IMF Executive Board approved USD 15.6 billion for Ukraine under a New Extended Fund Facility (EFF) Program

Today, on March 31, the IMF Board approved a new four-year Extended Fund Facility (EFF) Program for Ukraine with financing in the amount of USD 15.6 billion (SDR 11.6 billion).

It is expected that Ukraine may receive the first tranche from the Fund in the near future. And its volume will be about USD 2.7 billion of direct budget funding.

The program includes two phases. The first phase, planned for 2023-24, will focus on implementing a robust budget for 2023 and increasing revenue mobilization, including by avoiding new measures that might erode tax revenues.

The first phase also provides inflation reduction and stability of exchange rate, including through maintaining adequate foreign exchange reserves. In addition, measures to promote long-term financial stability are expected, including by preparing a deeper assessment of the banking sector health and further promoting central bank independence.

At the same time, the Government of Ukraine undertakes to support and continue reforms to strengthen the system of governance and fight against corruption, including through amendments to legislation.

During the second phase of the program, the focus will be on reforms that will help to support post-war recovery and reconstruction as efficiently as possible, and will help Ukraine implement the necessary measures on the way to European integration. Long-term economic growth is also one of the priorities of the second phase of the EFF program.

It is planned that during the second phase, Ukraine will return to the pre-war policy framework, in particular, to a flexible exchange rate and inflation targeting. At the same time, there will be a focus on implementing essential structural reforms in fiscal policies to stabilize medium-term revenues by introducing a national revenue strategy, and also launching public finance management and introducing public investment management reforms that will aid in the post-war reconstruction process. To help the post-war reform endeavors, it is necessary to improve competition in the crucial energy sector, while reducing quasi-fiscal liabilities.

In turn, the Government of Ukraine commits to:

• strengthen policies that sustain fiscal, external, price and financial stability;

• support economic recovery while enhancing governance and strengthening institutions to promote long-term growth in Ukraine's post-war reconstruction and European integration path.

Despite the conditions of extremely high uncertainty in Ukraine, the EFF program is a pillar of cooperation with various international partners and paves the way for large-scale funding from donors, including the G7 countries and the European Union.

Minister of Finance of Ukraine Sergii Marchenko stated:

“We are grateful to the Fund's Board for the decision regarding the Extended Fund Facility Program for Ukraine. Unprecedented work was done to achieve the result, because this is an exceptional case of providing an IMF program to a warring country. The EFF program will significantly strengthen the economy and financial system, while facilitating the mobilization of additional financial resources from donors. Currently, Ukraine is at the beginning of a new stage of cooperation both with the International Monetary Fund and with partner countries.”