On 11 December 2023, the IMF Executive Board completed the 2023 Article IV consultation with Ukraine and approved the second review of the Extended Fund Facility (EFF) program.
The successful completion of the EFF second review involves the immediate allocation by the IMF of the third tranche – about USD 900 million (SDR 663.9 million) – to Ukraine. These funds will be used to finance Ukraine’s budget expenditures. The tranche will also support the country’s international reserves, reinforcing the NBU’s capability to ensure the sustainability of the exchange rate.
In addition, the program’s successful implementation preserves Ukraine’s access to the overall macroeconomic support package from international partners for the duration of the four-year program. It currently totals USD 122 billion.
The IMF leadership commended Ukraine’s progress in meeting its commitments under the EFF despite the challenges and hardship of the full-scale war.
Ukraine met all quantitative performance criteria for end-June and indicative targets for end-September. Most of the structural benchmarks for end-October were also completed on time, and several measures to meet other structural benchmarks were completed with a certain delay.
The IMF leadership once again highlighted the Ukrainian authorities’ commitment to pursue the reform agenda. Specifically, the Fund commended the country’s further progress in its fight against corruption and in public administration development.
The IMF emphasized that the sustained diligent implementation of structural reforms, including domestic resource mobilization, combined with timely and predictable international financing, is necessary to maintain macrofinancial sustainability. At the same time, it is important to press forward with institutional reforms and support reconstruction efforts, while promoting a green recovery as Ukraine makes its way to EU accession.
"The second review of the program has been completed successfully. Our key task within the IMF cooperation framework remains unchanged: to meet the commitments we made under the program. Ukraine needs this primarily to fortify its macrofinancial sustainability and raise the financing necessary for Victory and reconstruction. The IMF Executive Board’s decision also reaffirms international partners’ commitments and assurances regarding the maintenance of support for Ukraine in 2024 and beyond, including within the framework of the general aid package envisaged by the program," said NBU Governor Andriy Pyshnyy.
The IMF also emphasized that despite the war’s devastating impact, macroeconomic indicators came out better than expected.
The Ukrainian economy is showing extraordinary resilience. The latest data indicate a stronger-than-anticipated economic recovery, a sustained sharp decline in inflation, and the preservation of exchange rate sustainability, including since the NBU’s successful transition to managed flexibility of the exchange rate amid strong international reserves.
With this in mind, the IMF upgraded their forecast of Ukraine’s real GDP growth for 2023 to 4.5%, up from the 1%–3% estimate made in the course of the first review of the EFF. The IMF expects the pace of recovery to slow to 3%–4% in 2024, considering that the full-scale war drags on. At the same time, risks to economic growth remain significant due to extremely high uncertainty over the war.
The Article IV consultation focused on policy measures for strong, steady, and sustainable economic growth during post-war reconstruction, and on promoting Ukraine’s EU accession.
The parties primarily paid attention to macroeconomic policy measures. Those include a gradual return to the pre-war principles of monetary and FX policy, corporate governance reform, banking sector recovery, as well as climate change mitigation, which will make it possible to achieve sustainable economic growth and raise the standard of living in Ukraine.
The IMF Executive Board’s decision to approve the second review of the program was preceded by a Staff-Level Agreement (SLA) reached on 10 November 2023.
As previously reported, the IMF Executive Board on 31 March 2023 approved a four-year Extended Fund Facility arrangement for Ukraine. The program envisages measures to support fiscal, external, price, and financial stability and economic recovery in a period of high uncertainty, as well as to improve corporate governance and strengthen state institutions to facilitate Ukraine’s post-war reconstruction and EU accession.
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 the results of quarterly reviews. The total amount of IMF funds that Ukraine stands to receive this year will increase to SDR 3.3 billion (USD 4.5 billion) thanks to the successful second review of the program.