The International Monetary Fund (IMF) has approved a $15.6 billion aid package to help rebuild the economy of conflict-hit Ukraine, the fund said.
According to the IMF, the Russian aggression has devastated Ukraine’s economy, with activity contracting by about 30% last year, destroying much of its capital stock and increasing poverty.
The 48-month Extended Fund Facility (EFF) program, approved by the fund’s board of directors, is worth approximately $15.6 billion.
This forms part of the IMF’s $115 billion aid package of debt relief, grants and loans from multilateral and bilateral agencies, the IMF confirmed at a press conference on Friday.
The IMF recently changed its rules to allow lending programs to countries facing “very high uncertainty”.
IMF Deputy Managing Director Gita Gopinath said in a statement that the new four-year plan aims to “support macroeconomic and financial stability and undertake important structural reforms in the face of ongoing war.”
Of the total amount approved by the IMF, $2.7 billion will be immediately provided to Ukraine, with the remaining funds to be released over the next four years.
More “ambitious structural reforms” to support sustained growth and post-war reconstruction and facilitate Ukraine’s path to EU membership among other goals will be left until the end of active fighting. she added.
The EFF Loan is the first major financing program approved by the IMF for a country embroiled in a major war. His previous $5 billion IMF program in Ukraine ended last year.
“Russian aggression in Ukraine continues to have a devastating economic and social impact,” said Gita Gopinath.
Nevertheless, the Ukrainian authorities “have been able to maintain overall macroeconomic and financial stability thanks to skillful policymaking and substantial external support,” she added.
At the same time, the IMF said governance needs to be improved to enable long-term post-war growth.
The program also includes additional assurances from some IMF members in case active fighting continues beyond the current estimate of mid-2024.
According to the IMF, if the current conflict continues through 2025, Ukraine’s financial needs will rise from $115 billion to about $140 billion.
Kiev had already agreed a loan program with international donors about two weeks ago. However, the agreement required board approval.
Ukraine is seeking a multi-billion dollar aid plan that has been preceded by months of negotiations.
Ukrainian President Volodymyr Zelensky welcomed the new funding.
“This will be an important help in the fight against Russian aggression,” he wrote on Twitter.
The agreement is expected to support large-scale financing of Ukraine from international donors and partners, such as the World Bank and other lenders.
IMF officials said the $115 billion package includes IMF loans, $80 billion in grants and loan pledges from other countries, and $20 billion worth of debt relief commitments. I was.
The IMF said multiple stakeholders, including international financial institutions, private companies and most of Ukraine’s official bilateral creditors and donors, support Ukraine’s two-step debt settlement process. . after the program.
“The risks to the EFF arrangement are very high,” Gopinath said. “The success of the program will depend on the size, composition and timing of external funding on concessional terms that will help close the fiscal and external funding gaps and proactively restore debt sustainability. It’s hanging.”