The board of the International Monetary Fund (IMF) has approved a four-year $15.6bn extended fund facility (EFF) programme for Kyiv following discussions last month, Ukraine Business News reported on April 3.
Ukraine will receive the first $2.7bn tranche in the coming weeks and will get three tranches this year totalling $4.5bn following quarterly programme reviews. The deal is part of the US’ $115bn support package for the war-stricken country.
“It is an important help in our fight against Russian aggression. Together we support the Ukrainian economy. And we are moving forward to victory,” Ukrainian President Volodymyr Zelenskiy tweeted, thanking the fund for the deal.
The EFF programme was agreed on March 21 and consists of two phases. The first phase, lasting 12-18 months, aims to strengthen fiscal, external, price and financial stability by bolstering revenue mobilisation, avoiding monetary financing, and promoting central bank independence.
The second phase includes extensive reforms for recovery and reconstruction, measures to support Ukraine's EU accession goals, and enhancements to financial resilience and long-term growth.
“Ukraine would be expected to revert to pre-war policy frameworks, principally a flexible exchange rate and inflation targeting, while boosting productivity and competitiveness, strengthening institutions, and tackling financial and energy sector vulnerabilities,” the IMF stated in a press release.
Ms. Gita Gopinath, first deputy managing director of the IMF, noted that the risks to the arrangement are “exceptionally high”. She added that it has been designed to resolve Ukraine’s balance of payments problem and “restore medium-term external viability in both a baseline and downside scenario”
“The success of the programme depends on the size, composition and timing of external financing on concessional terms to help close fiscal and external financing gaps and restore debt sustainability on a forward-looking basis under the baseline and downside scenarios,” she stated.
“Moreover, the authorities’ track record of undertaking ambitious policies when warranted, their readiness to undertake contingency measures, and the frequent reviews in the first phase of the programme are risk mitigating factors,” she added.
In addition, the agreement will help mobilise additional financing from Ukraine's international partners including the G7 nations and the European Union.