The International Monetary Fund (IMF) has approved a $15.6 billion bailout package for Ukraine to aid in the conflict-affected country’s economic recovery, the fund said.
The Russian invasion devastated Ukraine’s economy, causing activity to shrink by about 30 percent last year, destroying much of its capital stock and fueling poverty, the IMF said.
The 48-month Extended Fund Facility (EFF) program, approved by the fund’s board of directors, is valued at approximately $15.6 billion.
It forms the IMF’s portion of a total $115 billion bailout package consisting of debt relief, grants and loans from multilateral and bilateral institutions, the organization confirmed at a press conference on Friday.
The IMF recently changed its rules to allow lending programs for countries facing “exceptionally high uncertainty”.
The new four-year program aims to “anchor macroeconomic and financial stability and implement crucial structural reforms as the war continues,” IMF deputy general manager Gita Gopinath said in a statement.
Of the total amount approved by the IMF, $2.7 billion will be immediately made available to Ukraine, with the rest of the money to be released over the next four years.
The more “ambitious structural reforms” to support sustainable growth and reconstruction after the war, and to ease Ukraine’s path to EU accession, among other things, will be postponed until the active struggle has ended, she added.
The EFF loan is the first major financing program approved by the IMF for a country involved in a large-scale war. Ukraine’s previous $5 billion IMF program expired last year.
“Russian invasion of Ukraine continues to have devastating economic and social consequences,” said Gita Gopinath.
Despite this, the Ukrainian authorities “nevertheless managed to maintain overall macroeconomic and financial stability, thanks to skillful policymaking and substantial external support,” she added.
At the same time, governance needs to be improved to enable long-term growth after the end of the war, the IMF said.
The program also includes additional guarantees from some IMF members in case the active struggle continues beyond the current estimate of mid-2024.
If the current conflict continues into 2025, it would increase Ukraine’s financial needs from $115 billion to about $140 billion, the IMF said.
Kiev had already agreed on the loan program with international donors about two weeks ago. However, that agreement still had to be approved by the Executive Board.
Ukraine had applied for the billion-dollar aid program and months of negotiations preceded it.
Ukrainian President Volodymyr Zelenskyy welcomed the new funding.
“It is an important help in our fight against Russian aggression,” he wrote on Twitter. “Together we support the Ukrainian economy. And we move forward to victory!”
The agreement is expected to help unleash large-scale funding for Ukraine from international donors and partners, including the World Bank and other lenders.
An IMF official said the $115 billion package includes the IMF loan, $80 billion in grant and loan pledges from other countries, and $20 billion in debt relief pledges.
The IMF said multiple stakeholders, including international financial institutions, private sector companies and most of Ukraine’s official bilateral creditors and donors, support a two-step debt-handling process for Ukraine that includes adequate funding guarantees for debt relief and concessional financing during and after the crisis. program.
“The risks to the EFF scheme are exceptionally high,” said Gopinath. “The success of the program depends on the size, composition and timing of external financing on concessional terms to help close fiscal and external financing gaps and restore debt sustainability on a forward-looking basis.”