Ovunc Kutlu
March 22, 2023•Update: March 22, 2023
ISTANBUL
The International Monetary Fund (IMF) and the Ukrainian authorities have reached an agreement on a $15.6 billion loan program.
The new four-year Extended Fund Facility (EFF) arrangement aims to support the Ukrainian authorities' policies to sustain fiscal, external, price, and financial stability, support economic recovery, while promoting long-term growth in post-war reconstruction and Ukraine’s path to EU accession, the IMF said in a statement on late Tuesday.
IMF Mission Chief for Ukraine Gavin Gray said Russia's war led to Ukraine's economic activity contracting by 30% last year, as a large share of the capital stock has been destroyed, while poverty levels have climbed.
"Acute macroeconomic challenges persist due to the scale of the shock and the expansion of the fiscal deficit ... A gradual economic recovery is expected over the coming quarters, as activity recovers from the severe damage to critical infrastructure, although headwinds persist, including the risk of further escalation in the conflict," he added.
While the first phase of the program during the first 12-18 months aims to strengthen fiscal, external, price and financial stability, the second phase will target more expansive reforms in macroeconomic stability to support recovery and early reconstruction, according to the IMF.
In a separate statement on Tuesday, US Treasury Secretary Janet Yellen said that she welcomed the agreement and added: "An ambitious and appropriately conditioned IMF program is critical to underpin Ukraine’s reform efforts, including to strengthen good governance and address risks of corruption, and provide much needed financial support."
She said the agreement will also bolster the economic assistance of the US and its allies have provided to fund essential services like schools, hospitals, and first responders.
