On 28 June 2024, the IMF Executive Board completed the fourth review of the Extended Fund Facility (EFF) program.
The successful approval of the fourth review of the program provides immediate access to SDR 1,669.82 million (about USD 2.2 billion in equivalent), which will be channeled for budget support. This will bring the total disbursements under the program to about USD 7.6 billion.
Despite the ongoing challenges of the war, the performance under the EFF program remains strong: all quantitative performance criteria were met and all structural benchmarks were implemented on time or with a short delay, underscoring Ukraine's continued commitment to its ambitious reform program, the IMF said.
All quantitative performance criteria for end-March were met, and a sustained reform momentum and timely disbursement of external support are needed to maintain macroeconomic stability, restore fiscal and debt sustainability, and strengthen institutional reforms on the path to EU accession.
The Ukrainian economy demonstrated greater resilience than expected in the first quarter of 2024, although outlook remains highly uncertain. This is evidenced by steady economic activity amid declining inflation and sufficient international reserves. At the same time, the outlook for the second half of the year and 2025 has worsened, mainly due to devastating attacks on Ukraine's energy infrastructure and high risks associated with uncertainty about the duration of the war. Vigilance against these risks is necessary to enable timely responses if shocks materialize, the IMF emphasizes. In view of these factors, the IMF expects the economic recovery to slow down in the second half of 2024.
Kristalina Georgieva, IMF Managing Director, praised skillful policymaking of the Ukrainian authorities and the adaptability of households and firms, which, together with sizable external financing, helped maintain macroeconomic and financial stability despite the fact that russia's invasion of Ukraine continues to have a devastating social and economic impact.
To meet Ukraine's financing needs, timely and predictable external disbursements are needed, along with maximum mobilization of domestic resources and careful liquidity management.
Therefore, fiscal policy for the rest of 2024, as well as preparations for 2025, should be based on steadfast revenue mobilization efforts aligned with the National Revenue Strategy. In this regard, measures that erode the tax base should be avoided and tax and customs administration together with the Economic Security Bureau of Ukraine (ESBU) strengthened. Further strengthening medium-term budgeting, fiscal risks and transparency, and public investment management should advance in support of these goals.
IMF staff also emphasized the importance of restructuring commercial external debt and restoring debt sustainability in line with the goals set out in the program. This should help create space for critical spending and bring the debt back to an acceptable level.
Maintaining the managed exchange rate flexibility will help strengthen the resilience of the economy to external shocks. Moreover, continued disinflation combined with well-anchored inflation expectations and FX cash market stability suggest scope for further monetary policy easing. Gradual easing of FX controls remains essential to safeguard FX reserves. Furthermore, the authorities should make efforts to avoid monetary financing.
The financial sector remains stable, the IMF underlines. Efforts should continue to strengthen bank resolution and supervision, governance, and contingency planning.
Steadfast reforms to enhance anti-corruption and governance frameworks, including ensuring the effectiveness of anticorruption institutions, remain essential to contain fiscal risks, secure donor confidence, enhance growth, and support the path to EU accession.
"This marks a significant milestone in our cooperation with the IMF. The Board's approval of the fourth review will make the EFF the most effective program for Ukraine among all IMF programs, marking the first time we have achieved so many successful reviews within a single program. The Ukrainian team is very professional, and the IMF's expert support is strong. We have all the components to be effective next time as well," said NBU Governor Andriy Pyshnyy.
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 and is part of a support package for Ukraine worth USD 122 billion.
Disbursements under the program are conditional on review results. This year, Ukraine may receive three disbursements for the total amount of SDR 3.3 billion (USD 4.5 billion). This year, Ukraine has already received one disbursement from the IMF in the amount of SDR 663.9 million (about USD 880 million). In total in 2024, Ukraine could receive four disbursements to the total amount of SDR 4 billion (USD 5.4 billion).