IMF reaches staff agreement on Ukraine loan review; will enable US$900 million disbursement

WASHINGTON: The International Monetary Fund said on Tuesday (May 30) that it has reached a staff-level agreement with Ukraine for the first review of the war-torn country's US$15.6 billion IMF loan program, which would allow for a US$900 million disbursement to Kyiv upon approval by the IMF Executive Board.

The IMF said in a statement that the board is expected to consider the staff-level agreement in the coming weeks.

The IMF approved the US$15.6 billion four-year Extended Fund Facility program for Ukraine in March, enabling additional donor support of about US$100 billion.

The IMF said Ukraine's performance under the arrangement's economic program has been strong, and all quantitative performance criteria for end-April targets were met. Structural benchmarks through end-May were also met.

"Overall, macroeconomic and financial stability have been maintained, thanks to prudent policy making and continuous and timely external support," the Fund said upon completion of a review mission in Vienna.

The Fund upgraded its outlook for Ukraine's GDP output in 2023 to growth of 1 per cent to 3 per cent, from a March forecast range of a 3 per cent contraction to 1 per cent growth, with the new loan program underpinning the economy.

But challenges, including a "horrific" humanitarian toll, and the destruction from the war's attacks, continue to have a "devastating impact on the economy", the IMF said.

Ukraine's fiscal deficit remains very high, requiring large financing needs covered by external grants and highly concessional loans.

"Protecting core functions of the state under existing financing constraints will continue to require the authorities to navigate difficult policy tradeoffs," the IMF said, including avoiding new measures that might erode tax revenues.