Warsaw.
“There we will agree on the terms and conditions, and filling, and volumes, and so on. Now it’s a little early to talk about specific details, because there are a lot of issues of internal discussion of the Fund,” said the head of the Ministry of Finance on March 1.
“I think we will find the necessary solutions so that in April we could have a full-fledged program with the Fund,” said Marchenko.
According to him, so far we are talking about a four-year program, whose task is to make the necessary policy adjustments so that Ukraine, which today spends 50% of its budget on military expenditures and the other 50% financed by the aid of partners, after the war came to a level of “more or less” self-sufficiency.
“The Fund does not yet put forward unbearable conditions that we cannot fulfill. We are talking about program, basic things: ensuring monetary and fiscal stability; reduction of the budget deficit and ensuring an acceptable level of burden on the budget and also good public administration and ensuring best corporate practices. And we are talking about anti-corruption programs, which have traditionally been part of IMF programs,” explained the head of the Ministry of Finance.
Prime Minister Denis Shmygal stated that the amount of the program may amount to $15 billion, of which Ukraine would like to receive $5 billion this year.
As earlier reported, last autumn, when the IMF was not ready to provide substantial financing at once, Ukraine requested a four-month Monitoring Program with Board of Directors (PMB) from the Fund, which the Fund approved on December 20.
An IMF mission concluded in Warsaw on Feb. 17, resulting in a statement that a staff-level agreement (SLA) had been reached to end that program early and move forward with preparations for a new, expanded program involving financing.
Kiev hopes that in the beginning of the second quarter of 2023, the PMB will be replaced by a multiyear extended funding program EFF amounting to about $15 billion, which can cover the gap in covering the $ 38 billion deficit of the state budget-2023, which is now, according to about $5-10 billion.
