IMF board approves four-year $15.6 billion loan to Ukraine

The Executive Board of the International Monetary Fund has approved a four-year loan to Ukraine in the amount of $15.6 billion, Bloomberg reported with reference to a source.

The publication notes that this is the first loan that the IMF will provide to a country in a state of war.

A group of creditors of Ukraine supported an unprecedented decision that requires the IMF to change its lending rules, extending the moratorium on debt repayment for the duration of the program. Creditors — Canada, France, Germany, Japan, United Kingdom and the United States — have called on other creditors to help restore the solvency of Ukraine, whose economy has shrunk by about a third since the Russian invasion last year.

The program will be divided into two stages. At the first stage lasting 12-18 months, Ukraine will take measures to strengthen fiscal, external, price and financial stability, in particular, liquidate monetary financing.

At the second stage, larger-scale reforms will be carried out to strengthen macroeconomic stability and support the recovery and reconstruction of the country, in particular within the framework of Ukraine's aspiration to join the European Union. During this period, Ukraine is expected to return to pre-war policy frameworks, including a flexible exchange rate and an inflation targeting regime, according to the IMF.

IMF staff forecasts for Ukraine's economy in 2023 range from a 3% contraction to 1% growth after a 30% decline in 2022.

President Volodymyr Zelenskyy has already thanked the IMF for this decision. "It is an important help in our fight against Russian aggression. Together we support the Ukrainian economy. And we are moving forward to victory!" he wrote on Twitter.

Prime Minister Denys Shmyhal also welcomed the decision of the IMF Board.

Funds from the IMF will help the government finance all critical expenditures and maintain macro-financial stability, he noted.

Shmyhal confirmed that the program will consist of two parts. "The first is urgent financing before our victory in the war. The second part is the post-war reconstruction and transformation of Ukraine. We expect the first tranche of more than $2.7 billion in the near future," he said.

The IMF program will be part of the general package of financial support for Ukraine from international partners in the amount of $115 billion, the Prime Minister noted.