The International Monetary Fund's executive board on Thursday approved a third review of Ukraine's $15.6 billion loan program, allowing the release of $880 million for budget support and bringing total disbursements to $5.4 billion, the IMF said.
The global lender said the risks facing Ukraine remained exceptionally high, particularly the uncertainties surrounding the war with Russia and prospects for external financing, although Ukraine mission chief Gavin Gray said the fund still expected the war in Ukraine to wind down by the end of 2024.
Gray told reporters that Ukraine's overall performance on its Extended Fund Facility program with the IMF had remained strong over its first year, and Kyiv had met all but one of the quantitative performance criteria. The miss involved a very minor amount of tax revenues.
Ukraine should receive the funds in coming days, Gray said. That should be welcome news as the U.S. Congress continues to debate approval of a $61 billion supplemental aid package for Ukraine. Gray said the IMF would have to study the impact on Ukraine's debt levels if U.S. lawmakers decided to convert some of that funding to a loan instead of a grant.
Sanaa Nadeem, the IMF's deputy mission chief for Ukraine, said the IMF had approved a new debt sustainability analysis for Ukraine that had not materially changed the macroeconomic analysis but did exclude some $3 billion in debt for Russian Eurobonds that had been contested by Ukrainian authorities.
She told reporters that credible progress was being made on restructuring Ukraine's commercial debt, and the IMF expected technical discussions on that issue to pick up in coming weeks.
Strong anchor
The IMF said its loan program continued to provide a strong anchor for Ukraine's economic program, which has remained on track despite extremely challenging circumstances due to Russia’s war in Ukraine, now in its third year.
While Ukraine's economy was more resilient than expected in 2023, headwinds were re-emerging in 2024, with growth expected to soften to 3% to 4% because of uncertainty about the war and as supply constraints become more binding, the IMF said.
“Looking ahead, the recovery is expected to slow somewhat, given the exceedingly high risks to the outlook stemming mainly from the exceptionally high war-related uncertainty as well as potential delays in external financing," IMF chief Kristalina Georgieva said in a statement.
"The authorities should be vigilant against these risks. It is also critical that the external financing committed to Ukraine by all donors is disbursed in a timely and predictable manner to safeguard Ukraine’s hard-won macroeconomic stability."
One critical factor for Ukraine's future remains the return of an estimated 6.5 million people — mainly women and children — who fled the country and remain outside its borders because of the war.
Nadeem said the IMF continued to expect a net loss of about 2 million people but there was a risk that number could grow the longer the war lasts.
"This is indeed a very challenging situation and does present headwinds to society," she said, noting that Ukraine had an aging society even before the war.
