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Staff Level Agreement with IMF Reached on Third Review of Extended Fund Facility Arrangement

Staff Level Agreement with IMF Reached on Third Review of Extended Fund Facility Arrangement

The mission of the International Monetary Fund, which worked in Warsaw from 17 to 22 February 2024, has completed their work regarding the third review of the Extended Fund Facility (EFF) Arrangement for Ukraine.

"The IMF staff and the Ukrainian authorities have reached staff-level agreement (SLA) on the third review of the EFF Agreement. The SLA is subject to approval by the IMF Executive Board, with Board consideration expected in the coming weeks", said the IMF Mission Chief Gavin Gray.

Ukraine met all structural benchmarks and all but one quantitative performance criteria (i.e. a small miss of the floor on tax revenues due to border blockades). In view of this, the IMF Executive Board will consider disbursement of SDR 663.9 million (about USD 880 million).

During the mission, the IMF staff confirmed that the Ukrainian authorities remain committed to implementing structural reforms to maintain macroeconomic stability, support development goals, and pursue a path to EU accession. The upholding of macroeconomic and financial stability, together with substantial external financing, ensured a stronger-than-expected economic recovery last year. Based on 2023 performance, the IMF revised its GDP growth projections upwards from 4.5% to 5%. However, as the war continues and external financing is delayed, the IMF staff expects Ukraine's economic growth to slow to 3%–4% in 2024.

The financial system of Ukraine remains stable and liquid, though continued vigilance is warranted given war-related uncertainty. The IMF has underlined that the NBU’s recent Bank Resilience Assessment and its prompt action to close capital shortfalls have been welcome steps to preserve stability. Priorities ahead include strengthening supervision and financial safety nets, financial market infrastructure deepening, including of the payment system, and resume the regular resilience assessment and, when conditions allow, completing an independent asset quality review.

The IMF staff also noted that Ukraine's FX market remains resilient after the transition to a managed flexibility of exchange rate in October 2023. The easing of currency controls will remain an important task for the NBU's exchange rate policies. At the same time, each step in this direction will be taken in a balanced and gradual manner, in line with the Strategy for Easing FX Restrictions, Transitioning to Managed Flexibility of the Exchange Rate, and Returning to Inflation Targeting.

As before, in terms of fiscal policy, the Ukrainian authorities should focus their efforts on securing budget revenues and mobilizing financing on the domestic debt market. It is also important to prioritize government spending and refrain from the measures that adversely affect the revenue base. Further on, efforts will be made to restore the sustainability of public debt, thoroughly control fiscal risks, better target the state program Affordable Loans 5–7–9% and ensure the reliable implementation of the recently adopted law on corporate governance. 

"Timely disbursement of committed external support, projected at USD 38 billion in 2024, is critical for budget financing and sustaining macroeconomic stability," noted Gavin Gray.

"Another successful staff level agreement proves that the vector of our policy remains unchanged. We will continue to meet commitments we have made to reinforce Ukraine’s macrofinancial resilience, receive necessary financing from international partners, and bring the country’s EU accession closer. The ongoing full-scale war remains the key risk to the Ukrainian economy and financial system. At the same time, we have demonstrated our capability to act decisively and proactively in order to attain our goals," said NBU Governor Andriy Pyshnyy.

For reference

On 31 March 2023, the IMF Executive Board approved a four-year Extended Fund Facility arrangement for Ukraine. The EFF program is being implemented in two stages (wartime and post-war). It provides access to SDR 11.6 billion (equivalent to USD 15.6 billion) in IMF credit financing. 

Disbursements under the program are conditional on review results. In 2023, Ukraine received three disbursements to the total amount of SDR 3.3 billion (USD 4.5 billion). This year, Ukraine could receive four disbursements to the total amount of SDR 4 billion (USD 5.4 billion).

This arrangement is part of a baseline-scenario USD 122 billion total support package from international partners that is designated for Ukraine.


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