The IMF has struck a deal with Ukraine to provide a $15.6bn loan and a long-awaited financial lifeline to Kyiv as it tries to shore up its economy in the face of Russia’s full-blown invasion of the country.
The multilateral lender announced the agreement on Tuesday after a series of talks with Ukrainian authorities in Warsaw held this month. It still needs to be approved by the IMF board, which is expected to happen in the coming weeks.
Gavin Gray, the IMF official leading the talks, said: “The staff-level agreement reflects the IMF’s continued commitment to support Ukraine and is expected to help mobilise large-scale concessional financing from Ukraine’s international donors and partners over the duration of the programme.”
The IMF said the programme would unfold in two stages, with the first 12-18 months devoted to build “fiscal, external, price and financial stability”. This would be focused on “revenue mobilisation” — increasing tax collection — as well as eliminating “monetary financing” and relying on domestic debt markets instead. Ukraine also committed to strengthening its governance and anti-corruption framework, the IMF said.
The second phase of the deal, which will last four years, is designed to “entrench macroeconomic stability, support recovery and early reconstruction”, as Kyiv tries to achieve its goal of EU accession. “During the second phase, Ukraine would be expected to revert to prewar policy frameworks, including a flexible exchange rate and inflation-targeting regime,” the IMF said.
Janet Yellen, the US Treasury secretary, cheered the deal, which confirms previous reporting by the Financial Times. For months, Ukraine and many of its allies had been pushing for the IMF to offer more financial help to Kyiv.
“An ambitious and appropriately conditioned IMF programme is critical to underpin Ukraine’s reform efforts, including to strengthen good governance and address risks of corruption, and provide much-needed financial support,” Yellen said.
“It will also bolster the economic assistance that the United States and our partners have provided that is funding essential services like schools, hospitals and first responders, and which is offering vital support to the Ukrainian economy,” she added.
