IMF Executive Board Completes Fifth Review of EFF Arrangement for Ukraine and Approves USD 1.1 Billion Disbursement

On 18 October 2024, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Ukraine’s Extended Fund Facility (EFF). he successful completion of this review unlocks immediate access to 834.9 million SDRs (equivalent to approximately USD 1.1 billion), which will go towards budget support. Following this disbursement, total IMF financing under the program will increase to around USD 8.7 billion.

According to the IMF's release, Ukraine’s performance under the EFF remains strong despite the challenges posed by the war. All end-June and continuous quantitative performance criteria and indicative targets were met. Additionally, all structural benchmarks for end-September were achieved, except for one benchmark that was postponed for valid reasons. Another two structural benchmarks were completed ahead of schedule. Furthermore, the Ukrainian authorities have implemented all prior actions for this review.

In the first half of 2024, Ukraine's economy proved more resilient than the IMF had anticipated, with continued growth. However, the IMF has revised its economic outlook for 2024-2025 downward, primarily due to ongoing russian attacks on Ukraine’s energy infrastructure and uncertainty surrounding the war. The IMF now expects real GDP growth of 3% in 2024, with growth in 2025 forecasted to range between 2.5% and 3.5%. However, risks to the outlook remain exceptionally high.

The IMF noted that the financial sector remained stable. To ensure continued resilience, the National Bank of Ukraine (NBU) will focus its efforts on strengthening banking regulation and supervision, as well as on planning for the case of materialization of adverse scenarios in view of the risks to the outlook.

Maintaining exchange rate flexibility will further enhance the economy’s resilience to external shocks. At the same time, with inflation accelerating, the scope for further monetary easing remains limited, stressed the IMF. It is important to approach FX controls easing gradually to safeguard Ukraine's international reserves.

“Russia’s war in Ukraine continues to bring a devastating social and economic toll on Ukraine. Despite the war, macroeconomic and financial stability is being preserved through skillful policymaking by the Ukrainian authorities as well as substantial external support. Ukraine’s financing needs remain large, driven by the continuing war. Timely and predictable external support—on terms consistent with debt sustainability—is essential to closing financing gaps and safeguarding stability,” said IMF Managing Director Kristalina Georgieva in her statement. 

Ukraine will also continue efforts to mobilize domestic revenue to cover rising expenditures, respond to shocks, and restore fiscal sustainability. It will require further tax policy measures as well as efforts to improve tax compliance and combat tax evasion, as envisioned under the National Revenue Strategy. The IMF emphasized in its statement that the authorities’ efforts to avoid monetary financing should continue.

The program remains fully financed with a cumulative external financing envelope of USD 151 billion in the baseline and USD 187 billion in the downside over the 4-year program period. It includes new commitments from the Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative.

“We are making effective progress in implementing the program, as demonstrated by its continuity—five successful reviews in just one and a half years is a record achievement. Throughout this time, we have maintained a high pace of reforms and upheld the quality of our efforts despite increasing challenges. The next program review is scheduled for December, and we are already working on the action plan outlined during the IMF’s September mission to Ukraine,” commented Andriy Pyshnyy, Governor of the National Bank of Ukraine, on the IMF's decision.