IMF Finalizes Sixth Review of Ukraine's Loan Program

• The IMF Board today completed the Sixth 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 by the authorities for budget support.
• Ukraine's economy remains resilient, and performance remains strong under the EFF despite challenging conditions. The authorities met all end-September quantitative performance criteria and structural benchmarks.
• Sustained reform momentum, progress at domestic revenue mobilization, and timely disbursement of external support are necessary to safeguard macroeconomic stability, restore fiscal and debt sustainability, and improve governance.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the Sixth Review of the EFF, enabling the authorities to draw US$1.1 billion (SDR 834.9 million), which will be channeled by the authorities for budget support. This will bring the total disbursements under the IMF-supported program to US$9.8 billion.

Ukraine's 48-month EFF, 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$148 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.

Ukraine's performance under its program remains strong. All end-September and continuous quantitative performance criteria and indicative targets were met. The authorities have also completed a prior action on the enactment of the package of tax measures, have met all end-October structural benchmarks due by the Sixth Review and three of the end-December benchmarks.

Economic growth in 2024 has been upgraded given better than expected resilience to the energy shocks. However, a slowdown is expected in 2025 due to an increasingly tight labor market, the impact of Russian attacks on Ukrainian energy infrastructure, and continued uncertainty about the war. Inflation has risen recently, mainly due to food prices, while inflation expectations remain well anchored. Adequate reserves have been sustained by continued sizeable external support. 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] :

"Russia's war in Ukraine continues to take a devastating social and economic toll on Ukraine. Despite the war, macroeconomic stability is being preserved through skillful policymaking by the Ukrainian authorities as well as substantial external support. The economy has remained resilient, reflecting the continued adaptability of households and firms, although risks are tilted to the downside due to headwinds from attacks on energy infrastructure and a tight labor market. Preparedness and contingency planning are key to enable appropriate policy action should risks materialize.

The program remains fully financed with a cumulative external financing envelope of US$148 billion in the baseline and US$177 billion in the downside over the 4-year program period, including commitments from the G7's Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative. Full, timely and predictable external support—on terms consistent with debt sustainability—remains essential to maintaining full program financing and safeguarding stability.

A tax package and 2025 Budget in line with the program baseline have been enacted, but there are few remaining buffers and strict budget execution will be key. Continued progress at domestic revenue mobilization is imperative for Ukraine to meet its high priority spending needs and to restore fiscal sustainability. Strong implementation of the National Revenue Strategy and customs reform will help raise further revenues, improve compliance, combat evasion, and support EU accession.

After completing the Eurobond exchange in August, the authorities are now focusing on reaching agreement with other holders of external commercial claims, including GDP warrants, in line with their strategy. A swift agreement in line with the program's debt sustainability objectives would reduce fiscal risks and create space for critical spending needs.

Inflation has accelerated more than expected in recent months, and the recent tightening of monetary policy was appropriate; the NBU should stand ready to take further action should inflation expectations deteriorate. Allowing exchange rate flexibility will help strengthen the resilience of the economy to external shocks while safeguarding reserves.

The financial sector remains stable, but vigilance is needed given heightened risks. Progress on strengthening bank resolution and risk-based supervision, stress-testing frameworks and contingency planning should be sustained.

Reform momentum in anticorruption and governance needs to be sustained. In particular, the authorities need to advance the creation of a new court for high public disputes, and amend the criminal procedure code."

[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 .