IMF Concludes Fifth Review of Ukraine Fund Facility

• The IMF Board today completed the Fifth Review of the extended arrangement under the Extended Fund Facility (EFF) for Ukraine, enabling a disbursement of about US$1.1 billion (SDR 834.9 million) to Ukraine, which will be channeled for budget support.
• Ukraine's economy remains resilient, and performance remains strong under the EFF despite challenging conditions. The authorities met all end-June quantitative performance criteria and completed four structural benchmarks.
• Sustained reform momentum, domestic revenue mobilization, and timely disbursement of external support are necessary to safeguard macroeconomic stability, restore fiscal and debt sustainability, and enhance institutional reforms.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the Fifth Review of the EFF arrangement for Ukraine, enabling the authorities to draw US$1.1 billion (SDR 834.9), which will be channeled for budget support. This will bring the total disbursements under the IMF-supported program to US$8.7 billion.

Ukraine's 48-month EFF arrangement, with access of SDR 11.6 billion (equivalent to US$15.5 billion, or about 577 percent of quota), was approved on March 31, 2023, and forms part of a US$151.4 billion support package for Ukraine. The authorities' IMF-supported program helps anchor policies that sustain fiscal, external, and macro-financial stability at a time of exceptionally high uncertainty. The EFF aims to support the economic recovery, enhance governance, and strengthen institutions with the aim of promoting long-term growth in the context of reconstruction and Ukraine's path to EU accession.

All end-June and continuous quantitative performance criteria and indicative targets were met. The authorities have implemented prior action for the review, and completed structural benchmarks relating to tax privileges, public companies affected by the war, customs reform and public investment management, underscoring their continuing commitment to an ambitious reform agenda. Two structural benchmarks have been reset to allow more time for completion of the reform.

The economy was more resilient than expected in the first half of 2024, with continued growth, moderate inflation, and adequate reserves bolstered by continued sizeable external support. Nevertheless, the outlook for the remainder of the year and 2025 has worsened since the Fourth Review, largely due to sustained Russian attacks on Ukrainian energy infrastructure and uncertainty about the war; overall, the outlook remains subject to exceptionally high uncertainty.

Following the Executive Board discussion on Ukraine, Ms. Kristalina Georgieva, Managing Director of the IMF, issued the following statement [1] :

1. Russia's war in Ukraine continues to bring a devastating social and economic toll on Ukraine. Despite the war, macroeconomic and financial stability is being preserved through skillful policymaking by the Ukrainian authorities as well as substantial external support. The economy has remained resilient, despite significant damage to the energy infrastructure, reflecting the continued adaptability of households and firms.
2. Ukraine's performance and commitment under the program continues to be strong. All quantitative performance criteria for end-June were met, and those for end-September are expected to have been met. All but one structural benchmark through end-September were completed, while the missed structural benchmark has been reset to accommodate delays in the appointment process partly beyond the control of the authorities. Moreover, two structural benchmarks due later in the year and the prior action for the review was also implemented. The program remains fully financed with a cumulative external financing envelope of US$151 billion in the baseline and US$187 billion in the downside over the 4-year program period, including with new commitments from the Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative.
3. Looking ahead, the recovery is expected to slow amid headwinds from the impact of the attacks on energy infrastructure and the continuing war, while risks to the outlook remain exceptionally high. Preparedness is necessary to enable appropriate policy action should risks materialize.
4. Ukraine's financing needs remain large, driven by the continuing war. Timely and predictable external support—on terms consistent with debt sustainability—is essential to closing financing gaps and safeguarding stability. At the same time, decisive domestic revenue mobilization is critical for Ukraine to meet elevated spending needs, respond to shocks, and restore fiscal sustainability, which will require further tax policy measures as well as efforts to improve compliance and combat evasion, as envisioned under the National Revenue Strategy.

Further strengthening medium-term budgeting, fiscal risk frameworks and transparency, and public investment management should advance in support of these goals.

5. The Eurobond exchange in August was an important milestone in the authorities' strategy to restore debt sustainability. Efforts to conclude the remaining steps in line with the authorities' strategy and the program's debt sustainability objectives should continue.
6. Continued exchange rate flexibility under the managed exchange rate regime will help strengthen the resilience of the economy to external shocks. The recent uptick in inflation suggests limited room for further easing in the near term, though inflation remains well-anchored, and the FX cash market continues to show stability. A state-dependent and gradual approach to the easing of FX controls remains essential to safeguard FX reserves. The authorities' efforts to avoid monetary financing should continue.
7. The financial sector remains stable. Efforts should continue to strengthen bank resolution and supervision, governance, and contingency planning in view of risks to the outlook.
8. Continuing the reform momentum in anticorruption and governance, including ensuring the effectiveness of anticorruption institutions and strengthening governance in the energy sector, remain essential to help contain fiscal risks, secure donor confidence and enhance growth, which would also support Ukraine's path to EU accession.

[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .