## UKRAINE: THIRD REVIEW OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR A WAIVER OF NONOBSERVANCE OF A PERFORMANCE CRITERION, AND MODIFICATIONS OF PERFORMANCE CRITERIA (content unit 1ukrea2024001)

## Source details

**Canonical URL:** [UKRAINE: THIRD REVIEW OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR A WAIVER OF NONOBSERVANCE OF A PERFORMANCE CRITERION, AND MODIFICATIONS OF PERFORMANCE CRITERIA (content unit 1ukrea2024001)](https://www.imf.org/-/media/files/publications/cr/2024/english/1ukrea2024001.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2024/english/1ukrea2024001.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2024/english/1ukrea2024001.pdf.json)

---

### Arrangement, program objectives, and staff action
- 48-month EFF arrangement with access of SDR 11.6 billion (equivalent to US$15.6 billion, or about 577 percent of quota), approved on March 31, 2023; part of a US$122 billion support package for Ukraine.
- Program aims:
  - Anchor policies to sustain fiscal, external, price and financial stability amid exceptionally high war-related uncertainty.
  - Support economic recovery.
  - Enhance governance and strengthen institutions to promote long-term growth in the context of reconstruction and Ukraine’s path to EU accession.
- Staff supports completion of the Third Review, enabling a purchase of SDR 663.9 million (33 percent of quota).

### Recent program performance and macroeconomic developments
- Compliance and program actions:
  - All but one quantitative performance criterion and all indicative targets for end-December were met.
  - All structural benchmarks through end-February were met.
  - Board approved authorities’ request for a waiver for non-observance of the December performance criterion on tax revenues missed by UAH 3.6 billion (less than 0.1 percent of GDP).
- 2023 outturns and early-2024:
  - Real GDP growth in 2023: 5 percent (0.5 pp above the Second Review projection).
  - Inflation: 26.6 percent end-2022; 5.1 percent y/y in December 2023; 4.3 percent y/y in February 2024.
  - Gross international reserves: US$38.5 billion (5 months of prospective imports) at end-January 2024.
  - Current account: deficit US$9.8 billion (5.5 percent of GDP) in 2023 (from surplus US$8 billion, 5 percent of GDP, in 2022).
  - Trade deficit 2023: US$28.8 billion (16.3 percent of GDP).
  - Banking sector: reported non-performing loan ratio fell to 36.7 percent in January 2024; deposits increased by 28 percent in 2023.
  - Monetary policy: cumulative Key Policy Rate cuts of 1,000 bps in 2023 (400 bps attributable to transition to a floor system in October 2023); transition to a managed float on October 3; exchange rate depreciated cumulatively 4.5 percent through end-February, spread between cash and official rates compressed below 5 percent.

### Fiscal stance, 2024 Budget, and execution measures
- 2024 Budget (anchor):
  - Budgeted expenditures: 57 percent of GDP.
  - Planned revenues excluding grants: 37 percent of GDP.
  - Overall balance excluding grants for 2024: UAH -1,562 billion (20.2 percent of GDP).
  - 2024 priorities: maintain full-year defense operations funding and appropriate social protection, including for veterans and IDPs.
- Liquidity and execution measures:
  - External budget support (including IMF) expected to be main source of budget funding in 2024, amounting to US$38.1 billion.
  - Domestic market issuance: raised US$0.4 billion net in January; plan net total domestic bond issuance of US$3.6 billion in 2024 to rebuild buffers.
  - Measures taken: bringing SOE dividends forward to February; mobilizing deposit buffers; postponed expenditures and requested advance tax payments (including estimated UAH 24 billion bank profit tax pre-payments).
  - Working group identified short-term revenue measures amounting to at least ½ percent of GDP ready for implementation if needed.

### Financing, debt sustainability, and restructuring strategy
- Financing gaps and assurances:
  - Cumulative baseline financing gap over the program period: US$121.8 billion.
  - Cumulative downside financing gap: US$140.6 billion.
  - Firm commitments in place for the next 12-month period (April 2024 through March 2025).
- Debt sustainability metrics and targets:
  - Public and publicly-guaranteed debt (baseline path highlights): 50.5 (2021); 78.4 (2022); 82.9 (2023); 94.0 (2024); 96.7 (2025); 95.9 (2026); 93.8 (2027) — percent of GDP (selected table entries).
  - Staff indicative targets: public debt of 65 percent of GDP by 2033 and aim to reach 82 percent of GDP by 2028; gross financing needs (GFNs) should average 8 percent of GDP in post-program period (2028–33); debt service flow relief on external obligations should aim to be 1–1.7 percent of GDP per year.
- Restructuring strategy:
  - External commercial debt: ongoing credible process; initial proposals to creditors expected shortly with intention to conclude restructuring by mid-year and ahead of expiry of the debt standstill in August 2024.
  - Official bilateral debt: Group of Creditors committed to a 2-stage process; first step extends debt standstill until 2027; definitive restructuring expected before final review.
  - Capacity-to-repay assurances retained at program approval; under baseline Fund credit peaks: stock of total Fund credit expected to peak at 8 percent of GDP and 35.8 percent of gross reserves in 2024; debt service to the Fund would peak at 1.8 percent of GDP and 8.6 percent of gross reserves in 2025.

### Monetary, exchange rate, and FX reserve policies
- Monetary policy:
  - Recent disinflation and well-anchored inflation expectations imply scope for further cuts in the KPR while maintaining positive real rates.
  - Floor-based operational framework adopted in October 2023; NBU to ensure standing facilities parameters are consistent with stance and consider longer maturities for liquidity absorption instruments.
  - Staff analysis: target real neutral rate around 3 percent over medium term; support inflation converging to NBU target of 5±1 percent over 2–3 years.
- Exchange rate and FX controls:
  - Transition to managed float important; increased exchange rate flexibility will help shock absorption.
  - Gradual, staged easing of FX controls consistent with NBU Strategy to safeguard FX reserves.
  - Three previously approved Multiple Currency Practices (MCPs) considered eliminated as of February 1.
- FX reserves:
  - Projected gross international reserves end-2024: US$42.1 billion (5.4 months of prospective imports), assuming gross external budget financing of US$38.1 billion (including Fund support).
  - Authorities intend to maintain adequate FX reserves through program; request to increase floor on NIR QPC for end-March 2024 in view of better-than-expected reserves.

### Financial sector resilience, supervision, and bank reforms
- NBU Resilience Assessment (December 2023; 20 largest banks, 91 percent of assets):
  - Identified aggregate capital shortfall of about US$130 million for three banks; US$127 million for two state-owned banks already addressed (Ukreximbank and Sense).
  - Forward-looking scenario identified US$428 million potential capital vulnerabilities for five banks; required capital management plans and compliance timeline: address negative equity gaps by September 2024 and fully return to regulatory compliance by March 2026.
  - NBU committed to an independent asset quality review (AQR) when conditions allow; align NPE definition with EU standards by end-April 2024; strengthen monitoring by end-December 2024.
- Privatization and state ownership:
  - MOF to submit updated SOB privatization draft law to Parliament by end-March 2024; appoint internationally recognized financial advisor by end-May 2024 to prepare Sense Bank and Ukrgasbank for sale.
  - Continuous SB proposed modification: all systemic banks with majority state ownership will fall under MOF responsibility; non-systemic nationalized banks transferred to DGF for resolution without fiscal recapitalization.
- Financial market infrastructure and oversight deliverables (selected deadlines):
  - Close gaps with international valuation standards and propose roadmap by end-March 2024.
  - Public database of real estate transaction prices and property price indexes by March-2024.
  - Strategy to support resumption of lending by end-May 2024; draft law for war insurance system by end-June 2024.
  - Implement supervisory risk assessment methodology by end-December 2024 (reset from end-June).

### Governance, anti-corruption, SOE corporate governance, and reconstruction governance
- Governance and anti-corruption:
  - Adoption of legislation to enhance SAPO autonomy and effectiveness (SB met end-December 2023).
  - Asset declarations publicly accessible again end-January 2024 and undergoing risk-based verification by NACP.
  - Further reforms to Criminal Procedural Code and High Anti-Corruption Court processes expected; some SBs timing reset to accommodate legislative workload.
- SOE corporate governance law (Law #5593-D adopted February):
  - Broadens powers of SOE supervisory boards; establishes competitive, transparent selection and independent evaluations; grants boards powers to appoint/dismiss CEOs and approve financial and strategic plans while preserving MOF gatekeeper role for key financial metrics.
  - Authorities to prepare SOE state ownership policy (SOP), dividend policy and privatization strategy; SOP planned end-October 2024 (SB reset from end-August to end-October 2024).
- Reconstruction governance and PIM:
  - Rapid Damage and Needs Assessment (RDNA-3) estimate: reconstruction costs US$486 billion (230 percent of pre-war GDP) over next decade.
  - PIM roadmap adopted end-December 2023; authorities to develop action plan and government decree linking MTBF, PIM and reconstruction priorities (SB end-December 2024).
  - Emphasis on transparency, digital PIM ecosystem, audits of reconstruction funds and projects.

### Program requests, modifications, and structural benchmark changes
- Authorities’ requests:
  - Waiver of non-observance of the floor on tax revenues for December (missed by UAH 3.6 billion).
  - Modifications of: (i) end-March QPC on the non-defense primary cash balance; (ii) end-March 2024 QPC on net international reserves to lock in better-than-expected performance.
  - Modifications/resets of SBs: modify continuous SB on treatment of banks with majority state ownership; reset SB on supervisory risk assessment methodology from end-June to end-December 2024; reset SB on SOE strategy end-August → end-October 2024; reset SB on anti-corruption end-March → end-April 2024.

### Risks, downside scenario, and contingency measures
- Key risks and likelihoods:
  - Intensification/prolongation of war: Likelihood High; Expected impact High.
  - Shortfalls in external financing: Likelihood High; Expected impact High.
  - Abrupt global slowdown: Likelihood Medium; Expected impact High.
  - Commodity price volatility; loss of export/transit corridors; social unrest; loss of reform momentum; deepening geoeconomic fragmentation — all highlighted with corresponding policy responses in the Risk Assessment Matrix.
- Downside scenario (Exceptionally High Uncertainty framework):
  - Assumes more intense war running into 2025 starting in 2024Q2.
  - Macro effects: Real GDP contraction of 4 percent in 2024 (versus baseline growth of 3–4 percent); zero growth in 2025; higher inflation; larger fiscal needs; impaired export capacity.
  - Updated cumulative financing gap in downside: US$140.6 billion (versus baseline US$121.8 billion).
  - Financing requirement in downside: additional financing in the form of highly concessional loans close to grant terms and further debt treatment.
  - Policy responses: prioritize rapid revenue measures, mobilize domestic financing, consider temporary FX controls and calibrated monetary/fiscal measures consistent with program parameters; spending contingent on highly concessional/grant external financing.

### Key selected economic and social indicators (selected years and exact values as presented)
- Nominal GDP (billions of Ukrainian hryvnias): 5,451 (2021); 5,191 (2022); 6,495 (2023); 7,748 (2024); 8,865 (2025); 9,841 (2026); 10,798 (2027).
- Real GDP (percent change): 3.4 (2021); -29.1 (2022); 5.0 (2023); [3 to 4] (2024); 6.5 (2025); 5.0 (2026); 4.5 (2027).
- Unemployment rate (ILO, period average, percent): 9.8 (2021); 24.5 (2022); 19.1 (2023); 14.5 (2024); 13.8 (2025); 11.6 (2026); 10.4 (2027).
- Consumer prices (period average): 9.4 (2021); 20.2 (2022); 12.9 (2023); 6.4 (2024); 7.6 (2025); 6.2 (2026); 5.2 (2027).
- Nominal wages (average): 20.8 (2021); 1.0 (2022); 20.1 (2023); 16.9 (2024); 15.9 (2025); 13.3 (2026); 10.5 (2027).
- General government fiscal balance (percent of GDP): -4.0 (2021); -15.7 (2022); -19.7 (2023); -13.7 (2024); -7.3 (2025); -4.7 (2026); -3.5 (2027).
- Public and publicly-guaranteed debt (percent of GDP): 50.5 (2021); 78.4 (2022); 82.9 (2023); 94.0 (2024); 96.7 (2025); 95.9 (2026); 93.8 (2027).
- Gross reserves (end of period, billions of U.S. dollars): 30.9 (2021); 28.5 (2022); 40.5 (2023); 42.1 (2024); 41.6 (2025); 45.1 (2026); 45.0 (2027).
- Memorandum items: Per capita GDP / Population (2017): US$2,640 / 44.8 million. Literacy / Poverty rate (2022 est): 100 percent / 25 percent.

### Staff appraisal summary and policy recommendations (near term and medium term)
- Immediate priorities:
  - Ensure timely and predictable disbursement of committed external financing to safeguard macroeconomic stability.
  - Strengthen domestic revenue mobilization (National Revenue Strategy adopted December 2023) while avoiding measures that erode the tax base.
  - Carefully manage liquidity in coming months and prepare the 2025 Budget to transition toward greater self-reliance while addressing high defense needs.
  - Continue monetary easing in line with disinflation and inflation expectations while maintaining positive real rates and guarding against monetary financing.
  - Gradual easing of FX controls in line with NBU Strategy; increase exchange rate flexibility to act as shock absorber.
  - Enhance financial sector preparedness: strengthen supervision, financial safety nets, conduct independent AQR when conditions allow, and unwind crisis measures prudently.
  - Maintain steadfast momentum on anti-corruption and governance reforms, operationalize SOE corporate governance law, and finalize SOP and dividend/privatization strategies.
- Medium-term focus:
  - Complete external commercial debt treatment on terms consistent with program parameters.
  - Deliver a revenues-based fiscal adjustment to restore fiscal and debt sustainability and aim for a medium-term primary surplus supported by revenue mobilization of 3–4 percent of GDP during 2024–27 (NRS target).
  - Strengthen PIM, MTBF, fiscal risk analysis, and SOE stress testing to contain fiscal risks during reconstruction.

*Source: IMF staff report for the Third Review under the Extended Arrangement for Ukraine (text and tables provided in the supplied content).*

### 663.9 million), which will be channeled for budget support.

### UKRAINE: THIRD REVIEW OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR A WAIVER OF NONOBSERVANCE OF A PERFORMANCE CRITERION, AND MODIFICATIONS OF PERFORMANCE CRITERIA

### Arrangement and program objectives
- 48-month EFF arrangement with access of SDR 11.6 billion (equivalent to US$15.6 billion, or about 577 percent of quota), approved on March 31, 2023, and part of a US$122 billion support package for Ukraine.
- Program aims:
  - Anchor policies to sustain fiscal, external, price and financial stability amid exceptionally high war-related uncertainty.
  - Support economic recovery.
  - Enhance governance and strengthen institutions to promote long-term growth in the context of reconstruction and Ukraine’s path to EU accession.
- Staff supports completion of the Third Review, enabling a purchase of SDR 663.9 million (33 percent of quota).

### Recent program performance and developments
- Compliance:
  - All but one quantitative performance criterion and all indicative targets for end-December were met.
  - All structural benchmarks through end-February were met.
  - Board approved authorities’ request for a waiver for non-observance of the December performance criterion on tax revenues, which was missed by a minor amount.
- Macroeconomic outturns in 2023:
  - Economy more resilient than expected with robust growth outturns, continued sharp disinflation, and maintenance of adequate reserves.
- Risks and headwinds:
  - Headwinds re-emerging in 2024; growth expected to soften to 3–4 percent due to war uncertainty and binding supply constraints.
  - Outlook subject to exceptionally high downside risks from war-related factors, potential shortfalls in external financing, and socio-economic impacts from policy responses to shocks.

### Managing risks and policy messages (from Managing Director statement and staff discussion)
- External financing:
  - Critical that external financing committed by donors is disbursed in a timely and predictable manner to safeguard macroeconomic stability.
  - External disbursements on appropriate concessional terms, together with strong domestic resource mobilization, are necessary to meet financing needs and secure fiscal and debt sustainability.
- Fiscal policy:
  - Strengthen revenue mobilization, underpinned by the recently approved National Revenue Strategy, while avoiding measures that erode the tax base.
  - Advance reforms in medium-term budget preparation, fiscal risks and transparency, and public investment management.
  - External commercial debt treatment in line with program parameters to create space for critical spending and restore debt sustainability.
- Monetary and exchange rate policy:
  - Recent shift to a managed exchange rate regime important; increased exchange rate flexibility will help strengthen resilience to external shocks.
  - Continued disinflation and well-anchored inflation expectations support further easing in monetary policy.
  - Gradual easing of FX controls, consistent with the National Bank of Ukraine’s strategy, to safeguard FX reserves.
  - Authorities’ efforts to avoid monetary financing should continue.
- Financial sector:
  - Financial sector remains stable; continue enhancing preparedness for strengthening financial safety nets, supervision, governance, and contingency planning.
  - NBU’s Resilience Assessment and prompt action to close capital shortfalls are welcome; medium-term priorities include strengthening supervision, financial safety nets, completing an independent asset quality review when conditions allow, and unwinding crisis measures.
- Governance and anticorruption:
  - Steadfast reform momentum to enhance anti-corruption and governance frameworks, including ensuring the effectiveness of anticorruption institutions, essential to contain fiscal risks, enhance growth and support EU accession.

### Focus of the review and policy priorities
- Fiscal policy:
  - 2024 Budget remains appropriate short-term anchor; careful liquidity management required for next several months.
  - Prepare 2025 Budget to gradually transition to greater self-reliance while addressing high defense needs and advancing medium-term budgeting, domestic revenue mobilization, and public investment management reforms.
- Financing:
  - Prompt disbursement of committed official support crucial for macroeconomic and financial stability.
  - External donor financing remains main source of budget funding in 2024, complemented by significant net financing from the domestic market.
  - Plans for external commercial debt treatment advancing and should be completed on terms consistent with program parameters.
- Monetary and exchange rate:
  - Given still high real interest rates, monetary policy easing can continue in line with disinflation and inflation expectations.
  - Transition to managed float has proceeded smoothly; greater exchange rate flexibility would strengthen role as shock absorber and help safeguard external stability.
  - Continue judicious, staged approach to liberalizing FX controls consistent with NBU Strategy.
- Financial regulation and supervision:
  - Continue vigilance given high uncertainty; focus on strengthening supervision and financial safety nets, completing independent asset quality review when conditions allow, and unwinding crisis measures.
- Governance:
  - Passage of law reforming SOE corporate governance paves way for SOE State Ownership Policy.
  - Further reforms to the Criminal Procedural Code would enhance effectiveness of anti-corruption investigations.

### Program issues, requests, and reform progress
- Requests by authorities:
  - Waiver of non-observance of the floor on tax revenues for December (missed by a minor amount).
  - Modifications of: (i) end-March QPC on the non-defense primary cash balance of the general government (excluding budget support grants); and (ii) end-March 2024 QPC on net international reserves (NIR) to lock in better-than-expected performance.
  - Modifications/resets of structural benchmarks: (i) modify continuous SB on treatment of banks with majority state ownership; (ii) reset SB on supervisory risk assessment methodology from end-June to end-December 2024; (iii) reset SB on SOE strategy from end-August to end-October 2024; (iv) reset SB on anti-corruption from end-March to end-April 2024.
- Structural benchmark achievements through end-February:
  - Adopted the National Revenue Strategy (NRS).
  - Reviewed public investment management procedures and generated a roadmap of future measures.
  - Adopted legislation to enhance institutional autonomy and effectiveness of SAPO.
  - Identified short-term revenue measures based on working group proposals.

### Key selected economic and social indicators (2021–27, as presented)
- Nominal GDP (billions of Ukrainian hryvnias): 5,451 (2021); 5,191 (2022); 6,495 (2023); 7,748 (2024); 8,865 (2025); 9,841 (2026); 10,798 (2027).
- Real GDP (percent change): 3.4 (2021); -29.1 (2022); 5.0 (2023); [3 to 4] (2024); 6.5 (2025); 5.0 (2026); 4.5 (2027).
- Contributions to Real GDP (percent): Domestic demand 12.9 (2021), -23.7 (2022), 8.6 (2023), 3.3 (2024), 5.3 (2025), 3.8 (2026), 3.4 (2027).
- Unemployment rate (ILO definition; period average, percent): 9.8 (2021); 24.5 (2022); 19.1 (2023); 14.5 (2024); 13.8 (2025); 11.6 (2026); 10.4 (2027).
- Consumer prices (period average): 9.4 (2021); 20.2 (2022); 12.9 (2023); 6.4 (2024); 7.6 (2025); 6.2 (2026); 5.2 (2027).
- Consumer prices (end of period): 10.0 (2021); 26.6 (2022); 5.1 (2023); 8.5 (2024); 7.0 (2025); 5.5 (2026); 5.0 (2027).
- Nominal wages (average): 20.8 (2021); 1.0 (2022); 20.1 (2023); 16.9 (2024); 15.9 (2025); 13.3 (2026); 10.5 (2027).
- Real wages (average): 10.5 (2021); -16.0 (2022); 6.4 (2023); 9.8 (2024); 7.8 (2025); 6.7 (2026); 5.0 (2027).
- Savings (percent of GDP): 12.5 (2021); 17.6 (2022); 10.8 (2023); 11.9 (2024); 10.8 (2025); 13.5 (2026); 16.2 (2027).
  - Private savings: 12.7 (2021); 30.8 (2022); 25.8 (2023); 23.4 (2024); 13.7 (2025); 13.8 (2026); 14.8 (2027).
  - Public savings: -0.2 (2021); -13.2 (2022); -14.9 (2023); -11.5 (2024); -2.9 (2025); -0.2 (2026); 1.4 (2027).
- Investment (percent of GDP): 14.5 (2021); 12.6 (2022); 16.3 (2023); 17.6 (2024); 19.0 (2025); 20.5 (2026); 21.3 (2027).
  - Private investment: 10.7 (2021); 10.1 (2022); 11.5 (2023); 15.4 (2024); 14.5 (2025); 16.0 (2026); 16.4 (2027).
  - Public investment: 3.8 (2021); 2.5 (2022); 4.8 (2023); 2.3 (2024); 4.5 (2025); 4.5 (2026); 4.9 (2027).
- General government fiscal balance (percent of GDP): -4.0 (2021); -15.7 (2022); -19.7 (2023); -13.7 (2024); -7.3 (2025); -4.7 (2026); -3.5 (2027).
- Fiscal balance, excl. grants (percent of GDP): -4.0 (2021); -25.0 (2022); -26.3 (2023); -20.2 (2024); -10.3 (2025); -6.0 (2026); -4.7 (2027).
- External financing (net, percent of GDP): 2.4 (2021); 10.8 (2022); 16.6 (2023); 11.8 (2024); 6.5 (2025); 3.5 (2026); 0.4 (2027).
- Public and publicly-guaranteed debt (percent of GDP): 50.5 (2021); 78.4 (2022); 82.9 (2023); 94.0 (2024); 96.7 (2025); 95.9 (2026); 93.8 (2027).
- Gross reserves (end of period, billions of U.S. dollars): 30.9 (2021); 28.5 (2022); 40.5 (2023); 42.1 (2024); 41.6 (2025); 45.1 (2026); 45.0 (2027).
- Current account balance (percent of GDP): -1.9 (2021); 5.0 (2022); -5.5 (2023); -5.7 (2024); -8.2 (2025); -7.0 (2026); -5.1 (2027).
- Goods exports (annual volume change in percent): 35.0 (2021); -43.8 (2022); -16.1 (2023); 18.5 (2024); 2.6 (2025); 15.8 (2026); 7.0 (2027).
- Goods imports (annual volume change in percent): 17.0 (2021); -24.7 (2022); 21.1 (2023); 11.0 (2024); 9.2 (2025); 9.3 (2026); 10.0 (2027).
- Exchange rate (Hryvnia per U.S. dollar, end of period): 27.3 (2021); 36.6 (2022); 38.0 (2023).
- Memorandum items:
  - Per capita GDP / Population (2017): US$2,640 / 44.8 million.
  - Literacy / Poverty rate (2022 est): 100 percent / 25 percent.

### Outlook summary from Executive Summary and staff
- 2024 outlook:
  - Recovery expected to continue at a slower pace in 2024 due to liquidity strains and weaker sentiment.
  - Temporary pick-up in inflation expected.
  - Fiscal deficit to remain large; stable FX reserves projected provided committed external financing is disbursed in full.
  - Headwinds to growth expected to be temporary assuming the war winds down by end-2024; medium-term macroeconomic framework little changed on back of EU accession path.
- Downside risks:
  - Exceptionally high due to war-related uncertainties, potential shortfalls in external financing, and socio-economic impacts of policy responses if shocks materialize.

*Source: IMF staff report for the Third Review under the Extended Arrangement for Ukraine (text and tables provided in the supplied content).*

### 1.      Russia’s war in Ukraine continues to have a devastating social and economic impact

### 1.      Russia’s war in Ukraine continues to have a devastating social and economic impact

### Human and economic devastation
- Thousands killed or injured and millions displaced internally and as refugees.
- Output remains 25 percent below pre-war levels.
- Productive capacity in agriculture and key industries is “severely compromised.”
- Energy infrastructure suffered heavy damage in winter 2022 but has been more resilient in recent months.
- Rapid Damage and Needs Assessment estimates reconstruction costs at US$486 billion (230 percent of pre-war GDP) over the next decade.

### External support and financing developments
- External budget support (including the IMF) amounted to US$42½ billion in 2023.
- European Council agreement on the €50 billion Ukraine Facility on February 1 is noted as a significant positive development; flows expected to resume in March.
- Protracted approval process of budget support from the United States poses liquidity challenges.
- Border blockades in neighboring countries disrupted trade flows and tax collections late in the year.
- Recent shortfalls and delays in aid flows through February contributed to financing uncertainty.

### Recent economic developments and program performance (late 2023–early 2024)
- Real GDP growth in 2023 estimated at 5 percent (0.5 pp above the Second Review projection); sequential recovery expected to continue into early 2024 at a slower pace.
- Inflation developments:
  - December 2023: 5.1 percent y/y (down from 26.6 percent in end-2022).
  - February 2024: 4.3 percent y/y.
- External sector:
  - Current account swung to a deficit of US$9.8 billion (5.5 percent of GDP) in 2023, from a surplus of US$8 billion (5 percent of GDP) in 2022.
  - Trade deficit doubled to US$28.8 billion (16.3 percent of GDP) in 2023.
  - Gross international reserves: US$38.5 billion (5 months of prospective imports) at end-January 2024.
- Banking sector:
  - Banks’ claims on the private sector remain below pre-war levels but the annual pace of contraction has declined.
  - Reported non-performing loan ratio fell to 36.7 percent in January 2024.
  - Deposits increased by 28 percent in 2023.
- Monetary and exchange rate policy:
  - National Bank of Ukraine cut the Key Policy Rate by a cumulative 1,000 bps in 2023 (400 bps attributable to the transition to a floor system in October 2023).
  - Transitioned to a managed float on October 3; exchange rate depreciated cumulatively 4.5 percent through end-February, with two-way movements and sizable NBU FX sales; spread between cash and official rates compressed below 5 percent.
- Fiscal execution:
  - Tight control over non-defense expenditures contained overall deficit relative to the Second Review baseline.
  - Ramp up in domestic market issuance in Q4 helped accumulate a modest cash buffer going into 2024.
- Program performance:
  - Authorities met all but one of the QPCs for end-December 2023.
  - Missed QPC on tax revenues (excluding social security contributions) by UAH 3.6 billion (less than 0.1 percent of GDP).
  - Other QPCs/ITs met, including net international reserves, non-defense primary balance, floor on social spending, ceilings on budgetary arrears and government borrowing from the NBU.
- Structural reforms:
  - All four SBs through end-February met, including:
    - Review of public investment management procedures and roadmap.
    - Adoption of the National Revenue Strategy.
    - Identification of potential short-term revenue measures from the revenue working group.
    - Adoption of legislation to enhance institutional autonomy and effectiveness of the Specialized Anti-corruption Prosecutor’s Office (SAPO).

### Key statistics (as reported)
- Output still 25 percent below pre-war levels.
- Reconstruction costs: US$486 billion (230 percent of pre-war GDP).
- External budget support in 2023: US$42½ billion.
- 2023 real GDP growth: 5 percent.
- Inflation: 26.6 percent end-2022; 5.1 percent y/y in December 2023; 4.3 percent y/y in February 2024.
- Current account 2023: deficit US$9.8 billion (5.5 percent of GDP); 2022 surplus US$8 billion (5 percent of GDP).
- Trade deficit 2023: US$28.8 billion (16.3 percent of GDP).
- Gross international reserves end-January 2024: US$38.5 billion (5 months of prospective imports).
- Reported non-performing loan ratio January 2024: 36.7 percent.
- Deposits growth in 2023: 28 percent.
- Cumulative KPR cuts in 2023: 1,000 bps (400 bps due to floor system transition).
- Exchange rate cumulative depreciation since October 3 through end-February: 4.5 percent.
- QPC miss on tax revenues: UAH 3.6 billion (less than 0.1 percent of GDP).

### Outlook and scenarios
- Baseline 2024 projections and expectations:
  - 2024 growth: projected at the lower end of the 3–4 percent range.
  - Inflation forecast for 2024: 8.5 percent.
  - Baseline overall deficit excluding grants for 2024: UAH 1,562 billion (20.2 percent of GDP).
  - Current account 2024: expected to widen slightly to 5.7 percent of GDP (from 5.5 percent in 2023).
  - Gross international reserves projected end-2024: US$42.1 billion (5.4 months of prospective imports), assuming gross external budget financing of US$38.1 billion (including support from the Fund).
  - Credit: moderate expansion expected in 2024 supported by subsidized lending programs (5-7-9 and eOselya), credit guarantees, and revived loan demand.
- Medium-term outlook:
  - Broadly unchanged relative to the Second Review, supported by assumption of an end to the war by end-2024 and an expansive structural reform agenda (including the Ukraine Plan and path to EU accession).
- Downside scenario (Exceptionally High Uncertainty framework):
  - Assumes a more intense war running into 2025 starting in 2024Q2.
  - Output contraction reaches 4 percent in 2024 compared with baseline growth of 3–4 percent.
  - Downside features higher inflation in 2024, slower return of inflation to target, larger fiscal spending needs, and impaired export capacity.
  - Downside assumes added donor financing relative to the baseline for the duration of the war, commensurate with that at program approval.

### Risks and enterprise risks
- Key risks:
  - Major shortfalls or prolonged delays in external financing could force prompt countermeasures, weaken confidence, further dampen growth, and be potentially destabilizing.
  - Intensification or prolongation of the war could increase defense spending needs and open financing gaps.
  - Sub-optimal policy responses (e.g., accumulation of budgetary arrears, social spending cuts) could provoke negative sentiment and social unrest.
- Enterprise risks to the Fund:
  - Financial risks partially mitigated by:
    - EU’s €50 billion Ukraine Facility approval (February).
    - Ukraine’s adequate FX reserves position.
    - Additional safeguards from capacity to repay assurance required under EHU policy.
  - Business risks mitigated by strong implementation of UCT-standard conditionality and greater-than-expected economic resilience.
  - Reputational risks if the Fund does not continue assisting a member with large BoP needs that has shown strong commitment to program policies.

### Policy priorities and discussions (near term)
- Near-term policy focuses:
  - Adapting near-term fiscal policies to manage liquidity amid aid delays.
  - Identifying strategies to respond to potential shocks.
  - Calibrating monetary and exchange rate policies to maintain stability.
  - Advancing critical structural reforms in fiscal policy, the financial sector, anti-corruption, and governance to improve prospects, contain risks, and prepare for a gradual winding down of external assistance.
- Specific policy achievements and tools:
  - Tight control on non-defense expenditures to contain deficit.
  - Domestic market issuance to build cash buffer.
  - Subsidized lending initiatives (5-7-9 and eOselya) to support credit.
  - Ongoing structural reform steps including SAPO enhancement and revenue strategy adoption.

*Source: IMF staff estimates.*

### 13.      The 2024 Budget, as adopted last November, remains the fiscal anchor. Budgeted

### 1ukrea2024001 - 13.      The 2024 Budget, as adopted last November, remains the fiscal anchor. Budgeted

### Fiscal stance and 2024 budget composition
- Budgeted expenditures: 57 percent of GDP, reflecting core priorities including maintaining defense operations for a full-year and appropriate social protection, including for veterans and IDPs; other expenditure categories are being tightly constrained.
- Planned revenues excluding grants: 37 percent of GDP, reflecting several revenue measures, including the one-time bank profit tax on last year’s extraordinary bank earnings.
- Overall deficit excluding grants: expected to narrow only a little from last year.

### Budget execution: liquidity, measures taken, and tradeoffs
- Major execution challenge: volatility in the disbursement of committed external financing.
- Expected sizable external financing (including from the EU’s Ukraine Facility) is expected to arrive in March and will substantially improve liquidity.
- Measures taken to execute the budget in line with available resources:
  - SOE dividends: several planned payments of SOE dividends were brought forward to February.
  - Domestic market issuance and deposit utilization: raised US$0.4 billion on net from the domestic bond market (a 200 percent rollover rate) in January; mobilized additional net financing through mid-February; government deposit buffers will continue to be deployed as needed.
  - Expenditure postponements and tax pre-payments: postponed expenditures and requested advance tax payments, including those related to the bank profit tax (the latter estimated at about UAH 24 billion).
- Tradeoffs and risks: these measures can cause unpredictable budget implementation, diminish tax transparency, and entail economic disruption. Further delays in external financing would likely require resort to suboptimal measures.

### Contingency and short-term domestic response
- Any deviations from the 2024 Budget will likely require an offsetting domestic effort, given limits to further external financing.
- Authorities will need to either further mobilize domestic financing or identify new adjustment measures.
- A working group has identified short-term revenue measures amounting to at least ½ percent of GDP that could be quickly implemented if needed (¶23).

### Medium-term fiscal outlook and required adjustments
- 2025 Budget: will need to internalize continuing risks and involve greater self-reliance to meet expenditure priorities (MEFP ¶14).
- Even if the war winds down at the end of 2024 in the baseline, substantial needs for defense, reconstruction, social protection, and economic development will persist while external budget support is expected to scale down sharply.
- Medium-term objective: restore fiscal and debt sustainability by reducing public debt and gross financing needs to more manageable levels while creating space for priority spending.
- Key interrelated fronts for restoring sustainability:
  - (i) securing debt treatments (¶50),
  - (ii) achieving a prudent borrowing mix,
  - (iii) undertaking substantive medium-term fiscal adjustment.
- Medium-term fiscal adjustment emphasis: focus primarily on the revenue side; a medium-term primary surplus is needed.

### Revenue policy directions and constraints
- Revenue measures and reforms contemplated:
  - Aligning VAT and excise taxes with the EU acquis.
  - Reforms to taxation of the extractive sector and environmental taxes.
  - The authorities warned measures to introduce progressivity in income taxation now could encounter enforcement problems prior to reforms to improve integrity and build trust in tax authorities (¶24).

### 2024 financing strategy and domestic issuance needs
- External budget support (including the IMF) expected to be the main source of financing in 2024, amounting to US$38.1 billion.
- Despite external support, positive net domestic financing still needed; authorities should end the year with a net zero use of deposits and net total domestic bond issuance of US$3.6 billion to rebuild buffers used earlier in the year.
- Obtaining flow relief from the external commercial debt restructuring could help lower interest financing pressures and support burden sharing.

### Domestic market considerations and debt management
- Domestic instruments must remain attractive to maintain local market appetite.
- Banks are the main holders of domestically issued debt, have ample liquidity, expanding balance sheets, limited alternative investments, and their government exposures are below recent peaks—suggesting capacity to purchase debt.
- Authorities should monitor market developments, conduct outreach with major market participants, and adapt issuance plans (maturity, currency) to match market demand.
- Continue strengthening treasury cash and liquidity management and debt management:
  - Improve liquidity forecasting and cash management (supported by IMF TA, MEFP ¶21).
  - Enhance coordination across Ministry of Finance, Liquidity Management Department, State Treasury, NBU, and Debt Management Agency (DMA).
  - Strengthen training and staffing of the DMA and update the Medium-Term Debt Strategy promptly after the external commercial debt restructuring.

### Monetary financing stance
- Monetary financing should remain a last resort and be governed by a robust framework.
- Avoidance of monetary financing during the program has supported macroeconomic stability.
- Baseline: no monetary financing envisaged (Indicative Target), although limited amounts could be obtained if there were a shortfall in external financing.
- Priority: finalize the framework governing the use of such financing in line with the program and the IMF’s Safeguards Assessment; MOF and NBU discussions should continue promptly to resolve remaining issues.

### Fiscal structural reforms — short-term measures and National Revenue Strategy (NRS)
- Short-term revenue readiness:
  - Working group established in December 2023 has identified a menu of measures yielding at least ½ percent of GDP (end-February 2024 Structural Benchmark).
  - The working group will continue beyond its initial mandate to explore temporary and permanent revenue measures, with permanent measures to be consistent with the NRS.
- National Revenue Strategy (NRS) (adopted December 2023 — end-December 2023 Structural Benchmark):
  - Objective: generate revenues sufficient for post-war development while maintaining fiscal and debt sustainability.
  - Key principles:
    - Strengthening buy-in: revamp MOF outreach to government agencies, donors, private sector, and civil society.
    - Sequencing (bolstering integrity and improving trust): start reforms by strengthening integrity, reducing administrative and political discretion, and building trust in STS and SCS.
    - Areas of focus: reform of overly broad and generous simplified regimes; equity-focused reforms (e.g., more progressive personal income tax); revenue-enhancing alignment with EU directives (VAT and excise); extractive industries’ rent payments.
    - Broad assessment of tax privileges: on track to prepare an assessment to arrive at a unified reform approach (Structural Benchmark, end-July 2024).
    - Reforms to meet post-war needs: developing a package of post-war tax policy measures including carbon emissions taxation, extractive industries’ taxation options, and principles for taxation of virtual assets to align with EU rules (MEFP ¶25). IMF and other partners to provide TA.

### Tax administration, STS and SCS reforms, and integrity measures
- Strengthen operational effectiveness, trustworthiness, and integrity of STS and SCS (MEFP ¶24, ¶26):
  - STS actions by end-2024: prepare a long-term Digital Development Plan including measures to enhance confidentiality of tax data; progress on organizational restructuring for compliance risk management (CRM); enhance electronic data submission; revamp e-audit; strengthen information exchange with foreign partners.
  - SCS actions: adopt legislation to reinstate post-clearance customs audit by end-April 2024; consider criminalization of large-scale customs fraud and smuggling in conjunction with progress on the ESBU; HR work continues but is slower than expected.
  - Both STS and SCS to develop criteria for assessing Anti-Corruption Programs and pursue legislative changes to combat tax evasion and strengthen international collaboration.

### Economic Security Bureau of Ukraine (ESBU) reform
- Legislation prepared to reform the ESBU (Structural Benchmark, end-June 2024):
  - Clarify ESBU mandate and investigative powers; focus ESBU on major economic crimes; maintain delineation between ESBU and NABU investigative powers.
  - Legislation to establish legal basis through clear procedures for selecting management, include experts with international experience in selection committees, establish a disciplinary committee, and develop re-attestation mechanisms after appointment of new ESBU head.
  - Emphasize coordination with MOF and enhance ESBU analytical capacity.

### Restoring the Medium-term Budget Framework (MTBF)
- MOF progress: diagnostic review of pre-war MTBF policies and practices relative to best practices (Structural Benchmark, end-October 2024). First gap analysis completed with IMF TA identifying gaps in:
  - (i) expenditure baseline estimates;
  - (ii) costing of new policies;
  - (iii) computing budget space and updating expenditure limits;
  - (iv) subnational governments and social funds;
  - (v) multi-year commitments;
  - (vi) alignment with the EU fiscal governance framework in light of EU accession.
- Pilot application: MOF will pilot key findings for the 2025-2027 budget declaration; key spending units asked to identify main factors feeding into baseline cost estimates to improve costing of new policies and bottom-up PFM processes (MEFP ¶28).

### Fiscal transparency, fiscal risks, and special funds
- Progress on fiscal risks assessment and transparency:
  - Strengthened fiscal risk statement attached to the 2024 Budget; steps to undertake more rigorous fiscal risk analysis for future budgets.
  - As part of 2025–2027 budget declaration preparations, MOF requested line ministers and key spending units to identify main fiscal risks for inclusion in the medium-term budget.
  - Plans to include consolidated financial performance analysis and stress testing across major SOEs, strengthened with recent IMF TA.
  - Work to identify major public companies severely affected by the war and prepare an assessment of their potential fiscal and quasi-fiscal costs (Structural Benchmark, end-September 2024), supported by IMF TA and linked to the SOE corporate governance law.
  - Developing methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including PPPs, guarantees, and SOEs, in coordination with MOE and other line ministries.
  - With IMF TA, MOF will finalize development of risk-based fees for guarantees and prepare amendments to the existing decree; IMF TA mission expected in April–May 2024.
  - Special funds: Fund for the Liquidation of the consequences of the Armed Aggression will continue supporting restoration of restored and damaged property as stipulated in the 2024 Budget; since July 2023 MOF has published information about sources and usage of funds on special accounts donated by private individuals and legal entities.

### Business Development Fund (BDF) and 5-7-9 program
- Further progress needed to strengthen the BDF business model and 5-7-9 program (MEFP ¶31, ¶32).
- Achievements and planned actions:
  - Adopted a draft concept note on BDF governance and a proposal to strengthen the 5-7-9 program design, including phasing out large company eligibility and commissioning an independent assessment of BDF and its support programs.
  - Authorities will strengthen the concept note before final approval by end-March 2024 (Structural Benchmark, end-March 2024).
  - BDF to remain subordinated to MOF but measures to strengthen governance and financial self-sustainability will be taken; lending programs to be targeted and time bound; risk of political interference to be eliminated.
  - Legal framework for establishing an independent supervisory board to be enacted by end-September 2024, providing an operational budget for BDF.

*Source: International Monetary Fund.*

### 30.      Immediate measures should be taken to ringfence the potential fiscal and financial

### Immediate measures should be taken to ringfence the potential fiscal and financial sector risks related to the 5-7-9 loan program

### Risks and immediate actions for the 5-7-9 loan program
- Current budget cost from subsidized lending is still less than 0.3 percent of GDP.
- Underlying portfolio has expanded rapidly, creating potential for swift changes in fiscal exposure.
- Issues warranting attention:
  - A backlog of bank compensations has accumulated, including due to delays in program budget submissions from the MOE, which is expected to clear starting end-March 2024.
  - Delays in compensation should be avoided given the potential impact on banks’ trust in government commitments and the 5-7-9 program.
  - Frequent revisions to program terms and conditions have expanded program eligibility amid a constrained budget envelope.
    - To mitigate overspending risk, strengthen criteria for targeting the program to micro- and SMEs.
    - Authorities should refrain from making the program a flagship post-reconstruction lending facility, as this may impede the resumption of market-based lending.
  - Clarify roles of MOE and MOF:
    - MOE should maintain responsibility for identifying priority sectors for SMEs.
    - MOF should be responsible for controlling and monitoring spending under the program.
  - Medium-term and annual budget declarations should continue to establish the spending envelope for subsidized interest to avoid risks of overspending.

### Public Investment Management (PIM) — action plan and objectives
- Authorities committed to developing an action plan for PIM (Structural Benchmark, end-December 2024).
  - Will build on the recently finalized roadmap (Structural Benchmark, end-December 2023) and include a government decree with a specific action plan and timeline linking the MTBF and national reconstruction priorities.
- The action plan will:
  - Establish clear institutional links between the MTBF, PIM and reconstruction priorities, bolstering the MOF’s gatekeeper role at all relevant stages of the public investment cycle (verifying that projects proposed for budget funding have passed necessary screening and approval processes) to mitigate fiscal and debt sustainability risks.
  - Help strengthen coordination between the MOF, MOE and Ministry of Infrastructure and other line ministries responsible for project execution.
  - Provide clear guidance on strengthening public investment management policies in line with best practices for capital budgeting and inclusion of PIM in multi-annual budget planning and the MTBF (MEFP ¶34), following principles of budget unity, coherence, and predictability.
  - Confirm the MOF’s role as ‘gatekeeper’ to the budget, verifying that projects proposed for budget funding have passed through necessary screening and approval processes.

### The “Gatekeeper Role” — MOF functions and powers
- The “gatekeeper” is an institution with legal and administrative powers to identify and prevent risks at each stage of occurrence; in public finance the MOF is usually assigned this role to identify and ringfence risks to debt and fiscal sustainability.
- MOF policy functions and corresponding regulatory/implementation powers listed:
  1. Fiscal policy analysis/ policy formulation and fiscal rules — Monitor compliance with rules, spending ceilings and performance targets
  2. Formulation of the medium-term (MT) budget framework and annual budget — Coordinate the budget cycle; ensure budget unity and predictability
  3. Debt management strategy — Regulate markets, and coordinate with the central bank
  4. Tax and other revenues policy — Elaborate tax policies and enforcing tax laws
  5. Public investment strategy, planning, policies, and regulations/guidelines — Check for risks through stages of the public investment cycle, including contingent liabilities (e.g., guarantees, PPPs)
  6. Policies on public procurement and PPPs — Focus on value for money at feasibility stage, procurement policies, and monitoring implementation
  7. Budget execution — Design and issue policies, guidelines, instructions for commitments control and monitor expenditure execution
  8. Fiscal risks, guarantees, ringfencing risks from SOEs — Elaborate policies on SOE financial management, monitor implementation, undertake stress tests and analysis
  9. Cash forecasting, liquidity management — Align budget execution and debt management with cash and liquidity management in coordination with the central bank
- OECD context: MOF core functions primarily include categories 1–4, 7–9; about half of OECD countries lead on public investment strategy and PPPs while the rest limit the MOF’s role to budgets, unity and predictability.
- Recommendation: Establish checks and balances with one institution—normally the MOF—entrusted with powers to safeguard fiscal and debt sustainability and ensure safeguarding functions are well defined and implemented.

### Monetary and Exchange Rate Policies
- High real interest rates and well anchored inflation expectations suggest scope for further policy rate cuts.
  - In January, the NBU opted to maintain the KPR at its current level citing elevated risks and the need to maintain moderate inflation and support FX market stability.
  - Staff analysis using a quarterly projections model (QPM) supports that reducing interest rates, while maintaining an overall tight monetary stance with rates approaching the real neutral rate of around 3 percent over the medium term, would support inflation converging towards the NBU’s target of 5±1 percent over the NBU’s forecast horizon (2–   3 years).
- Operational framework:
  - The floor-based monetary policy operational framework is appropriate given high liquidity; in October 2023 the NBU moved to a floor-based framework from a corridor system, aligning the de jure KPR with the de facto main instrument (the overnight CD).
  - Near-term: NBU should ensure standing facilities parameters are consistent with the monetary policy stance and assess potential impact on demand for government bonds.
  - Consider longer maturity for main liquidity absorption instruments to enhance transmission and sterilization effectiveness.
- Exchange rate and FX policies:
  - Under the managed exchange rate regime, greater flexibility would help the exchange rate serve as a shock absorber; greater flexibility combined with calibrated FX interventions would increase shock absorption while safeguarding reserves.
  - Easing of FX controls should continue gradually and staged in line with the FX liberalization roadmap under the NBU’s Strategy to safeguard external stability.
    - Legislative amendments planned to reinstate the discretionary right of the NBU to approve or deny exceptions to cross-border FX transactions.
  - The three previously approved multiple currency practices (MCPs) are considered eliminated as of February 1st when the Fund’s new policy on MCPs came into effect.
  - Authorities committed to continue monitoring MCPs carefully with staff as the exchange rate transition unfolds.
- NBU profit transfers:
  - Legislation planned to grant the NBU rights to increase the annual profit transfer to the budget and to make an early distribution before completion of the annual external audit of the NBU’s accounts, on a one-time basis for 2024.
  - Legislation aims to include a cap on distributable profits to safeguard the NBU’s financial autonomy; no negative NBU balance sheet implications are expected given adequate general reserves.
- Safeguards:
  - NBU has a broadly sound safeguards framework adapted to wartime conditions; authorities are implementing recommendations of the 2023 safeguards assessment to strengthen governance practices including establishing a framework for monetary financing of the government and exploring best practices for appointment processes for members of the NBU Council and the Board.

### Financial Sector — resilience, privatization, and market infrastructure
- NBU Resilience Assessment (applied to the 20 largest banks accounting for 91 percent of system assets) completed in December 2023:
  - Loan review identified an aggregate capital shortfall of about US$130 million for three banks, of which US$127 million for two state-owned banks has already been addressed (Ukreximbank and Sense).
  - Forward-looking scenario identified US$428 million of further potential capital vulnerabilities for five banks.
  - NBU required these banks to prepare capital management plans to address potential negative equity gaps by September 2024 and fully return to regulatory compliance by March 2026.
  - NBU committed under the program to undertake a more detailed and independent asset quality review (AQR) once conditions allow; to prepare, the NBU will align the definition of non-performing exposures with EU’s standards by end-April 2024 to strengthen monitoring by banks and supervisors by end-December 2024 (MEFP ¶53).
- Preparations for privatizing SOBs:
  - MOF, in consultation with the NBU and IFIs, is reviewing and updating the 2012 draft law on SOB privatization and will submit it to Parliament by end-March 2024.
  - MOF will appoint an internationally recognized financial advisor by end-May 2024 to prepare two systemic SOBs for sale: Sense Bank and Ukrgasbank (4 percent and 6 percent of system assets respectively).
  - Authorities committed that all systemic banks with majority state ownership will fall under MOF responsibility and any non-systemic banks that come under state ownership will not be recapitalized using fiscal resources and will be transferred to the Deposit Guarantee Fund (DGF) for resolution upon breach of prudential requirements (proposed modified Continuous Structural Benchmark).
- Strengthening financial safety nets and capital standards:
  - DGF and NBU, in consultation with IFIs, assessed bank intervention and resolution infrastructure and proposed recommendations to close gaps; a roadmap will be prepared by end-April 2024 setting out reform agenda to close key gaps by end-December 2024 (Structural Benchmark, end-December 2024).
  - NBU aligned banks’ regulatory capital structure with EU norms and increased capital requirements for financial companies in December 2023.
- Financial market infrastructure and oversight activities (NBU tasks and deadlines):
  - Close gaps with international valuation standards and propose an implementation roadmap by end-March 2024.
  - Propose implementation of a publicly accessible database of real estate transaction prices and property price indexes by March-2024.
  - Propose priority actions to enhance capital market infrastructure for direct foreign investor access to marketable debt instruments by end-April 2024.
  - Prepare a comprehensive strategy to support resumption of lending, with regard to financial stability and fiscal risks by end-May 2024.
  - Prepare a draft law to establish a fully functional war insurance system by end-June 2024.
  - Propose amendments to the Law on Banks and Banking to include consideration of supervisory observations in recognition of related parties by end-June 2024.
  - Prepare a concept note to introduce and develop derivative financial instruments (including forwards) market by end-July 2024.
  - Prepare a concept note on regulatory requirements for person to person (p2p) and other electronic payments to identify and restrict unusual behavior by end-July 2024.
  - Propose a supervisory framework incorporating risks of Banking-as-a-Service by end-July 2024.
  - Prepare a concept note for a supervisory risk assessment methodology for payment service providers by end-August 2024 and implement the methodology by end-December 2024.
  - Propose ways to strengthen requirements for audit companies and audit reports and prepare an implementation roadmap by end-September 2024.
  - Develop strategies for the Ukrainian Financial Housing Company and Export Credit Agency by end-November 2024.
  - Implement a supervisory risk assessment methodology to inform supervisory engagement priorities by end-December 2024 (Structural Benchmark, proposed to be reset).

### Governance and growth-enhancing policies
- Anti-corruption reforms critical for public and donor confidence and EU membership goal:
  - Complementing reform on strengthening the Specialized Anti-Corruption Prosecutor’s Office (SAPO), authorities plan further amendments to the criminal procedural code to enhance effectiveness of corruption investigations, including on mutual legal assistance and reasonableness of time limits of pre-trial investigations.
  - Asset declarations of public officials were made publicly accessible again in end-January and are undergoing risk-based verification by the National Agency for Corruption Prevention (NACP) to detect illicit enrichment.
  - A new head of the NACP was appointed in February; competitions for new anti-corruption judges are under way with participation of independent experts with international experience.
  - Authorities requested a short (one-month) extension on the structural benchmark for rationalizing the adjudication framework of the High Anti-Corruption Court (Structural Benchmark, proposed to be reset from end-March to end-April 2024) due to heavy legislative agenda in Parliament.
  - Staff encouraged advancement on creation of a new administrative court, completion of the external audit of the NABU, and enhancing effectiveness of supreme audit institutions.
  - Authorities remain committed to an IMF staff-led governance diagnostic assessment after the lifting of Martial Law.

*Source: IMF content unit 1ukrea2024001 (excerpt).*

### 44.      In February, Parliament adopted a landmark SOE corporate governance law (5593-D)

### 44. In February, Parliament adopted a landmark SOE corporate governance law (5593-D)

### SOE corporate governance law (Law #5593-D)
- Broadens the powers of SOE supervisory boards while respecting critical PFM principles to mitigate SOE fiscal risks (MEFP ¶65).
- Law features and governance changes:
  - Establishes a competitive and transparent selection process for SOE supervisory board members.
  - Sets up regular independent evaluations of SOE supervisory boards.
  - Grants SOE boards ultimate powers to appoint and dismiss CEOs and approve financial and strategic plans.
  - Maintains a gatekeeper role for the MOF, including approval of key financial metrics in the financial plans of natural monopolies and strategic SOEs to limit quasi-fiscal risks and safeguard public finances.
  - Requires the ownership entity to avoid exerting undue control on SOEs, including in the absence of a SOE board, and to provide justification for dismissals of board representatives.
  - Establishes minimum dividends in the primary law with a sunset clause for the duration of Martial Law; after Martial Law, SOE dividends should be guided by an overarching dividend policy.

- Implementation next steps: authorities intend to develop comprehensive secondary legislation to operationalize procedures, reporting templates, roles, and responsibilities for SOE financial planning.

### SOE state ownership policy (SOP), assessments, and timelines
- Authorities will prepare a comprehensive SOE state ownership policy (SOP).
- Law #5593-D gives the CMU powers to approve a SOP, dividend policy and privatization strategy, planned for end-October 2024 (Structural Benchmark, proposed to be reset from end-August to end-October 2024).
- SOP scope:
  - Long-term priorities of SOE state ownership, public policy objectives and rationales, the state’s role, and implementation in SOE governance including roles and responsibilities of involved government agencies.
- MOF responsibilities:
  - Will set financial viability criteria of SOEs and conduct a financial assessment of SOEs.
  - A financial assessment will be done as an interim step by end-May 2024 as an input to the SOP.
- Policy guidance: Implementing Law #5593-D and completing the SOP are described as essential preconditions for exploring options to strengthen SOE management, which should not be rushed.

### Energy sector stability, market reforms, and corporate governance
- Authorities prioritize energy security given vulnerability to missile attacks; measures include swift repairs, boosting domestic gas production, and securing electricity imports.
- Tariff and social protection guidance:
  - Gradual increase in gas and electricity tariffs towards cost recovery will eventually be required (especially once the war winds down), while allocating adequate and well-targeted resources to protect vulnerable households.
  - Lifting on December 29, 2023, of a moratorium (Resolution #1405) on disconnecting consumers in arrears is expected to contribute to higher payment discipline.
- Market liberalization:
  - CMU will adopt a roadmap for gradual liberalization of gas and electricity markets, with a time-bound implementation plan for the post-Martial Law period; staff emphasized establishing safeguards to protect vulnerable groups.
- Governance progress and actions:
  - Seating of the 7th board member of Naftogaz noted as progress on energy corporate governance.
  - Planned adoption of Law #6133 would pave the way for GTSO to rightsize its operations ahead of the expiry of the transit contract with Gazprom at end-2024.
  - Work expected to start soon on a review of the arrears and financial conditions of the District Heating Companies (DHCs) (Structural Benchmark, end-June 2024).

### Program issues, requested modifications, and fiscal governance
- Authorities’ requests to the program:
  - Waiver of non-observance of the QPC on the floor on tax revenues excluding social security contributions on the basis of its minor size (UAH 3.6 billion, or less than 0.1 percent of GDP).
  - Modification of the floor on the non-defense cash primary balance of the general government excluding grants for end-March 2024.
  - Request to increase the floor on net international reserves for end-March 2024 in light of better-than-expected FX reserve levels and commitment to external sustainability.
- Structural Benchmark (SB) modifications and resets requested:
  - Modification to continuous SB stipulating that all banks with majority public ownership remain under MOF shareholder management and any nationalized non-systemic banks be transferred to the DGF for resolution (reflecting NBU’s restricted bank intervention powers under Martial Law).
  - Requests to reset timing for three SBs:
    - Implementing a supervisory risk assessment methodology: end-June 2024 → end-December 2024.
    - Producing a SOE state ownership policy, dividend policy and privatization strategy: end-August 2024 → end-October 2024.
    - Enacting amendments to the procedural code for anti-corruption judges: end-March 2024 → end-April 2024.

### Financing, debt sustainability, and capacity-to-repay indicators
- Financing gaps and assurances:
  - Cumulative baseline financing gap over the program period: US$121.8 billion.
  - Cumulative downside financing gap: US$140.6 billion.
  - Firm commitments are in place for the next 12-month period (April 2024 through March 2025).
- Debt sustainability assessment:
  - Criteria for assessing debt as sustainable on a forward-looking basis continue to be met, based on: substantial revenues-based fiscal adjustment, assurances of exceptional financing on highly concessional terms from official sector creditors and donors, and planned debt operations to restructure external claims in line with program parameters.
  - In the absence of restructuring, debt is assessed as unsustainable.
  - Updated indicative modeling shows targets for debt restructuring remain appropriate.
  - Targets and aims highlighted in Figure 5 (text):
    - To achieve debt sustainability, debt should be 65 percent of GDP by 2033 and aim to reach 82 percent of GDP by 2028.
    - Gross financing needs (GFNs) should average 8 percent of GDP in the post-program period (2028–33).
    - Debt service flow relief on external obligations should aim to be 1–1.7 percent of GDP per year.
- Authorities’ restructuring strategy:
  - External commercial debt: ongoing credible process; initial proposals to creditors expected shortly with intention to conclude restructuring by mid-year and ahead of expiry of the debt standstill in August 2024.
  - Official bilateral debt: Group of Creditors of Ukraine committed to a 2-stage process; first step extends debt standstill until 2027 (formally agreed in December); definitive restructuring expected to be finalized before the final review of the program; Group committed to provide additional relief if the downside scenario emerges.
  - Ukraine has no external arrears.
- Capacity-to-repay (CtR) assurances and Fund exposure:
  - CtR assurance provided at program approval by a significant group of creditors/donors remains valid.
  - Under the baseline scenario, the stock of total Fund credit is expected to peak at 8 percent of GDP and 35.8 percent of gross reserves in 2024.
  - Debt service to the Fund would peak at 1.8 percent of GDP and 8.6 percent of gross reserves in 2025.
  - Under the downside scenario, outstanding credit to the Fund would peak at 9.1 percent of GDP in 2026 and 43.8 percent of gross reserves in 2024.
  - Under the downside scenario, debt service to the Fund would peak at 2.2 percent of GDP in 2025 and 9 percent of gross reserves in 2024.

### Financing table highlights and capacity development
- Selected financing and CD figures:
  - IMF (prospective) over the program period: 4.5, 5.4, 1.8, 2.6, 1.3 (Cumulative IMF prospective: 15.6) — as presented in the financing table columns by year.
  - Potential flow relief from debt operations: 0.0, 4.6, 3.2, 3.6, 0.5 (Cumulative: 11.8).
  - Memorandum and country program notes include rolling assumptions and donor conditionalities.
- Ukraine Capacity Development Fund (UCDF):
  - UCDF formally launched; inaugural Steering Committee meeting held in Kyiv on February 13, 2024.
  - Initial CD workplan funding amounts to US$27.5 million, with expectations that the target of US$65 million will be reached.
  - Current resources supported by bilateral contributions totaling US$16.5 million provided by the Netherlands, Slovakia, Latvia, Japan, and Lithuania.
  - Additional resources totaling US$17 million have been pledged by other donor partners; these resources will help cover IMF CD operations over five years (2024–28).

### Staff appraisal and macro-fiscal implications
- Macroeconomic context and risks:
  - Ukraine’s economy remained resilient to war-related shocks; activity was more vigorous than expected and inflation fell steeply last year.
  - Ongoing challenges: massive and growing war damages, volatility around external financing, disruption from blockades along the Western border.
  - Continuing uncertainty regarding the war and external budget support are significant headwinds likely to temper the pace of recovery this year.
- Program performance and fiscal outlook:
  - Authorities delivered strong performance under the Extended Arrangement’s Third Review, achieving all but one end-December 2023 QPC; the miss on tax collections QPC was minor and end-March 2024 target appears on track.
  - Timely disbursement of committed external financing is critical to maintain macroeconomic stability; delays have compelled temporary difficult measures to reconcile budget execution with available resources.
  - The approved budget remains an appropriate anchor for fiscal policies in 2024, but authorities should be prepared to respond to shocks; decisive actions may be needed if liquidity strains continue, including domestic revenue mobilization and market financing.
  - With less abundant external financing in 2025, the next budget will require major efforts to mobilize revenues to meet substantial expenditure requirements and contribute to restoring fiscal and debt sustainability.

*Source: IMF staff report text as provided in the content unit.*

### 59.      Continued momentum on fiscal structural reforms will help mobilize revenue, contain

### Continued momentum on fiscal structural reforms will help mobilize revenue, contain

### Fiscal structural reforms and revenue mobilization
- The adoption of the NRS last December was a major step forward to mobilize revenues.
- Efforts to implement the NRS, particularly to strengthen tax and customs administration, should continue.
- Further controlling fiscal risks should include:
  - improvements to the Business Development Fund’s governance;
  - ringfencing risks from the 5-7-9 lending program;
  - moving ahead with reforms to public investment management.

### Debt restructuring and sustainability
- The debt restructuring should proceed consistent with program parameters to deliver debt sustainability in both the baseline and the downside scenarios.
- The authorities’ intention to begin discussions with external commercial creditors soon is welcome.
- Sufficient debt relief, along with fiscal adjustment and an appropriately concessional financing mix in the future should help bring public debt and financing needs to sustainable levels.

### Monetary policy and exchange rate flexibility
- Recent disinflation and well anchored inflation expectations suggest scope for further cuts to the key policy rate while maintaining positive real rates.
- Greater exchange rate flexibility, with well-calibrated FX intervention, will:
  - increase economic resilience;
  - prevent external imbalances;
  - safeguard FX reserves.
- Maintaining the NBU’s staged approach to relaxing FX controls in line with the Strategy is appropriate.

### Financial system surveillance and stability
- Continued careful surveillance of the financial system will help contain risks to stability.
- The system remains stable and liquid, and most capital needs identified by the NBU’s December 2023 Resilience Assessment have already been addressed.
- Efforts to strengthen financial sector safety nets and to deepen financial market infrastructure and oversight should continue.

### Governance, anti-corruption, and SOE management
- Strengthening governance, anti-corruption, and management of SOEs are essential to making progress on important development objectives.
- Achieving robust and sustained growth over the medium term and pursuing EU accession will need determined actions on deep reforms that tackle longstanding corruption.
- Reforms to strengthen SOE management and governance issues will be essential to improving performance and containing fiscal risks.

*Source: IMF country report content unit 1ukrea2024001 (paragraphs 59–63).*

### 64.      Staff supports the authorities' requests for a waiver of non-observance of a QPC,

### 1ukrea2024001 - 64.      Staff supports the authorities' requests for a waiver of non-observance of a QPC,

### Program endorsement and staff recommendation
- Staff supports the authorities' requests for:
  - a waiver of non-observance of a QPC;
  - modifications of two QPCs and one SB;
  - the resetting of three SBs;
  - the completion of the Third Review under the Extended Arrangement.
- Rationale: authorities’ strong performance under the program, enduring commitment to maintaining appropriate policies, and commitments from donors provide confidence that the program remains on track to meet its objectives.

### Structural benchmarks (selected implementation status and timing)
- Table covers 35 structural benchmarks with sector, timing, and status.
- Early 2023 milestones (examples):
  - SB1 Enact the second supplementary Budget 2023 — Fiscal — End-April 2023 — Met.
  - SB2 Submit draft law to restore and strengthen Article 52 of the Budget Code — Fiscal — End-May 2023 — Met.
  - SB3 Prepare an action plan from taxpayers’ perception survey as input into National Revenue Strategy roadmap — Fiscal — End-May 2023 — Met.
  - SB4 Submit draft law reinstating Budget Code limits on issuance of public guarantees — Fiscal — End-May 2023 — Met.
  - SB5 Enact amendments to Budget Code to enhance transparency of special accounts — Fiscal — End-May 2023 — Met.
  - SB6 Prepare conditions-based strategy to move to a more flexible exchange rate — Monetary and Exchange Rate — End-June 2023 — Met.
- Not met (implemented with delay) — End-July 2023 examples:
  - SB7 Adopt the draft law on tax policy and administration prepared under the PMB — Fiscal — End-July 2023 — Not Met (implemented with delay).
  - SB8 Transfer the GTSO shareholding to the Ministry of Energy and adopt the new charter — Energy/Corporate Governance — End-July 2023 — Not Met (implemented with delay).
  - SB9 Enact the law to restore asset declaration of public officials and reinstate NACP’s function — Governance/Anti-Corruption — End-July 2023 — Not Met (implemented with delay).
- Additional selected SBs:
  - SB10 Enact articles to allow MTBF preparation, debt strategy, ringfencing guarantee risks — Fiscal — End-September 2023 — Met.
  - SB11 Present 2024 budget declaration projections and fiscal risks statement — Fiscal — End-September 2023 — Met.
  - SB12 Amend the AML/CFT Law to re-establish enhanced due diligence on PEPs — Governance/Anti-Corruption — End-September 2023 — Not Met (implemented with delay).
  - SB13 Strengthen bank governance and oversight (three measures) — Financial Sector — End-September 2023 — Met.
  - SB14 MOF with STS and SCS to prepare action plan feeding into broader NRS — Fiscal — End-October 2023 — Met.
  - SB15 Update and publish the Medium-Term Debt Management Strategy — Fiscal — End-October 2023 — Met.
  - SB16 Simplify asset declaration system linking databases — Governance/Anti-Corruption — End-October 2023 — Met.
  - SB17 Select and appoint a supervisory board for the GTSO — Energy/Corporate Governance — End-October 2023 — Met.
  - SB18 Review PIM procedures and develop roadmap to unify PIM approaches — Fiscal — End-December 2023 — Met.
  - SB19 Adopt the National Revenue Strategy — Fiscal — End-December 2023 — Met.
  - SB20 Adopt legislation to enhance institutional autonomy and effectiveness of SAPO — Governance/Anti-Corruption — End-December 2023 — Met.
  - SB21 Prepare short-term revenue measures with yields of at least 0.5 percent of GDP ready for budget 2024 — Fiscal — End-February 2024 — Met.
  - SB22 Develop a concept note on the 5-7-9 program (SME targeting, phase-out of large companies eligibility) — Fiscal — End-March 2024 — (timing listed; status blank in table).
  - SB23 Adopt a new law on the ESBU consistent with ¶27 of the MEFP — Fiscal — End-June 2024 — (timing listed).
  - SB24 Prepare assessment of effectiveness of tax privileges — Fiscal — End-July 2024 — (timing listed).
  - SB25 Identify major public companies severely affected by the war and prepare review of fiscal/quasi-fiscal costs — Fiscal — End-September 2024 — (timing listed).
  - SB26 Produce diagnostic review of pre-war MTBF policies with IMF TA — Fiscal — End-October 2024 — (timing listed).
  - SB27 Adopt government decree linking MTBF and capital expenditures following PIM roadmap — Fiscal — End-December 2024 — (timing listed).
  - SB28 All systemic banks with majority state ownership fall under MOF responsibility; non-systemic banks under state ownership transferred to DGF — Financial Sector — Continuous — Modify.
  - SB29 Prepare a bank rehabilitation framework with DGF and IMF staff — Financial Sector — End-December 2024.
  - SB30 Implement a supervisory risk assessment methodology — Financial Sector — End-December 2024 — Reset (from end-June).
  - SB31 Determine stock of arrears and assess financial conditions of District Heating Companies via desk review — Energy — End-June 2024.
  - SB32 Amend procedural code to rationalize first-instance anti-corruption hearing by specialized judges — Governance/Anti-Corruption — End-April 2024 — Reset (from end-March).
  - SB33 Enact law to establish a new court to hear administrative cases against national state agencies with vetted judges — Governance/Anti-Corruption — End-July 2024.
  - SB34 Complete external audit of NABU effectiveness with three independent international experts and publish report — Governance/Anti-Corruption — End-September 2024.
  - SB35 Produce SOE state ownership policy, dividend policy and privatization strategy — SOE Corporate Governance — End-October 2024 — Reset (from end-August).

### Selected economic and social indicator highlights (Table 6, baseline scenario)
- Nominal GDP (billions of Ukrainian hryvnias):
  - 2021: 5,451
  - 2022: 5,191
  - 2023: 6,434
  - 2024: 6,495
  - 2025: 7,640
  - Long-run trajectory to 2033: 18,416 (2033).
- Real GDP (percent change):
  - 2021: 3.4
  - 2022: -29.1
  - 2023: 4.5
  - 2024: 5.0
  - 2025: [3 to 4] (table shows bracketed range for 2026–2027 and repeated 6.5, 5.0, etc.)
  - Later projections include 4.0 as the multi-year projection (repeated for later years).
- GDP deflator (percent):
  - 2021: 24.8
  - 2022: 34.3
  - 2023: 18.6
  - 2024: 19.2
  - 2025: 14.7
  - Subsequent years converge to 5.0.
- Unemployment rate (ILO, period average, percent):
  - 2021: 9.8
  - 2022: 24.5
  - 2023: 19.1
  - 2024: 19.1
  - 2025: 13.9, falling gradually to 8.5 by 2033.
- Consumer prices (period average):
  - 2021: 9.4
  - 2022: 20.2
  - 2023: 13.0
  - 2024: 12.9
  - 2025: 7.7
  - Converging to 5.0 in later years.
- Fiscal balance (percent of GDP):
  - 2021: -4.0
  - 2022: -15.7
  - 2023: -18.6
  - 2024: -19.7
  - 2025: -15.7
  - Improved to -0.9 by 2033.
- Fiscal balance, excluding grants (percent of GDP):
  - 2021: -4.0
  - 2022: -25.0
  - 2023: -27.1
  - 2024: -26.3
  - 2025: -20.4
  - Improves to -1.5 by 2033.
- Public and publicly-guaranteed debt (percent of GDP):
  - 2021: 50.5
  - 2022: 78.4
  - 2023: 87.1
  - 2024: 82.9
  - 2025: 96.7
  - Projected path to 72.5 by 2033.
- Gross reserves (end of period, billions of U.S. dollars):
  - 2021: 30.9
  - 2022: 28.5
  - 2023: 39.5
  - 2024: 40.5
  - 2025: 40.9
  - Projected to 60.1 by 2033.
- Memorandum items:
  - Per capita GDP / Population (2017): US$2,640 / 44.8 million.
  - Literacy / Poverty rate (2022 est 3/): 100 percent / 25 percent.

### General government finances (selected lines, Tables 7a/7b, billions of Ukrainian Hryvnia and percent of GDP)
- Revenue (billions of Ukrainian Hryvnia):
  - 2021: 1,990
  - 2022: 2,609
  - 2023: 2,935
  - 2024: 3,583
  - 2025: 3,220
- Tax revenue (billions of Ukrainian Hryvnia):
  - 2021: 1,825
  - 2022: 1,782
  - 2023: 2,144
  - 2024: 2,139
  - 2025: 2,651
- Expenditure (billions of Ukrainian Hryvnia):
  - 2021: 2,207
  - 2022: 3,426
  - 2023: 4,129
  - 2024: 4,865
  - 2025: 4,423
- General government overall balance (billions of Ukrainian Hryvnia):
  - 2021: -216
  - 2022: -817
  - 2023: -1,194
  - 2024: -1,282
  - 2025: -1,203

### Balance of payments and external financing (selected highlights, Tables 8a/8b and 9)
- Current account balance (percent of GDP):
  - 2021: -1.9
  - 2022: 5.0
  - 2023: -4.6
  - 2024: -5.5
  - 2025: -7.1
  - Later years: e.g., -3.4 by 2033 (Table 8a shows -10.3 as percent of GDP in a different presentation; Table 8b gives -3.4 for 2033).
- Goods exports (annual volume change, percent):
  - 2021: 35.0
  - 2022: -43.8
  - 2023: -15.3
  - 2024: -16.1
  - 2025: 17.9
- Gross international reserves (USD billions):
  - 2021: 30.9
  - 2022: 28.5
  - 2023: 39.5
  - 2024: 40.5
  - 2025: 40.9
- Gross External Financing Requirement (Table 9, selected totals, Billions of U.S. dollars):
  - A. Total financing requirements (examples): 2021: 37.5; 2022: 54.7; 2023: 65.6; 2024: 57.7; 2025: 68.3.
  - B. Total financing sources (examples): 2021: 39.6; 2022: 27.7; 2023: 32.5; 2024: 31.0; 2025: 35.9.
  - C. Financing needs (A - B) (examples): 2021: -2.2; 2022: 27.0; 2023: 33.1; 2024: 26.6; 2025: 32.4.
  - E. Official financing (examples): 2021: 1.7; 2022: 30.6; 2023: 44.0; 2024: 40.5; 2025: 34.9.
- Loan rollover rate (percent):
  - Banks: e.g., 2021: 97.2; 2022: 96.7; later years reported as 100.0 or around 100.0.
  - Corporates: e.g., 2021: 89.3; 2022: 105.2; total around 91.4 in 2021 and 98.2 in 2022.

### Monetary and banking (Table 10, selected lines)
- Broad money (end of period, billions of Ukrainian Hryvnia):
  - 2021: 2,071
  - 2022: 2,501
  - 2023: 3,072
  - 2024: 3,077
  - 2025: 3,630
- Base money (end of period, billions of Ukrainian Hryvnia):
  - 2021: 662
  - 2022: 793
  - 2023: 972
  - 2024: 977
  - 2025: 1,144
- Credit to the economy (billions of Ukrainian Hryvnia):
  - 2021: 1,023
  - 2022: 991
  - 2023: 917
  - 2024: 986
  - 2025: 1,004
- Memorandum (percent changes):
  - Base money (year-on-year percent): 11.2 (2021), 19.6 (2022), 22.6 (2023), 23.3 (2024), 39.9 (2025).
  - Broad money (year-on-year percent): 12.0 (2021), 20.8 (2022), 22.8 (2023), 23.0 (2024), 17.7 (2025).
  - Credit to the economy (percent change): 8.4 (2021), -3.1 (2022), -7.5 (2023), -0.5 (2024), -15.8 (2025).

### Indicators of Fund credit and EFF schedule (Tables 11 and 12)
- Table 11: Indicators of Fund Credit (millions of SDR, end-of-period stocks and obligations):
  - Existing Fund credit, Stock:
    - 2024: 7,264
    - 2025: 5,527
    - 2026: 4,029
    - 2027: 3,117
    - 2028: 2,560
    - 2029: 2,003
    - 2030: 1,447
    - 2031: 890
    - 2032: 334
    - 2033: 0
  - Prospective purchases disbursements:
    - 2024: 4,003; 2025: 1,368; 2026: 1,931; 2027: 966; subsequent years: 0.
  - Stock of existing and prospective Fund credit (end-of-period):
    - 2024: 11,267
    - 2025: 10,899
    - 2026: 11,332
    - 2027: 11,385
    - 2028: 10,634
    - 2029: 9,353
    - 2030: 7,821
    - 2031: 5,967
    - 2032: 4,032
    - 2033: 2,320
  - In percent of quota (Ukraine's quota is SDR 2,011.8 million effective February 2016):
    - 2024: 560; 2025: 542; 2026: 563; 2027: 566; 2028: 529; 2029: 465; 2030: 389; 2031: 297; 2032: 200; 2033: 115.
- Table 12: EFF Schedule of Reviews and Available Purchases (millions of SDR; total cumulative access):
  - Board approval of the EFF (March 31, 2023): 2,011.83 (quota), cumulative access 2,690.11; Millions of USD and percent of quota lines appear in table.
  - Subsequent review availability examples:
    - June 15, 2023: 663.90 (access) — First review.
    - October 13, 2023: 663.90 — Second review.
    - February 29, 2024: 663.90 — Third review.
    - June 15, 2024: 1,669.82 — Fourth review.
    - Schedule continues through March 10, 2027, and cumulative total: Total 11,608.25 (Millions of SDR) and 15,552.74 (Millions of USD 1/ as per table).
  - Memorandum item: Quota 2,011.8.

### Quantitative Performance Criteria and Indicative Targets (Table 13, selected items)
- I. Quantitative Performance Criteria (end of period; billions of Ukrainian hryvnia, unless indicated):
  - Floor on the non-defense cash primary balance of the general government, excluding budget support grants:
    - Mar 2025 Adjusted QPC: 105,000 — Actual: 105,000 — Status: Met.
    - Proposed Rev. QPC and later proposed QPCs and ITs shown with values including 140,715; 135,000; 257,184; 250,000; 368,313; 368,313; 415,410; 415,410; 330,000 (table contains multiple dated entries).
  - Floor on tax revenues (excluding Social Security Contributions):
    - Example entries: 1,653,992 (QPC) — Status: Not Met (table shows Not Met).
    - Later proposed values include 426,300; 880,400; 1,398,600; 2,042,250; 485,000 (table shows multiple columns).
  - Ceiling on publicly guaranteed debt:
    - Example entries: 37,000; 20,538; 57,538; 40,258 — Status: Met.
    - Repeated ceiling values in subsequent columns: 47,900 and 53,626.
  - Floor on net international reserves (in millions of U.S. dollars):
    - Example entries: 24,900; -3,211; 21,689; 28,244 — Status: Met.
    - Later column values include 25,400; 28,400; 25,300; 26,800; 25,400; 27,900; 23,000; 24,900; 26,000.
- II. Indicative Targets (selected):
  - Ceiling on general government arrears:
    - Target: 2,000 — Status: Met when 1,556 recorded.
  - Floor on social spending:
    - 499,600 target — Status: Met when 551,083 recorded.
  - Ceiling on general government borrowing from the NBU:
    - Example entries: -70; 449,296; 48,592; -731 — Status: Met with example values -9,500; -2,884 etc. (table includes multiple columns).
- III. Continuous performance criterion:
  - Ceiling on non-accumulation of new external debt payments arrears by the general government — target 0 — Status: Met (table entries show 0).

*Source: Excerpts from the IMF staff report and supporting tables contained in the provided content unit.*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### External Risks
- Intensification of regional conflicts.
  - Likelihood: High
  - Expected impact: High. Effects include increased loss of life; further destruction of capital stock; outward migration and internal displacement; nascent recovery stall; sharp fall in growth; further restrictions on seaport access and logistical challenges; curtailment of export recovery; rising import needs (defense, energy, infrastructure repair); widened fiscal and external financing needs; possible resort to monetary financing with pressures on prices and the exchange rate; high inflation eroding purchasing power and increasing poverty; weak activity affecting bank and SOE balance sheets.
  - Policy response:
    - Maintain appropriate macroeconomic policies to safeguard macroeconomic and financial stability and prepare contingency plans for the materialization of downside risks.
    - Mobilize domestic financing to help meet fiscal financing needs and seek additional external financing that is grant-based or on highly- concessional terms.
    - Enhance and update contingency plans, including for the financial sector.

- Abrupt global slowdown.
  - Likelihood: Medium
  - Expected impact: High. Recessions in key donor countries could reduce or delay disbursement of committed external financing and shift the financing mix toward less advantageous and more expensive sources (monetary financing, other borrowing on non-concessional terms).
  - Policy response:
    - Prioritize spending and seek additional revenue measures.
    - Mobilize domestic financing to plug financing gaps.
    - Diversify external financing sources and obtain financing that is grant-based or on highly concessional terms.

- Commodity price volatility.
  - Likelihood: High
  - Expected impact: Medium. High energy prices could strain consumption and business activity and widen fiscal and external financing needs; low/volatile agricultural prices amid logistical costs could alter sowing decisions.
  - Policy response:
    - Continue rationing access to energy to priority areas. Limit electricity exports.
    - Continue to expand gas production. Secure alternative sources and storage for gas through the heating season.
    - Targeted transfers to most vulnerable groups within the existing budget envelope.
    - Build on and deepen alternative export routes.

- Shortfalls in availability of external financing as well as domestic financing.
  - Likelihood: High
  - Expected impact: High. Could result in larger financing gaps, necessitating financial repression, monetary financing and a sharp compression in spending, intensifying macro-financial risks and reversing the ongoing economic recovery.
  - Policy response:
    - Prioritize spending and seek additional revenue measures.
    - Mobilize domestic financing to plug financing gaps.
    - Diversify external financing sources and obtain financing that is grant-based or on highly concessional terms.

### Domestic Risks
- Social unrest.
  - Likelihood: Medium
  - Expected impact: High. Declining real incomes and worsening inequality could amplify social unrest, undermine national unity, produce counterproductive populist policies, widen fiscal and external imbalances, delay adjustment, and stall reform momentum.
  - Policy response:
    - Maintain appropriate macroeconomic policies to safeguard stability.
    - Targeted transfers to most vulnerable groups within the existing budget envelope.

- Loss of reform momentum.
  - Likelihood: Medium
  - Expected impact: High. Poor governance, corruption, retrenchment of oligarchic interests, and lack of oversight on the use of external funding could decrease incentives for reform, exacerbate financing gaps, reduce future external financing inflows, and lead to donor fatigue.
  - Policy response:
    - Adhere to governance reforms while maintaining recent progress made in strengthening anti-corruption and judicial institutions.
    - Mobilize domestic financing and prioritize spending.

- Loss of export and transit corridors and EU restrictions for agricultural produce.
  - Likelihood: High
  - Expected impact: Medium. Loss of the temporary Black Sea corridor would severely impact the balance of payments, potentially exacerbating financing gaps and FX markets and undermining the nascent recovery; prolonged closure of other transit routes through Eastern Europe would curtail exports and weigh on future farming decisions.
  - Policy response:
    - Urge partners for a quick resolution to minimize disruption to transit routes.
    - Diversify supply chains.
    - Accelerate reconstruction of Danube Deep Sea shipping lanes, repair of railroads with external financing and further expansion of the temporary Black Sea corridor.

### Structural Risks
- Deepening geoeconomic fragmentation.
  - Likelihood: High
  - Expected impact: High. Broader conflicts and inward-oriented policies could lead to a less efficient configuration of trade and FDI, supply disruptions, protectionism, policy uncertainty, technological and payments systems fragmentation, rising shipping and input costs, financial instability, and lower growth; Ukraine as a trade-dependent economy is exposed to supply chain disruptions.
  - Policy response:
    - Maintain appropriate macroeconomic policies to safeguard stability and ensure adequate resources for core functions of the state.
    - Diversify trade products, supply chains, and partners.
    - Continue with reforms to support competitiveness and increase productivity.

### Downside Scenario (Annex II summary)
- Baseline assumption: Updated downside scenario assumes a more intense war running into 2025 with the shock starting in 2024Q2; war assumed to wind down by end-2025 versus end-2024 in the baseline.
- Key macro effects:
  - Real GDP: sharp decline of 4 percent in 2024 (versus 3–4 percent growth in the baseline) and zero growth in 2025.
  - Fiscal deficit: would further increase in 2024–25 and improve only gradually thereafter.
  - FX imbalances: would resurface and persist longer given worse export performance, leading to higher nominal depreciation before converging to the baseline trend.
  - Reserves: staff assumes some FXI for 2024 in the downside given ample buffers, resulting in a lower path of reserves compared to the baseline.
  - Recovery: more subdued than in the baseline due to greater damage to capital stock and weakened balance sheets; output remains well-below pre-war levels.
- Financing implications:
  - Updated cumulative financing gap in the downside scenario: US$140.6 billion.
  - Comparison with baseline forecast for 2023–27: baseline US$121.8 billion; downside is about a US$19 billion increase.
  - Financing requirement: entirety of additional financing would need to be in the form of highly concessional loans (close to grant terms).
  - Program period needs: scenario requires a mix of additional grants in the program period, highly concessional financing consistent with assurances received, and further debt treatment to ensure debt sustainability.
- Policy and contingency responses:
  - Authorities prepared to take measures largely in line with Second Review: increases in tax revenues, seeking further external financing, monetary tightening, larger mobilization of domestic financing, and likely further adjusting FX policies and CFMs (to be justified and temporary).
  - Given tight 2024 Budget expenditure envelope, bulk of adjustment would come from tax measures that can be implemented rapidly; some spending should be contingent on available financing.
  - Domestic financing: enhance measures to access additional domestic financing (UAH and FX if required) to close fiscal financing gaps, especially near-term, without compromising stability.
  - FX management: temporary pressures on managed floating regime may require reintroduction of earlier FX controls.
  - If shocks exceed the downside scenario: possible measures include a solidarity tax (supplement to the PIT), additional tax on luxury goods or excise duties/fees, larger domestic bond financing, monetary financing within program parameters (e.g., administrative measures requiring banks to hold stipulated amounts or minimum holding periods of government securities), secondary purchases of government bonds by the NBU, inflation- or exchange-rate linked bonds, expanded FX controls combined with proactive FX policies.
  - Spending: ultimately spending under certain categories would be contingent on the flow of highly concessional/grant-based external financing.
- Assessment: Program considered robust under the updated downside scenario given authorities’ policy commitments, track record, renewed financing assurances, and expected debt relief; debt sustainability analysis reconfirms that additional financial assurances would restore debt sustainability on a forward-looking basis.

### Selected Downside Scenario Key Statistics (as presented)
- Cumulative financing gap (downside scenario, 2023–27): US$140.6 billion
- Baseline cumulative financing gap (2023–27): US$121.8 billion
- Downside scenario real GDP change: -4 percent in 2024; 0 percent in 2025
- Nominal GDP (billions of Ukrainian hryvnias): 2024: 5,451; 2025: 5,191; 2026: 6,495; 2027: 7,238; 2028: 7,946; 2029: 8,598; 2030: 9,400; 2031: 10,245; 2032: 11,166; 2033: 12,170
- Real GDP (percent change series including 2024–2033): 2024: 3.4; 2025: -29.1; 2026: 5.0; 2027: -4.0; 2028: 0.0; 2029: 2.0; 2030: 4.0; 2031: 3.8; 2032: 3.8; 2033: 3.8
- GDP deflator (percent change series): 2024: 24.8; 2025: 34.3; 2026: 19.2; 2027: 16.1; 2028: 9.8; 2029: 6.1; 2030: 5.1; 2031: 5.0; 2032: 5.0; 2033: 5.0
- Unemployment rate (ILO, period average, percent): 2024: 9.8; 2025: 24.5; 2026: 19.1; 2027: 17.4; 2028: 17.1; 2029: 14.0; 2030: 13.1; 2031: 11.6; 2032: 11.2; 2033: 10.6
- Consumer prices (period average): 2024: 9.4; 2025: 20.2; 2026: 12.9; 2027: 7.2; 2028: 9.1; 2029: 7.4; 2030: 6.0; 2031: 5.2; 2032: 5.0; 2033: 5.0
- Fiscal balance (percent of GDP): 2024: -4.0; 2025: -15.9; 2026: -19.7; 2027: -17.6; 2028: -17.9; 2029: -15.4; 2030: -6.0; 2031: -5.4; 2032: -5.1; 2033: -4.2
- Public and publicly-guaranteed debt (percent of GDP): 2024: 48.9; 2025: 78.4; 2026: 82.9; 2027: 105.9; 2028: 123.2; 2029: 135.7; 2030: 134.3; 2031: 132.4; 2032: 130.3; 2033: 127.6
- Gross reserves (end of period, billions of U.S. dollars): 2024: 30.9; 2025: 28.5; 2026: 40.5; 2027: 34.4; 2028: 40.0; 2029: 44.2; 2030: 44.8; 2031: 43.1; 2032: 45.6; 2033: 49.8

*Source: Annex I. Risk Assessment Matrix and Annex II. Downside Scenario (extracts) from the provided IMF document.*

### Annex II. Table 2b. Ukraine: General Government Finances (Downside Scenario), 2021–2033

### Annex II. Table 2b. Ukraine: General Government Finances (Downside Scenario), 2021–2033

### Fiscal aggregates (percent of GDP)
- Revenue: 36.5 (2021 act.), 50.3 (2022 act.), 55.2 (2023 act.), 47.8 (2024 proj.), 44.0 (2025 proj.), 43.0 (2026 proj.), 41.8 (2027 proj.), 40.6 (2028 proj.), 40.6 (2029 proj.), 40.5 (2030 proj.), 40.6 (2031 proj.), 40.5 (2032 proj.), 40.3 (2033 proj.)
- Expenditure: 40.5 (2021 act.), 66.0 (2022 act.), 74.9 (2023 act.), 65.4 (2024 proj.), 62.0 (2025 proj.), 58.5 (2026 proj.), 47.7 (2027 proj.), 46.0 (2028 proj.), 45.7 (2029 proj.), 44.8 (2030 proj.), 44.2 (2031 proj.), 43.9 (2032 proj.), 43.7 (2033 proj.)
- General government overall balance: -4.0 (2021 act.), -15.7 (2022 act.), -19.7 (2023 act.), -17.6 (2024 proj.), -17.9 (2025 proj.), -15.4 (2026 proj.), -6.0 (2027 proj.), -5.4 (2028 proj.), -5.1 (2029 proj.), -4.2 (2030 proj.), -3.6 (2031 proj.), -3.4 (2032 proj.), -3.3 (2033 proj.)
- General government overall balance, excluding grants: -4.0 (2021 act.), -25.0 (2022 act.), -26.3 (2023 act.), -28.4 (2024 proj.), -24.8 (2025 proj.), -19.9 (2026 proj.), -8.4 (2027 proj.), -6.5 (2028 proj.), -6.0 (2029 proj.), -5.1 (2030 proj.), -4.5 (2031 proj.), -4.2 (2032 proj.), -4.1 (2033 proj.)

### Revenue composition (percent of GDP)
- Tax revenue: 33.5 (2021), 34.3 (2022), 32.9 (2023), 33.5 (2024), 33.9 (2025), 35.4 (2026), 36.2 (2027), 36.3 (2028), 36.5 (2029), 36.5 (2030), 36.6 (2031), 36.6 (2032), 36.5 (2033)
- Tax on income, profits, and capital gains: 9.4; 10.6; 10.1; 8.8; 9.1; 9.2; 9.0; 9.3; 9.3; 9.4; 9.4; 9.4; 9.4
  - Personal income tax: 6.4; 8.1; 7.6; 6.8; 7.2; 7.2; 7.0; 7.2; 7.2; 7.3; 7.3; 7.3; 7.3
  - Corporate profit tax: 3.0; 2.5; 2.5; 2.0; 2.0; 2.0; 2.0; 2.0; 2.0; 2.1; 2.1; 2.1; 2.1
- Social security contributions: 6.6; 8.3; 7.5; 8.0; 7.2; 7.0; 7.0; 7.0; 6.9; 6.8; 6.8; 6.7; 6.8
- Property tax: 0.8; 0.7; 0.7; 0.6; 0.6; 0.6; 0.5; 0.5; 0.4; 0.4; 0.4; 0.3; 0.3
- Tax on goods and services: 13.4; 11.4; 12.1; 13.4; 13.9; 15.3; 16.1; 16.2; 16.5; 16.6; 16.7; 16.8; 16.7
  - VAT: 9.8; 9.0; 8.9; 9.7; 9.9; 10.7; 11.3; 11.2; 11.5; 11.7; 11.7; 11.8; 11.8
  - Excise: 3.3; 2.2; 2.9; 3.5; 3.8; 4.3; 4.7; 4.9; 4.8; 4.8; 4.8; 4.7; 4.7
  - Other (goods and services): 0.3; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2; 0.2
- Tax on international trade: 0.7; 0.5; 0.6; 0.9; 0.7; 0.8; 0.8; 0.8; 0.8; 0.8; 0.8; 0.9; 0.9
- Other tax: 2.6; 2.8; 1.9; 1.9; 2.3; 2.6; 2.6; 2.5; 2.6; 2.5; 2.5; 2.5; 2.5
- Nontax revenue: 3.0 (2021), 15.9 (2022), 22.2 (2023), 14.3 (2024), 10.1 (2025), 7.7 (2026), 5.6 (2027), 4.2 (2028), 4.1 (2029), 4.0 (2030), 4.0 (2031), 3.9 (2032), 3.8 (2033)
- Grants: 0.0 (2021), 9.3 (2022), 6.6 (2023), 10.8 (2024), 6.9 (2025), 4.4 (2026), 2.4 (2027), 2.4 (2028), 1.1 (2029), 0.9 (2030), 0.9 (2031), 0.8 (2032), 0.8 (2033)

### Expenditure composition (percent of GDP)
- Current expenditure: 36.6 (2021), 63.5 (2022), 70.2 (2023), 59.1 (2024), 55.4 (2025), 49.9 (2026), 40.9 (2027), 39.2 (2028), 38.7 (2029), 37.8 (2030), 37.2 (2031), 36.9 (2032), 36.7 (2033)
  - Compensation of employees: 9.5; 23.9; 22.8; 19.5; 17.2; 13.2; 7.7; 7.2; 6.8; 6.5; 6.5; 6.6; 6.6
  - Goods and services: 8.9; 16.3; 25.8; 14.5; 13.2; 11.5; 8.0; 6.6; 6.4; 6.0; 6.0; 5.8; 5.5
  - Interest: 2.8; 3.1; 3.9; 6.0; 5.8; 6.6; 6.9; 6.4; 6.4; 6.1; 5.7; 5.4; 5.2
  - Subsidies to corporations and enterprises: 2.1; 2.5; 2.4; 2.2; 2.2; 2.1; 2.1; 1.7; 1.6; 1.5; 1.4; 1.4; 1.3
  - Social benefits: 13.3; 17.7; 15.3; 17.0; 17.0; 16.3; 16.2; 17.3; 17.5; 17.6; 17.6; 17.8; 18.0
  - Social programs (on budget): 2.8; 5.5; 3.7; 5.2; 5.5; 5.5; 5.4; 5.4; 6.4; 6.9; 7.1; 7.1; 7.8
  - Pensions: 9.5; 11.2; 11.5; 11.4; 11.2; 10.5; 10.2; 11.1; 10.0; 9.4; 9.0; 9.1; 8.4
  - Unemployment, disability, and accident insurance: 1.0; 0.9; 0.1; 0.3; 0.3; 0.3; 0.6; 0.9; 1.1; 1.3; 1.5; 1.6; 1.7
  - Other current expenditures: 0.0 across all years shown
- Capital expenditure: 3.8 (2021), 2.5 (2022), 4.8 (2023), 5.2 (2024), 5.1 (2025), 5.6 (2026), 5.8 (2027), 6.0 (2028), 6.0 (2029), 5.9 (2030), 5.9 (2031), 5.9 (2032), 5.9 (2033)
- Net lending: 0.1 (2021), 0.0 (2022), -0.1 (2023), 0.4 (2024), 0.8 (2025), 2.4 (2026), 0.3 (2027), 0.1 (2028), 0.5 (2029), 1.0 (2030), 1.0 (2031), 1.0 (2032), 1.0 (2033)
- Contingency reserve (includes unallocated portion of expenditures from the COVID fund): 0.0 (2021), 0.0 (2022), 0.0 (2023), 0.7 (2024), 0.7 (2025), 0.7 (2026), 0.7 (2027), 0.7 (2028), 0.5 (2029), 0.0 (2030), 0.0 (2031), 0.0 (2032), 0.0 (2033)

### Financing and debt dynamics (percent of GDP)
- General government financing (total): 4.0 (2021), 15.7 (2022), 19.7 (2023), 17.6 (2024), 17.9 (2025), 15.4 (2026), 6.0 (2027), 5.4 (2028), 5.1 (2029), 4.2 (2030), 3.6 (2031), 3.4 (2032), 3.3 (2033)
- External financing (net): 2.4; 10.8; 16.6; 12.9; 7.5; 4.3; 1.4; -0.7; 2.1; 2.0; 1.2; 0.9; 1.0
  - Disbursements: 4.4; 11.8; 17.7; 16.0; 11.1; 8.1; 4.5; 2.9; 5.8; 6.1; 5.9; 5.6; 5.4
  - Amortizations and other external payments: -2.0; -1.1; -1.1; -3.0; -3.6; -3.7; -3.1; -3.5; -3.7; -4.1; -4.7; -4.8; -4.5
- Domestic (net) financing: 1.6 (2021), 5.1 (2022), 3.1 (2023), 4.6 (2024), 10.4 (2025), 11.1 (2026), 4.5 (2027), 6.1 (2028), 3.0 (2029), 2.2 (2030), 2.4 (2031), 2.5 (2032), 2.4 (2033)
- Bond financing (net): 1.2; 5.7; 2.8; 4.5; 10.3; 11.0; 4.2; 5.7; 2.7; 2.0; 2.3; 2.3; 2.3
  - Of which: NBU (Net): -0.3; 7.4; -0.2; -0.2; -0.2; -0.1; -0.1; -0.1; -0.1; -0.1; -0.1; -0.1; -0.3
  - Of which: Commercial banks: 1.5; -1.5; 2.6; 4.6; 10.1; 11.2; 4.3; 5.8; 2.7; 2.0; 2.3; 2.3; 2.5
- Direct bank borrowing: 0.6 (2021), 0.0 (2022), -0.1 (2023), 0.0 (2024) through 2033: 0.0 across projections
- Deposit finance: -0.3; -0.7; -0.9; 0.0; 0.0; 0.0; 0.3; 0.3; 0.3; 0.2; 0.2; 0.1; 0.1
- Privatization and other items: 0.1; 0.4; 1.3; 0.1; 0.1; 0.1; 0.1; 0.1; 0.1; 0.0; 0.0; 0.0; 0.0
- Financing gap/unidentified measures (-gap/+surplus): 0.0 across all years

### Memorandum items (levels and ratios)
- Primary balance: -1.1 (2021), -12.6 (2022), -15.8 (2023), -11.5 (2024), -12.1 (2025), -8.8 (2026), 0.9 (2027), 1.0 (2028), 1.3 (2029), 1.9 (2030), 2.1 (2031), 2.0 (2032), 1.9 (2033)
- Public and publicly-guaranteed debt: 48.9 (2021), 78.4 (2022), 82.9 (2023), 105.9 (2024), 123.2 (2025), 135.7 (2026), 134.3 (2027), 132.4 (2028), 130.3 (2029), 127.6 (2030), 124.5 (2031), 121.3 (2032), 118.3 (2033)
- Nominal GDP (billions of Ukrainian hryvnia): 5,451 (2021), 5,191 (2022), 6,495 (2023), 7,238 (2024), 7,946 (2025), 8,598 (2026), 9,400 (2027), 10,245 (2028), 11,166 (2029), 12,170 (2030), 13,264 (2031), 14,457 (2032), 15,757 (2033)

*Sources: Ministry of Finance; National Bank of Ukraine; and IMF staff estimates and projections.*

### 1.      This annex updates the SRDSAs performed for the 2023 Article IV Consultation and 2

### 1ukrea2024001 - 1.      This annex updates the SRDSAs performed for the 2023 Article IV Consultation and 2

### Overall assessment
- The updated SRDSA finds an overall assessment of high risks, based on determinations of high risks in both the medium- and long-term horizons.
- Debt was assessed as unsustainable in a pre-restructuring scenario.
- Despite pre-restructuring unsustainability, staff assesses debt as sustainable on a forward-looking basis given:
  - commitments under the program,
  - assurances from official creditors,
  - a credible process for private external debt restructuring.

### Baseline and downside scenarios (policy and macro assumptions)
- Baseline macro outlook:
  - Real GDP growth in 2024 remains around the "3–4   percent" range used in the last SRDSA.
  - Real GDP is projected to return to its pre-war level in 2030.
  - Inflation has surprised on the downside and is expected to be a bit lower in the early years; the medium-term inflation outlook is little changed.
- Downside scenario:
  - The shock is expected to materialize in the second quarter of 2024.
  - The contraction in the downside is somewhat smaller than in the 2nd review.
- Financing assumptions:
  - 2023 outturn reflects the absence of about $3.3 billion of expected U.S. grants and slightly higher disbursements from the World Bank.
  - In the projection horizon, U.S. grants are expected in 2024, consistent with the U.S. administration’s budget proposal, plus some newly announced grants from other partners.
  - Financing from the European Commission under the Ukraine Facility has been fully included, and the assumed profile of EC disbursements has been brought forward a bit.
  - Total official external financing assumed under the baseline (excluding the IMF) amounts to $94.4 billion over the program period.
  - After the program, budget support disbursements from partners are expected to be lower, around US$4.5–12 billion per year.
  - Baseline envisages a return to market access only in 2029.
- Coverage:
  - Authorities represent a dispute on three debts with Russia: a series of 2013 Eurobonds amounting to US$3 billion (subject to UK legal proceeding) and two bilateral loans with Russia amounting to about US$0.6 billion.
  - Following Fund procedures for disputed claims, these debts have been excluded from the debt stock in this DSA update, though they represent contingent liability risks in case of an adverse judgment.
  - Pre-restructuring SRDSAs incorporate projected payments on Ukraine's GDP warrants consistent with projected growth paths over 2024–33 under a passive policy assumption.

### Debt and gross financing needs (GFN) trajectories and risk signals
- Current estimate for end-2023 debt outturn is described as "a little below 85 percent of GDP" and is a bit lower than projected in the last SRDSA.
- In both baseline and downside, debt-to-GDP paths rise initially then resume a somewhat downward trend over the medium run.
- Gross financing needs are a bit lower than in the 2nd Review in both scenarios.
- Mechanical tools and medium-term modules:
  - Both medium-term mechanical tools indicate risks at high levels.
  - Overall risk metrics are very high, consistent with unsustainable debt absent restructuring.
  - Long-term risks remain assessed as high given extremely high uncertainty (including refinancing concessional debt on less favorable terms).
  - The fanchart indicates very high uncertainty around the debt trajectory; the GFN stress test finds persistently high financing needs, especially in the near term.

### Debt restructuring targets (indicative modeling)
- Public debt should reach 65 percent of GDP by 2033.
- Gross financing needs should average 8 percent of GDP in the post-program period (2028–33).
- Complementary targets:
  - Public debt of 82 percent of GDP by 2028.
  - Achieve debt service flow relief on external obligations of 1–1.8   percent of GDP per year.
- Rationale for flow relief:
  - Realizing such savings would reduce demands on local financial institutions to absorb government paper, create space for lending to support activity, and build liquidity buffers for macro-fiscal or contingent liability shocks.

### Policy and financing conditions to restore sustainability
- Restoration of debt sustainability depends on three ingredients:
  1. Fiscal adjustment — authorities’ plans under the program incorporate a meaningful revenues-based fiscal adjustment to be implemented over the duration of the program.
  2. Substantial concessional financing — official bilateral donors have provided commitments of substantial financing on concessional terms.
  3. Debt restructuring — donors agreed to a debt standstill during the program and provided assurances to restructure their claims before the final review; staff assesses a credible process exists to restructure external commercial debt in line with Fund staff targets.
- With implementation of program policies and commitments, all three conditions would be met and staff continues to assess debt as sustainable in a forward-looking sense.

### Coverage, disclosures, and public debt structure notes
- DSA coverage includes:
  - central government direct debt;
  - domestic and external government-guaranteed debt (loans and bonds) extended to SOEs;
  - debt of local governments;
  - Ukraine's liabilities to the IMF not included in central government direct debt.
- Exclusions:
  - non-guaranteed domestic and external liabilities of SOEs and disputed debts are not included.
- At end-2023:
  - debt held by external official creditors rose further due to substantial bilateral and multilateral financing disbursed in 2023;
  - domestic debt is mostly held by residents and denominated in hryvnia;
  - the share of FX debt in total debt is expected to continue rising based on expected official financing during the program, implying currency risk.

*Source: IMF staff.*

### Annex III. Figure 6. Ukraine: Medium-Term Risk Analysis (Baseline Scenario)

### Annex III. Figure 6. Ukraine: Medium-Term Risk Analysis (Baseline Scenario)

### Summary findings
- Both medium-term modules signal high sovereign stress risks in the baseline scenario.
- The Debt Fanchart Index (DFI) remains deeply in high-risk territory and is little changed from the last DSA.
- The GFN Financeability Index (GFI) indicates high liquidity-related risks driven by elevated average gross financing needs and large changes in bank claims on the government in a stress scenario.
- Current level of bank exposures to the government: 22.9 percent (pct) of bank assets.
- Overall medium-term index: High.

### Debt Fanchart (Debt fanchart module)
- Fanchart width: 152.4.2 (percent of GDP)
- Probability of debt non-stabilization (percent): 18.70.2
- Terminal debt-to-GDP x: 60.51.3
- Institutions index (Debt fanchart index, DFI): 3.7
- Risk signal: High
- Percentile in peer group: 0.82; 0.69; 0.8; 0.41; 0.34 (presented in the figure as percentile markers)

### Gross Financing Needs (GFN) module
- Average baseline GFN (percent of GDP): 16.15.5
- Banks' claims on the general government (pct bank assets): 22.97.4
- Change in banks' claims in stress (pct banks' assets): 68.122.8
- GFN financeability index (GFI): 35.7
- Risk signal: High

### Medium-Term Index and risk metrics
- Components and weights:
  - Debt fanchart index: 3.7
  - GFN financeability index: 35.7
- Medium-term index: Risk signal: High
- Final assessment: High
- Prob. of missed crisis, 2024-2029, if stress not predicted: 81.8 pct.
- Prob. of false alarms, 2024-2029, if stress predicted: 0.0 pct.

### Narrative commentary (from source)
- "Both medium-term modules signal high sovereign stress risks in the baseline scenario, as in the previous DSA for the Second Review and 2023 Article IV Consultation."
- "The DFI is little changed from the last DSA due and remains deeply in high-risk territory."
- "The GFI also still indicates high liquidity-related risks, reflecting projections of still-elevated average GFN-to-GDP ratios and large changes in bank claims on the government in a stress scenario, which are very high and would be difficult to manage if these shocks materialized."
- "The current level of bank exposures to the government is 22.9 percent."
- "Overall, the medium-term index continues being consistent with high risk in line with the mechanical signals from both tools."

*Source: IMF staff estimates and projections.*

### 6. Our international partners have assured us of their continued support to help ensure that

### 1ukrea2024001 - 6. Our international partners have assured us of their continued support to help ensure that

### Debt treatment, external financing, and program financing
- Public announcement on March 24, 2023 of intention to undertake a debt treatment of external public debt with the purpose of restoring public debt sustainability on a forward-looking basis.  
- Plan to start negotiations with bond holders soon with objective of completing needed operations no later than mid-2024.  
- A group of official creditors committed to a two-step process for a debt treatment and last December formally extended their debt moratorium until 2027.  
- The Extended Fund Facility (EFF) arrangement approval in March 2023 helped mobilize an external financing package from international partners totaling US$121.8 billion over the program period (2023Q2–27Q1).  
- Request for completion of the third review and a disbursement in the amount of SDR 663.90 million (33 percent of quota), to be channeled for budget support.

### Multiple currency practices (MCPs) and exchange rate regime
- Under IMF’s new policy on multiple currency practices (MCPs), the three previously approved MCPs are now considered eliminated.  
- Continuation of transition in exchange rate regime laid out in the NBU’s Strategy; authorities will monitor carefully in close collaboration with the IMF to help ensure MCPs do not arise.  
- Transition to managed flexibility of the exchange rate: since transition exchange rate depreciated through end-February 2024 by a cumulative 4.5 percent.  
- FX market conditions: spread between official and cash rates has remained low in the 1–5 percent range.

### Program commitments, monitoring, and staff support
- Memorandum of understanding between the National Bank of Ukraine (NBU) and the Ministry of Finance (MOF) established to govern mechanism of servicing of the government’s obligations to the Fund by the NBU on behalf of the MOF.  
- Authorities state that policies in the attached MEFP are adequate to achieve program objectives in the baseline and in a downside scenario; committed to adapt policies as conditions evolve and to consult with the IMF in advance of revisions in line with IMF consultation policies.  
- Commitment to provide IMF staff with data and information needed to monitor program implementation, including adherence to data provision requirements in the Technical Memorandum of Understanding (TMU).  
- Consent to IMF publication of the letter, the MEFP, the TMU, and accompanying Executive Board documents.

### Context and recent developments (war impact and program role)
- Continued effects of Russia’s invasion: around a quarter of the population displaced; devastating attacks on infrastructure and missile strikes countrywide.  
- Despite devastation, macroeconomic, financial, and external stability have been preserved; fiscal deficit remains very high with large external and domestic financing needs.  
- EFF arrangement provides strong anchor; program has helped infuse predictability into macroeconomic management.

### EU support and structural context
- EU’s Ukraine Facility: the €50 billion Ukraine Facility for 2024–27 approved in February 2024 by the EU Council expected to support budgetary needs, recovery, reconstruction, and modernization.  
- Candidate status for EU accession will frame recovery and reconstruction through regulatory regime defined by the EU acquis and progressive integration into the European internal market under Association Agreement and Deep and Comprehensive Free Trade Agreement.

### Economic outlook and key macroeconomic indicators
- 2023 estimated growth: 5 to 6 percent.  
- 2024 projected growth: 3 to 4 percent (assumes no further escalation of the war).  
- Inflation: peaked at 26.6 percent y/y in end-2022; 5.1 percent y/y at end-December 2023; expected to edge up in 2024 to around 8.5 percent.  
- Current account: deficit of US$9.8 billion in 2023 (followed a surplus of US$8 billion in 2022).  
- Gross international reserves estimated to reach US$42.1 billion by end-2024 under the baseline, equivalent to 5.4 months of prospective imports.  
- Credit and banking: official non-performing loan ratio fell to 37 percent in January 2024; provisioning ratio 83 percent. Deposits increased by 27 percent in 2023.  
- Agricultural and trade disruptions noted: termination of the grain corridor and trade restrictions from neighboring countries materially affected exports and current account.

### Risks, scenarios, and policy stance
- Downside risks: prolonged war, further damage to energy infrastructure, interruption of export transit routes, delayed donor support, and difficulty mobilizing higher domestic financing.  
- Authorities ready to take additional feasible fiscal measures under an updated downside scenario, including tax policy measures guided by the National Revenue Strategy (NRS) and spending measures based on efficiency gains.  
- Authorities stand ready to deploy foreign reserves to maintain FX market stability if needed and welcome partners’ readiness to provide additional financial resources sufficient to close financing gaps and preserve debt sustainability.  
- Upside potential: faster improvement in security could accelerate return of migrants, private investment, recovery of sentiment, reconstruction spending, and structural reforms tied to EU accession that could raise TFP growth.

### Policy framework and two-phased approach (2024–27)
- Phase 1: focus on maintaining macroeconomic, external, and financial stability; ensure robust budget implementation in 2024; maintain social spending to the extent possible; transition to managed flexibility of the exchange rate.  
- Phase 2: once war has tapered off, shift focus to expansive reforms for recovery and early reconstruction, promote economic growth, and restore medium-term external viability; revert to pre-war policy frameworks as conditions allow; EU accession progress as major anchor.

### Fiscal outturns for 2023 and fiscal policy for 2024
- Overall deficit 2023: UAH 1,282 billion, or 19.7 percent of GDP.  
- End-December 2023 fiscal targets: all but one achieved. Key figures:  
  - Non-defense cash primary balance excluding grants: UAH 380.5 billion at end-December (program floor UAH 105.0 billion, Quantitative Performance Criterion). Authorities request modification of end-March QPC from UAH 140.7 billion to UAH 135.0 billion while expecting same full-year result.  
  - End-December indicative target on overall balance excluding grants: UAH -1,717 billion (floor UAH -1,744.7 billion).  
  - Tax collections (excluding social security contributions): end-December UAH 1,650.4 billion against target UAH 1,654.0 billion (missed by a small amount; Quantitative Performance Criterion).  
  - Accumulation of overdue accounts payable (domestic arrears): UAH 1.6 billion in December (ceiling UAH 2.0 billion).  
  - Guarantees issued by the state government in 2023: UAH 40.3 billion (adjusted end-December 2023 ceiling UAH 57.5 billion, Quantitative Performance Criterion).  
  - Social spending: UAH 551.1 billion at end-June, UAH 51.5 billion above Indicative Target of UAH 499.6 billion.

- 2024 budget priorities and measures:  
  - Budget remains anchor for fiscal policy; prioritizes national defense with allocation consistent with a full-year of war operations.  
  - Containment of expenditures elsewhere while maintaining adequate resources for social safety net and support for war veterans and vulnerable populations.  
  - Revenue measures: extraordinary one-time tax on bank profits for 2024; banks to be taxed at a permanently higher corporate income tax rate going forward.  
  - Provision to reallocate personal income taxes between state and local budgets to provide adequate resources for key programs while avoiding interference with independence of local authorities.

*Document: Memorandum of Economic and Financial Policies and accompanying authorities’ letter (selected sections).*

### 12.       Under our projections, the overall balance excluding grants for 2024 will continue to

### 12.       Under our projections, the overall balance excluding grants for 2024 will continue to 

### Fiscal outlook for 2024
- Overall balance excluding grants for 2024: UAH -1,562 billion, or -20.2 percent of GDP.
- Annual pension indexation: 7.9 percent, carried out in line with legislation and within the expenditure envelope consistent with the deficit projection.
- Monitoring of budget implementation:
  - Floor on the non-defense cash primary balance of the general government excluding grants (Quantitative Performance Criterion).
  - Floor on the overall cash primary balance of the general government excluding grants (Indicative Target).
  - Floor on state budget spending on social programs (Indicative Target).
- Financing mix: primarily financed through budget support from international donors, with an important contribution sought from the government domestic bond market (¶19).
- Assessment: Given the financing mix, the deficit, while large, is consistent with fiscal sustainability.

### Contingent measures and readiness for shocks
- External financing risks acknowledged; prepared to take additional fiscal measures as needed to ensure stability.
- Working group to identify potential temporary revenue measures for 2024:
  - Met on February 9, 2024.
  - Identified potential measures yielding at least ½ percent of GDP (end-February structural benchmark).
  - Working group will continue efforts given high uncertainties and need to maintain stability.
- Policy focus if downside scenario materializes: predominantly increasing revenues and mobilizing domestic financing, reflecting substantial demands for defense and social protection.

### Budget planning for 2025 and medium-term priorities
- MOF launched preparation of the Budget Declaration for 2025-2027 as basis for the 2025 Budget.
- Expectations for 2025: challenging with substantial expenditure pressures tied to defense, reconstruction, and development priorities.
- Financing outlook: continued importance of external partners, with increased self-reliance needed in generating tax and non-tax revenues.
- Process commitment: adhere to the standard schedule to ensure careful preparation and timely adoption.

### Fiscal policy implementation principles (2024 and beyond)
- Revenues:
  - Refrain from introducing tax amnesties for the duration of the program.
  - Refrain from tax policy and administrative measures that may erode the tax revenue base.
  - Any tax-related measures to support imports related to national defense and security will be targeted, timebound, controlled, and subject to oversight.
- Expenditures:
  - Resist pressures on non-core spending categories.
  - Only revise spending categories in consultation with IMF staff and after identifying new financing sources or compensating fiscal measures.
  - Maintain strong commitment controls and strict oversight of budget execution by key spending units.

### Medium-term fiscal strategy and targets
- Return to sustainability involves three components:
  1. Continue implementing fiscal adjustment to deliver a medium-term primary surplus.
  2. Carefully evaluate the financing mix and seek highly concessional terms wherever possible.
  3. Complete a treatment of external public debt to bring public debt and gross financing needs back down to manageable levels (¶35).
- Revenue mobilization target: aim to mobilize 3-4 percent of GDP in additional revenues during 2024-27, as prescribed by the National Revenue Strategy (NRS).

### Reconstruction needs and financing principles
- RDNA-3 (published February 15, 2024) estimate: reconstruction needs of US$486 billion over the next 10 years.
- Priority sectors: housing, transport, and commerce and industry.
- Financing approach for reconstruction:
  - Ensure activities are consistent with a return to fiscal and debt sustainability.
  - Carefully evaluate the financing mix and seek highly concessional terms.
  - Use mechanisms consistent with integrated public investment management and the medium-term budget framework (see ¶28).

### Financing strategy — external and domestic financing
- 2023 gross external budget support disbursements (including the IMF): US$42.5 billion.
- 2024 financing needs: continued support from the EU, IFIs, and bilateral donors in amounts, composition, and timing envisaged is vital.
- IMF-supported program period referenced: April 2024–March 2025; firm financing assurances in place for this period.
- Beyond March 2025: key partners have assured continued support, providing good prospects for full financing over the program period.

### Domestic bond market and net domestic financing (¶19)
- Objective: maximize issuance of domestic government securities in the primary market with an objective of obtaining net positive financing in 2024.
- 2023 domestic market performance:
  - Net debt issuance on the domestic market: UAH 183 billion, or US$5 billion.
  - Implied rollover rate: 149 percent.
  - About 57 percent of gross hryvnia issuance was in the form of designated benchmark bonds that banks may use to meet reserve requirements.
  - Progress made in matching issuance yields and maturities to market demand and lengthening maturities.
- 2024 strategy:
  - Continue issuing government securities to obtain a meaningful contribution.
  - Study flow of liquidity into banking system, including on a bank-by-bank basis, to develop targeted strategies to encourage increased uptake of government bonds.
  - Joint Working Group under the Financial Stability Council (established April 2023) to support measures.
- Expected outcomes:
  - Successful placement of domestic securities coupled with timely external financing on appropriately concessional terms will enable budget execution as planned, avoid arrears, and continue to avoid monetary financing.
  - Ensure budget financing consistent with macroeconomic and financial stability and debt sustainability.

### Debt management and institutional capacity (¶20–21)
- External commercial debt treatment planned to conclude by mid-2024 to obtain adequate flow relief and align with program parameters.
- Medium-Term Debt Strategy (MTDS) update planned with a view to publishing by end-2024.
- Strengthening Debt Management Agency: increase staffing and training to support MTDS implementation and upcoming debt operation.
- Support domestic debt market development:
  - Benchmark securities outside the reserve requirement mechanism.
  - Expand and diversify investor base, including encouraging return of non-residents and cautious restoration of international capital market access over the medium term.
- Treasury cash and liquidity management:
  - Need to strengthen liquidity forecasting and cash management to lower volatility and transaction costs.
  - Conducted diagnostic assessment of treasury cash and liquidity management with FAD TA, based on international best practices.
  - Plan to incorporate findings and seek further TA.

### Fiscal structural reforms and National Revenue Strategy (NRS)
- Public finance reform focus areas:
  - Raise adequate revenues for reconstruction and social spending through efficiency, fairness, and simplicity (NRS).
  - Strengthen public investment processes, project management cycle, and commitment controls for post-war public investment and PFM.
  - Reform and strengthen the pension system and social safety net.
  - Enhance fiscal transparency and management of fiscal risks.
  - Strengthen interlinkages between MTBF, reconstruction priorities, and public investment management while keeping SOE fiscal risks under control.
- Commitment: continue to abstain from tax policy and administrative measures that adversely affect the tax revenue base and refrain from introducing new categories of taxpayers into existing preferential regimes.

### NRS specifics, sequencing, and implementation milestones
- NRS adopted in December 2023 (Structural Benchmark, end-December 2023).
- NRS objectives: fair and competitive tax framework to generate revenues sufficient for post-war development while maintaining fiscal and debt sustainability.
- Sequenced approach: initial focus on tax and customs administration reforms emphasizing integrity, reducing administrative and political discretion, and improving trustworthiness of administrative processes.
- NRS-supported measures and milestones:
  - Assessment of effectiveness of tax privileges and their cost to the budget; draft to be finalized by end-July, 2024 (Structural Benchmark, end-July 2024).
  - Approval of a long-term Digital Development Plan for the STS in accordance with the NRS implementation plan (by the end of 2024), including consolidation of IT platforms and independent administration.
  - Define strategic measures to ensure confidentiality and protection of data in STS systems, including concept of using anonymized data (data masking) pending detection of tax non-compliance (NRS section 4.2.3).
  - Develop legislative amendments to implement rules to combat tax evasion aligned with the EU Anti-Tax Avoidance Directive (EU ATAD) and international best practices.

### NRS policy and administrative reforms planned (tax policy and administration)
- Tax policy areas for 2024 and beyond:
  - Develop comprehensive package for post-war carbon emissions taxation based on environmental protection concept.
  - Analyze and assess taxation of extractive industries.
  - Define principles of taxation of virtual assets aligned with EU rules, including information exchange and OECD Global Forum initiatives.
  - These reforms supported by IMF FAD TA and other international partners.
- Strengthening tax and customs administration:
  - State Tax Service (STS) measures:
    - Use Global Taxpayer Survey systematically at least once every two years; address 2023 issues and complete 2024 survey by end-year.
    - Develop methodology to operationalize tax risk management system and adopt a comprehensive compliance improvement plan.
    - Organizational restructuring reflecting functional review results (by end-2024).
    - Determine criteria to assess the impact and efficiency of the STS Anti-Corruption Program.
    - Implement IT solutions for SAF-T UA (electronic format for large taxpayer data submission).
    - Improve information exchange with foreign competent authorities, including obtaining positive assessment from the OECD Global Forum on Information Security Management Maturity.
  - State Customs Service (SCS) measures:
    - Adopt legislation reinstating post-clearance customs audit effective end-April 2024.
    - Adopt and implement legislation to criminalize large-scale customs fraud and smuggling of all goods.
    - Launch initiative to determine criteria for assessing impact of the SCS Anti-Corruption Program.
    - Reforms of HR and compensation policies; improve operational management from headquarters (development of centers of excellence); move verification/checking of customs documents from border crossings to inland offices.

### Economic Security Bureau of Ukraine (ESBU) reforms (¶27)
- New law on the ESBU to:
  - Provide a clear mandate and scope for investigative powers focused on major economic crimes and strengthen analytical capacity.
  - Ensure STS and SCS capacity to address tax and customs violations; preserve delineation of investigative powers between ESBU and NABU.
  - Establish legal basis for ESBU operations, including:
    - Open, transparent and competitive process for selection of management and staff.
    - Strengthened requirements for selection commission for ESBU head, including decisive vote for independent experts with international experience.
    - Set up a disciplinary committee.
    - Introduce a contract system for employees.
    - Develop an attestation mechanism based on high-level principles in law and procedures approved by the CMU; attestation of managers prioritized and completed within a reasonable period after appointment of new ESBU head (Structural Benchmark, end-June 2024).

_International Monetary Fund — Ukraine program documents (excerpts)._

### 28. We will continue enhancing expenditure planning and the medium-term budget

### 28. We will continue enhancing expenditure planning and the medium-term budget framework (MTBF)

### Expenditure planning and MTBF actions
- Undertake a diagnostic review of pre-war MTBF policies and practices relative to best practices (Structural Benchmark, end-October 2024).
- First set of gap analyses completed and key areas of focus identified.
- Prepared the budget declaration for 2025-2027; letters sent to key spending units requesting inputs to estimate baseline costs of public services for 2025-2027—an essential input to enhance credibility of fiscal forecasts and assess affordability of existing policies.
- Sequenced approach to strengthen medium-term budget planning and expand MTBF coverage to include budgets of local governments and social funds.
- Priorities include alignment of MTBF with international practices and EU requirements.
- Continuous IMF TA support expected to enhance estimation of baseline expenditures in the instructions for the formulation of the 2026-2028 Budget declaration and 2026 Budget.

### Pensions and social spending (World Bank TA support)
- Pensions
  - Prepare a comprehensive conceptual framework to improve the pension system and review possibility of introducing a second pillar when conditions are in place.
  - Any legal amendments increasing pension expenditures must be accompanied by a medium-term fiscal and debt sustainability analysis and clear identification of necessary resources in amendments to the Pension Fund of Ukraine budget.
  - Committed to refrain from: (i) introducing new special pensions or privileges; (ii) providing further discretionary benefit increases; and (iii) modifications that would lead to a lowering of the legally defined retirement age.
- Mechanisms to support vulnerable groups
  - Enhance targeting and means testing of benefits to vulnerable populations.
  - With World Bank support, draft legislation to consolidate different types of social entitlements; explore integration of various social assistance programs under a single unified package based on individual needs regardless of recipient status (e.g., IDP or non-IDP).
  - Increased the income threshold for Guaranteed Minimum Income (GMI) program eligibility by 10 percent.

### Fiscal transparency and fiscal risk management
- Strengthened fiscal risk statement attached to the 2024 budget; will include consolidated financial performance analysis and stress testing across major SOEs going forward.
- Steps to integrate FRS analysis into annual budget preparation and the budget cycle; letter issued to line ministers and key spending units to start identifying key fiscal risks for inclusion in the 2025-2027 medium-term budget declaration.
- Continue strengthening SOE stress testing under different scenarios and identify major public companies severely affected by the war; prepare assessment of potential fiscal and quasi-fiscal costs (Structural Benchmark, end-September 2024). IMF TA requested; scope and timeline being defined.
- Develop methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including PPPs, guarantees, and SOEs; outreach to MOE and other line ministries to establish stronger links between fiscal risk assessment and government spending predictability.
- Finalize development of risk-based fees for guarantees and prepare amendments to the existing decree with ongoing IMF TA; upcoming IMF TA mission expected in April-May 2024.
- In collaboration with MOE, MOF will publish a list of PPPs and prepare a review of associated risks and potential impact on the 2025 Budget and onwards by end-September 2024.

### BDF governance and 5-7-9 program risk mitigation
- Draft concept note approved by Cabinet of Ministers at end-2023 to strengthen governance of BDF and redesign 5-7-9 program to target SMEs, phase out large company eligibility, enhance monitoring, and maintain safeguards.
- CMU approved phasing out large company eligibility in January 2024.
- February 2024: MOF, with international partners, commissioned an independent assessment of the BDF and its support programs to refine operational design to serve SMEs facing substantial barriers to funding.
- Planned amendments to concept note to incorporate:
  - BDF governance and financial self-sustainability measures; keep lending programs targeted and time bound; eliminate political interference.
  - Establish a majority independent supervisory board by end-September 2024; include minority shareholders and international agencies (KfW, JICA, etc.) as observers during selection of independent members.
  - Hire independent members via an independent recruitment firm; supervisory board to be chaired by an independent member.
  - Approve a law by end-May 2024 to allow foreign independent supervisory board members of the BDF to have similar asset declaration obligations as foreign independent members of supervisory boards of SOBs.
  - Provide BDF an adequate operational budget, including from program budget allocation for 5-7-9 lending subsidy and/or 0.5 percent of the amount compensated to the banks.
  - MOF to develop a draft law on the BDF by end-December 2024 to support board independence and responsibilities, including: (i) analysis and recommendations to CMU on targeting, implementation and phasing-out of lending programs; (ii) setting policies, processes and controls to keep lending programs within medium-term and annual budgets; (iii) detailed guidance on eligibility criteria and annual reviews of borrower eligibility; (iv) rules for participating banks; (v) regular detailed reporting on lending program performance and recommendations, including semi-annual reports and detailed publishing of costs and operational statistics.
- 5-7-9 loan program immediate measures:
  - Ringfence fiscal and financial sector risks.
  - MOF approved the budgetary passport submitted by MOE, enabling compensation of amounts due to participating banks starting from end-March 2024.
  - Strengthen targeting criteria to SMEs, reconsider lending limits, enhance monitoring, and maintain safeguards.
  - Clarify MOE (identification of sector priorities for SMEs) and MOF (control and monitoring of spending under the program) roles; medium-term and annual budget declarations to establish direction and spending envelope for subsidized interest.
  - MOF and MOE to develop coordination mechanisms to ensure directions and bank lending limits are respected and consistent with budgeted interest subsidy envelope.
- Finalize the concept note by end-March 2024 (Structural Benchmark end-March 2024) and prepare necessary regulatory amendments to operationalize it.

### Transparency of budgetary funds and special accounts
- Fund for the Liquidation of the Consequences of the Armed Aggression
  - Supported restoration of destroyed and damaged property in the amount of UAH 38.1 billion under Budget 2023.
  - In 2024, Fund will continue serving its purpose as stated in Article 28 of the 2024 State Budget Law.
  - Sources for Fund operations expected to comprise the unspent balance of about UAH 24 billion as of end-2023.
- Special accounts
  - April 2023 amendment to the Budget Code to ensure transparency of sources, usage and reporting of funds on special accounts.
  - From mid-2023, MOF publishes information about sources and usage of funds on special accounts donated by private individuals and legal entities.
  - Commitment to further transparency and accountability of these accounts.

### Strengthening public investment management (PIM)
- Developed a roadmap to reform public investment management covering an ambitious reform agenda (Structural Benchmark, end-December 2023).
- With IMF TA and/or other partners, work to operationalize the roadmap and complement it with a government decree containing a specific action plan and timeline that links MTBF and national reconstruction priorities and specifies a gatekeeper role for MOF (Structural Benchmark, end-December 2024).
- Amend the Budget Code (by end-2024) to establish clear institutional links between MTBF, PIM and reconstruction priorities, bolstering MOF’s gatekeeper role and mitigating debt sustainability risks.
- Strengthen coordination between MOF, MOE, Ministry of Infrastructure and other line ministries (project execution responsibility remains with line ministries).
- Continue strengthening PIM policies consistent with best practices of MTBF and PIM, following principles of budget unity, coherence, and predictability.

### External debt strategy and debt treatment
- Publicly announced intention to proceed with a debt treatment of external public debt on March 24, 2023.
- Strategy aims to close financing gaps during the program period, reduce gross financing needs to manageable levels including after the program, place public debt on a sustainable path, and create conditions for private sector participation in post-war reconstruction while preserving financial stability.
- Hired external financial advisors; committed to a credible, transparent process and continue discussions with private creditors to seek feedback.
- Debt treatment elements:
  - Official bilateral debt: Paris Club creditors committed to a two-step process involving extension of debt standstill and assurance of final debt treatment sufficient to restore debt sustainability before final review of IMF-supported program. First stage—extension of standstill until 2027—formally concluded in December 2023. Will seek comparable terms with other official creditors.
  - External commercial debt: August 2022 agreement with international bondholders included a voluntary 24-month deferral of debt service on direct and state-guaranteed Eurobonds; similar deferrals on some non-guaranteed external commercial debt. Technical work to prepare for discussions with commercial creditors to begin shortly after completion of this review; goal to complete needed debt treatment no later than mid-2024 and achieve treatment consistent with IMF macroframework and debt sustainability assessment parameters.
- Continue to strictly limit issuance of guarantees (Quantitative Performance Criterion); adequate space provided for guarantees on loans from IFIs and foreign governments for recovery and reconstruction projects.

### Monetary and exchange rate policies
- Objectives: safeguard price and external stability and ensure adequate level of international reserves.
- After emergency measures early in the war (fixed exchange rate and FX controls for national security), policies adapted as conditions evolve, guided by the Strategy.
- Monetary policy
  - Maintain appropriate stance to support price stability, anchor inflation expectations, and foster FX market sustainability.
  - Cut the key policy rate (KPR) by a cumulative 1,000 bps to 15 percent in 2023 in view of rapid disinflation and favorable inflation trajectory.
  - Plan to strengthen the role of inflation as the nominal anchor and steer policy to sustain moderate inflation throughout 2024, followed by return toward the target of 5 percent over the NBU’s forecast horizon.
  - Easing cycle to continue more gradually in 2024, supported by shift to symmetric forward guidance, subject to risks to inflation and economic outlook on NBU’s forecast horizon.
  - Intend to maintain sufficiently positive real interest rates to support price and external stability.
  - Operational design adjustments and measures to manage banking system structural liquidity to ensure attractiveness of hryvnia-denominated instruments and strengthen monetary transmission.
  - October 2023 shift from a corridor to a floor system aligned the de jure KPR with the de facto main overnight CD instrument; will ensure parameters on standing facilities are consistent with appropriate monetary policy stance.
  - Consider introduction of instruments beyond overnight maturity over time to increase average maturity of sterilization operations while considering implications for primary government bond market.
  - Introduction of the 3-month CD linked to hryvnia term deposit growth in April 2023 continues to support increase in real rate of return and total volume of hryvnia term deposits; will study impact amid easing and fine tune parameters to support bank competition and sustain positive real return on hryvnia assets.
- Exchange rate policies
  - Transition from exchange rate peg to managed flexibility has been smooth; exchange rate acts as shock absorber and fluctuates with market conditions supported by FX intervention.
  - Monitor FX market closely to ensure external stability; calibrate intervention framework to align with program objectives and ensure FX interventions are consistent with program NIR targets.
  - Avoid excessive exchange rate volatility under managed flexibility to help keep inflation and exchange rate expectations under control and preserve confidence in the hryvnia.
  - Facilitate functioning of FX cash market to ensure low and stable spread, including by easing access to noncash FX and increasing cash FX supply depending on market conditions.

*Source: 1ukrea2024001 - 28. We will continue enhancing expenditure planning and the medium-term budget framework (MTBF).*

### 42. We intend to maintain adequate FX reserves through the course of the program to

### 1ukrea2024001 - 42. We intend to maintain adequate FX reserves through the course of the program to

### FX reserves, external stability, and FX controls
- Intent to maintain adequate FX reserves through the program to safeguard external stability.
- 2023 developments:
  - FX reserves reached record levels in 2023 due to strong external financing flows, stronger than expected net exports and lower private outflows.
  - This allowed meeting the end-December Quantitative Performance Criterion on net international reserves.
- Request to increase the floor on the NIR QPC for end-March 2024 in view of better-than-expected FX reserve levels and continued commitment to external sustainability.
- FX controls policy:
  - Plan to carefully adjust FX controls to support economic recovery while maintaining FX market stability and addressing national and international security considerations.
  - Easing of FX controls over the past year on a case-by-case basis to support humanitarian aid, energy infrastructure and economic activity (in line with the FX Strategy).
  - NBU to amend necessary legislation to ensure discretionary right to approve permits for exemptions to general rules on cross-border transactions set by Resolution #18; approvals to be consistent with the FX Strategy and goal of safeguarding macroeconomic, financial and external stability.
  - Under IMF’s new multiple currency practice (MCP) policy, the three previously approved MCPs are now considered eliminated; continued monitoring during exchange rate transition to ensure multiple currency practices do not arise.

### NBU independence, monetary financing, and governance
- Commitment to avoid monetary financing:
  - Monetary financing was successfully avoided in 2023.
  - Commitment monitored by a ceiling on general government borrowing from the NBU (Indicative Target).
  - If unexpected critical needs arise or external disbursements are delayed, prioritized options: draw down excess government deposits or tap the government debt market; monetary financing from the NBU only as a last resort and in strictly limited amounts, underpinned by a mutually agreed MOF–NBU framework being developed in consultation with the IMF.
  - Avoidance of indirect forms of monetary financing outside core NBU functions (e.g., directed liquidity to banks for primary-market government securities); direct financing of off-budget programs by the NBU will be avoided altogether.
- Commitment to uphold independence and institutional effectiveness of the NBU:
  - Strong, independent NBU critical to macroeconomic stability and transition back to inflation targeting.
  - Governance arrangements:
    - Further enhanced the MoU between the NBU and the MOF for servicing the government’s obligations to the Fund through additional agreements, necessary contracts, and rigorous monitoring of settlements between the MOF and the NBU.
  - Financial autonomy:
    - Continue adherence to profit retention rules; distribution of NBU profits to state budget to follow procedures established by the NBU Law.
    - Provision envisaged to be introduced in the NBU law to grant NBU the right to advance profit transfers in 2024, while capping distributable profits to safeguard financial autonomy.
    - Commitment to refrain from using NBU profit for earmarked spending in 2024 and direct this revenue to the General Fund of the State Budget.
    - Acknowledgement that costs from monetary policy implementation via liquidity absorption (interest expenses on NBU CDs) are necessary and justified to support macroeconomic stability.
  - Financial reporting and EU accession preparation:
    - With IMF and other partners’ technical assistance, study ESCB accounting and financial reporting frameworks and assess NBU readiness to transition to financial reporting in line with ESCB standards.
- Unwinding wartime unconventional measures:
  - Intention to carefully unwind nonstandard wartime measures as conditions permit; ensure measures are targeted, clearly communicated and time bound.
  - As structural liquidity surplus unwinds, adjust monetary policy operational framework (including assessing merits of reverting to a corridor system).
  - Commitment to phase out wartime measures when conditions permit to strengthen monetary policy toolkit, safeguard NBU credibility and independence, and support eventual return to an inflation targeting framework.

### Financial sector stability, diagnostics, and contingency planning
- Emergency measures and operational continuity:
  - Emergency measures preserved financial stability; most bank branches operational, online banking available to clients with internet connectivity, non-cash payment system functioning normally, and liquidity robust for most banks.
  - “Power Banking” network of over 2,000 bank branches introduced in late 2022 to provide services during prolonged blackouts.
  - Licenses of eight small banks revoked under Martial Law (around 4 percent of system net assets as of December-2023); one bank (also around 4 percent of system assets) nationalized.
- Bank diagnostics and resilience work:
  - NBU completed a resilience assessment in 2023 with World Bank technical support covering banks comprising 90 percent of banking system assets.
    - Found banks generally adequately assess credit risk; minor additional capital requirements identified in five banks (mostly due to lower operating efficiency).
    - Most capital needs were in two banks and have already been addressed.
    - The other three banks required to submit capital management plans to the NBU to close the approximately UAH 10 billion (US$260 million) gap as of end-2023 in two stages by March 2026.
  - NBU plans to resume annual resilience assessments in 2025, including asset quality reviews and stress testing under baseline and adverse scenarios.
  - Prepare a prioritized interagency NPL resolution action plan by end-June 2024, informed by the NBU resilience assessment.
  - In line with Terms of Reference adopted January 2023:
    - Complete an independent asset quality review (AQR) once conditions have stabilized.
    - Carry out a subsequent bank viability assessment.
    - Current prohibition on bank capital distributions to remain until independent AQR findings fully reflected in banks’ regulatory ratios and financial statements.
- Contingency planning and minimizing fiscal costs:
  - NBU and Deposit Guarantee Fund (DGF) prepared contingency plans for potential high-impact events, in consultation with stakeholders and IMF staff.
  - Financial Stability Council approved plans related to adverse rulings from constitutional challenges against the DGF Law and updated contingency plan for litigation risks concerning past bank resolution decisions.
  - Continued focus on timely recovery of value from historical NPLs and assets of resolved banks while maximizing recovery of economic value.

### Bank rehabilitation, state ownership, and privatization plans
- Bank rehabilitation framework (Structural Benchmark, end-December 2024) to be prepared by DGF, MOF and NBU in consultation with IMF staff; framework to include:
  - Financial backstop mechanisms and improvements to the DGF’s financial position.
  - Measures to strengthen operational readiness, including regularly updated bank recovery and contingency plans.
  - Improved procedures to implement bank resolution tools and early intervention measures, including temporary administration for anti-crisis management.
  - Alignment of counterparty eligibility frameworks in monetary policy operations and lender-of-last-resort operations with international best practice.
- Interim steps already taken:
  - DGF and NBU prepared a diagnostic note by end-February 2024 to assess current bank resolution infrastructure.
  - Based on the diagnostic note, prepare a roadmap by end-April 2024 setting the reform agenda to close key outstanding gaps by end-December 2024.
- State ownership strategy:
  - Decisions that may increase state ownership will be taken in consultation with IMF staff and strictly limited to preserving financial stability and national security during Martial Law.
  - All systemic banks with majority state ownership will be under MOF responsibility; any non-systemic banks under state ownership will not be recapitalized using fiscal resources and will be transferred to the DGF for resolution upon breach of prudential requirements (Modified Continuous Structural Benchmark).
  - Key steps:
    - Prepare and implement a framework to inform decisions on additional banks coming under state control to preserve value and ensure effective operational management and decisions on future of such banks.
    - Continue analysis of banking system and wartime developments; consider updating general SOB strategy under Martial Law and those for individual majority state-owned banks prior to independent AQR.
    - If banks fall below regulatory capital requirements due to (i) NBU resilience assessment and/or (ii) new regulatory capital rules (¶53), they will be subject to capital management plans and business plan adjustments to return to compliance before the independent AQR.
    - Use independent AQR results to update general SOB strategy and strategies for individual majority public ownership banks, including privatization planning.
    - Prepare for privatization:
      - Review and update the 2012 draft law on SOB privatization in consultation with IFIs for submission to Parliament by end-March 2024.
      - Prepare two systemic state-owned banks for sale, Sense Bank and Ukrgasbank, by selecting and appointing an internationally recognized financial advisor using a transparent procedure by end-May 2024 with IFIs as observers; advisor selection considerations include international track record, comprehensive sale action plan, and advisory fee not as key determining criterion.
    - Develop strategies for the Ukrainian Financial Housing Company and Export Credit Agency by end-November 2024 to align with general financial sector development targets.

### Alignment with international best practice and infrastructure reforms (paragraph 53 and related)
- Financial reporting and audit:
  - Restore legislative obligations to submit financial statements and audit reports for financial institutions for the 2023 financial year and for business entities located outside the occupied territories for the 2024 financial year.
  - NBU has fully restored prudential reporting requirements for NBFIs.
  - Restore by end-September 2024 the requirements for mandatory quality control of services provided by audit companies, including verification of audit reports in line with draft #9662.
- Bank capital rules:
  - NBU issued a regulation in December 2023 to align banks’ regulatory capital structure with the EU Capital Requirements Directive and Regulation.
  - With World Bank support, close other gaps by end-December 2024.
- Property valuation and transparency:
  - State Property Fund (SPF), in coordination with the World Bank and stakeholders including NBU, NSSMC and IFIs, to by end-March 2024:
    - Develop provisions to improve draft amendments to the law “On Valuation of Property, Property Rights and Professional Valuation Activities in Ukraine” (#7386) to close gaps with international valuation standards.
    - Propose an implementation roadmap with transitional arrangements, supportive regulation/guidance, steps to strengthen valuers profession (including additional training requirements for valuation of financial assets), and creation of a register of valuations for financial assets.
  - NBU and Ministry of Justice to prepare a detailed proposal by end-March 2024 to increase real estate market transparency, strengthen systemic risk analysis and bank collateral valuations; proposal to include timelines for:
    - A publicly accessible database of real estate transaction prices with detailed metadata.
    - Residential and commercial property price indexes.
  - NBU to prepare a framework for development and annual publication of property price index forecasts based on the proposal.
- Bank remuneration:
  - NBU strengthened remuneration framework to limit variable compensation and payment mechanisms for senior bank management and staff with material impact on institution risk profile, aligning with EU standards.
- Virtual assets:
  - NBU and NSSMC to prepare an update of virtual assets legislation by end-December 2024 with IMF technical assistance and consultation to align with international best practice while considering economic development goals and mitigating price and financial stability risks.
- Non-performing exposures:
  - By end-April 2024, NBU in consultation with IFIs to align the definition of non-performing exposures with Article 47a and Article 178 of Regulation EU 575/2013 of the European Parliament and the EU Council of 26 June 2013.
  - Amendments to come into force from January 1st, 2025, strengthening monitoring by supervisors and banks.

### Strengthening supervision, AML/CFT, and new supervisory frameworks
- Recent supervisory developments (2023):
  - Separated related-parties unit from banking supervision.
  - Strengthened Supervisory Committee decision-making by implementing “supervisory panels” to provide additional independent review and horizontal communications.
  - Resumed scheduled onsite inspections for banking and non-banking institutions, with NBU discretion on staff safety.
  - Undertake a survey of supervisory panels’ effectiveness by end-September 2024 in consultation with IMF staff.
- Transition to risk-based supervision:
  - NBU to prepare and implement a supervisory risk assessment methodology to inform engagement priorities (Structural Benchmark, end-June, proposed to be reset to end-December 2024).
  - Apply methodology to all banks and prepare a supervisory action plan by end-December 2024.
  - Adjust organizational structure for bank supervision to support risk-based approach; develop expertise for supervision of ICT risks as part of operational risk; develop professional profiles and a multi-year training program for new hires.
- AML/CFT and penalties:
  - Strengthen risk-based AML/CFT supervision of banks, payment service providers and NBFIs, particularly on tax crimes and illegal gambling.
  - By end-December 2024, amend Article 32 of the AML/CFT law and corresponding amendments to Article 73 of the Banking Law to ensure penalties for AML/CFT violations are effective, dissuasive and proportionate, in line with international standards.
  - Financial sanctions applied will be established by laws of Ukraine and regulatory legal acts of the NBU.
- Supervision of hybrid banking models:
  - NBU, in consultation with the IMF, to propose a supervisory framework for Banking-as-a-Service and similar hybrid models by end-July 2024 based on international best practices.
- Transfer of bank ownership:
  - Any future transfers of bank ownership, including following seizures during Martial Law, to follow Law of Ukraine on Banks and Banking and formal notification, review and approval by the NBU.

*Source: Content unit 1ukrea2024001 - 42. We intend to maintain adequate FX reserves through the course of the program to*

### 55. We will strengthen the legal, regulatory, and supervisory framework for non-bank

### We will strengthen the legal, regulatory, and supervisory framework for non-bank financial institutions (NBFIs) and financial markets

### Beneficial ownership
- Since October 2021 the NBU has required all NBFIs (except credit unions) to disclose their owners and remedy any opaque ownership structures.
- The NBU will continue to monitor and take supervisory actions against NBFIs that do not meet this requirement.

### Legal framework (legislation and timing)
- Legislation passed in December 2021–July 2023: Financial Services and Financial Companies (#1953), Insurance (#1909) and Credit Unions (#3254).
- Most provisions of these laws came into force in January 2024 and the NBU has prepared implementing regulations.
- Rules for insurance intermediaries apply from January 2025, and Solvency II will apply from January 2027.
- The NBU and DGF plan to initiate development of:
  - a deposit insurance framework for credit unions, and
  - a guarantee framework for life insurance companies
  after Martial Law is lifted and once the regulations required for enforcing the new laws are put into effect.
- To strengthen governance of the Motor (Transport) Insurance Bureau of Ukraine (MTIBU), amendments to the Law of Ukraine “On Compulsory Civil Liability Insurance of Land Vehicles Owners” (#8300) have been submitted to Parliament.
  - Steps will be taken to facilitate adoption of the law by Parliament by end-May 2024.
  - Once passed, the law will improve state supervision of the MTIBU’s activities and align with the European Motor Insurance Directive (2009/103/EC).

### Capital and reporting requirements
- The NBU increased capital requirements for financial companies in December 2023 and provided a six-month transition period for existing entities to align their operations with the new requirements.
- The NBU will increase capital requirements for payment market participants aligned with the EU payment services directive (PSD2, 2015/2366) and international good practice by end-June 2024.
- The NBU will prepare a supervisory risk assessment methodology by end-September 2024 that distinguishes between types of NBFIs with the aim to transition to a risk-based supervision approach for NBFIs.
- The NSSMC will prepare draft regulation for financial intermediaries by end-December 2024, which will bring their capital requirements in line with the EU acquis.

### Payments market (regulation, supervision, and timelines)
- Draft legislation submitted to Parliament in December 2023 to strengthen regulatory requirements for market participants; aim to adopt the law by end-May 2024.
- To prioritize supervisory activities of payment service providers, in consultation with IFIs, actions include:
  - (i) prepare a concept note for a supervisory risk assessment methodology by end-August 2024 and implement the methodology by end-December 2024;
  - (ii) develop the reporting system;
  - (iii) strengthen supervision capacity through hiring specialists and building analytical competence;
  - (iv) prepare a concept note by end-July 2024 on regulatory requirements for person to person (p2p) and other such electronic payments to identify and restrict abnormal behavior, and implement supporting regulation by end-October 2024.

### Capital market regulation and harmonization with IOSCO principles
- Commit to enacting legislation that amends the Law (#5865) on the NSSMC to enhance the NSSMC’s powers, independence and institutional capacity, and its cross-border and domestic cooperation mandate.
- Ensure the law considers the mandate of other regulators and move swiftly to align with IOSCO principles to:
  - allow Ukraine to become a signatory of IOSCO’s multilateral MoU by end-December 2024;
  - fully implement other provisions of the law by end-December 2025.
- The NSSMC will take steps to enhance the operational efficiency of NBU’s capital controls in consultation with the NBU, including regulatory harmonization and aligning capital flow restrictions for securities accounts with those applied to bank accounts by end-July 2024.

### Related parties supervision
- The NBU will extend the powers of its related-parties supervision unit to NBFIs by end-August 2024.
  - This includes increasing the resources of the unit and designing a new internal database and tools for effective related-parties identification.
- The NBU, in consultation with IFIs, will propose draft amendments to the Law on Banks and Banking by end-June 2024 to take into account supervisory observations in the recognition of related parties.

### Insurance transparency
- A regulation adopted in February 2024 requires auditors to confirm that insurers have acceptable assets and to assess their value for the 2023 financial year.
- Disclosure requirements for insurance and reinsurance brokers will be updated by end-December 2025.

### Enhancing credit and financial market infrastructure (post-war recovery role)
- Capital market infrastructure:
  - Mechanisms needed for foreign investors to directly access marketable debt instruments beyond government securities.
  - The NBU, NSSMC and MOF in consultation with IMF and other IFIs will propose priority actions for enhancing capital market infrastructure by end-April 2024.
- War risk insurance system:
  - The NBU, together with the Ministry of Economy and Ministry of Finance, will prepare an initial draft law establishing a fully functional war insurance system by end-June 2024.
- Credit conditions:
  - The NBU, in consultation with key stakeholders, will prepare a comprehensive strategy to support development of lending, incorporating the 5-7-9 program amendments approved by the government (according to the concept note as envisaged in ¶31 herein) with due regard to financial stability and fiscal risks, by end-May 2024.
- Responsible consumer lending:
  - A draft law on improving state regulation and the functioning of credit bureaus was submitted to parliament in February.
  - Steps will be taken to facilitate adoption of the law by Parliament by end-September 2024.
  - Supervision of credit bureaus will be enhanced by establishing requirements for ownership and internal controls within six months of the law being adopted by the parliament and signed by the President.
- Monetary derivative instruments:
  - To hedge foreign exchange and interest rate risks and improve monetary transmission, the NBU in consultation with IFIs will prepare a concept note by end-July 2024 that sets out steps, conditions and timing needed to introduce and develop the derivative financial instruments (including forwards) market.

### Asset recovery
- Reconfirm commitment to continue efforts to recover value from assets of failed banks and to abstain from any interference with the current asset recovery strategies of the largest bank nationalized in 2016 and of the DGF.

### Governance and Anti-Corruption — Governance of Reconstruction
- Post-war reconstruction strategy will meet high standards of transparency and accountability.
- Plan to use digital technologies to implement full cycle of public investment projects and provide timely information for transparent tracking and analysis from planning to implementation, including procurement processes and expenditures.
- Develop a single digital ecosystem for PIM based on:
  - the updated Ministry of Economy’s Prozorro digital procurement system,
  - the Ministry of Finance’s IT systems for planning and execution monitoring of state and local budgets and IFI projects,
  - the Ministry of Infrastructure’s Digital Restoration EcoSystem for Accountable Management (DREAM),
  - and other relevant systems and registries.
- Comprehensive audits of reconstruction funds use, performance audits of selected individual projects, and timely publication of audit reports will be key features.
- Strategy will integrate mechanisms to prevent and identify corruption risks and refer cases to anti-corruption institutions as appropriate.
- NABU and the State Agency for Restoration and Development will continue cooperation and exchange of information per their memorandum of understanding.
- Efforts to enhance institutional independence and effectiveness of the Accounting Chamber and State Audit Service will be undertaken to ensure public funds for reconstruction and recovery are used for intended purposes.

### Anti-Corruption and Rule of Law — institutional strengthening and timelines
- Restore public access to asset declarations of key public officials:
  - The National Agency for Corruption Prevention (NACP) made publicly accessible previous asset declarations in January 2024.
  - Efforts by the NACP to monitor and verify completeness and accuracy of these declarations are ongoing.
  - Open and competitive selection for the new NACP Head was completed in February 2024 following expiration of the prior term.
- Legislation enacted on December 8 strengthens SAPO selection procedures, organizational capacity, oversight and procedural autonomy (Structural Benchmark met).
  - Further amendments to the Criminal Procedural Code will be enacted by end-June 2024 to enable the Prosecutor General to delegate to the SAPO management of extraditions and mutual legal assistance requests in relation to corruption investigations, and to enhance time limits of pre-trial investigations after notice of suspicion.
- NABU external audit:
  - External audit of the NABU’s effectiveness with participation of three independent experts with international experience will be completed and its report published (Structural Benchmark, end-September 2024).
  - The Cabinet of Ministers is preparing the decision to initiate selection and nomination of independent experts.
- NABU operational capacity:
  - Develop a plan for implementation in the post-Martial Law period to provide resources, equipment, and technological solutions for NABU to independently intercept communications (wiretapping).
  - Ensure NABU by end-October 2024 has access to independent and competent forensic experts to conduct investigative mandate, including complex corruption schemes.
- High Anti-Corruption Court (HACC) appointments and procedures:
  - Process initiated for nominating and appointing new members of the Public Council of International Experts to vet candidates for 24 new vacancies (15 first instance, 9 appellate).
  - Open and competitive selection for these vacancies will be ensured; final appointments to the HACC will be completed by end-July.
  - Amendments to the procedural code to rationalize matters heard by one HACC judge or a panel of three will be enacted (Structural Benchmark, end-March, proposed to be reset to end-April 2024).

### AML/CFT and beneficial ownership improvements
- NBU will conduct a thematic inspection of selected financial institutions’ compliance with enhanced customer due diligence on PEPs by end-June 2024 following legal amendments to the definition of politically exposed persons (PEPs).
- By end-August 2024, the NBU with IMF capacity development support will issue guidance for financial institutions and other covered non-bank institutions, consistent with FATF standards, on the application of a risk-based approach regarding PEPs, including relevant case examples.
- Commit to invest in building capacity of new and existing NBU staff to improve organizational performance and responsiveness in the AML/CFT framework.
- Improve the effectiveness of the beneficial ownership regime to enhance transparency in public procurement, detect conflicts of interest through transparent ownership structures, and prevent misuse of companies.

### Rule of law and judicial reforms
- Advisory Group of Experts constituted and proceeding with open competition for vacancies for Constitutional Court judges.
- Following dissolution of the Kyiv District Administrative Court in December 2022, a law will be enacted to establish the High Administrative Court of Ukraine (with first instance and appellate chambers) to hear administrative cases against national state agencies by judges vetted for competence and integrity with decisive and crucial vote of independent experts with international experience in the Public Council of International Experts (Structural Benchmark, end-July 2024).

### Corporate governance in SOBs and SOEs
- State-owned banks (SOBs):
  - Continue to strengthen governance and ensure professional, commercial operation without political interference.
  - Appointed independent supervisory board members to SOBs in H1 2023.
  - NBU applying fit and proper assessment framework to selected candidates.
  - Implement a procedure for conducting performance assessments for all SOBs in 2024; the first performance assessment for each bank will be conducted in early 2025.
  - MOF will publish key findings of its first annual assessment, together with the CMU’s proposed actions, in August 2025.
- State-owned enterprises (SOEs):
  - Draft law (#5593-D) adopted on February 22 to align SOE corporate governance with OECD Guidelines and mitigate fiscal risks.
    - Establishes regular independent evaluation procedure of SOE supervisory boards and clear criteria for early supervisory board dismissal.
    - Strengthens accountability and broadens supervisory board powers to appoint/dismiss CEOs and set CEO remuneration (based on the state’s remuneration policy).
    - MOF to play gatekeeper role on financial predictability, reporting, transparency, and approving key financial metrics in financial plans for natural monopolies and strategic SOEs; supervisory boards approve financial plans.
    - During Martial Law and 12 months thereafter—but not for a period of more than 3 years—a minimum level of SOE dividends will be set in #5593-D.
  - Once #5593-D is adopted, follow-up secondary legislation will operationalize SOEs’ financial planning process, financial indicators consistent with MOF gatekeeper role, revamped nomination process, and effective independent evaluation procedure for SOE supervisory boards.
  - Legal framework established by #5593-D shall not be applicable to state-owned banks.
  - Commit to independent evaluation of GTSO supervisory board one year after appointment; launch independent evaluations of supervisory boards of Naftogaz and Ukrenergo in early 2024 and conclude by end-October 2024.

### Strengthening SOE management options and sequencing
- In consultation with international partners, explore options to strengthen SOE management (including centralized modes) and define roles and mandates of key government institutions (MOF, MOE, CMU, SPFU).
- SOE reform sequencing and preconditions:
  - (i) pass the SOE corporate governance law;
  - (ii) implement related secondary legislation, including methodology and regular independent evaluations of SOE supervisory boards;
  - (iii) as an interim step, assess the financial conditions and fiscal risks of the SOEs in the state ownership policy by end-May 2024;
  - (iv) produce a comprehensive state ownership, dividend policy and privatization strategy (Structural Benchmark, end-August, proposed to be reset to end-October 2024).
- Assess financial viability of key SOEs to develop a framework to deal with quasi-fiscal costs, including legacy Public Service Obligations (PSOs).

*Source: IMF country document 1ukrea2024001 (chapter/section content).*

### 68. The SOE state ownership policy, which will serve as a critical input and pre-condition

### 68. The SOE state ownership policy, which will serve as a critical input and pre-condition

### SOE state ownership policy: core elements
- Long-term priorities of SOE state ownership; SOE public policy objectives and rationales for SOEs in state ownership (subject to regular reviews).
- The state’s role in the governance of SOEs and its implementation, including roles and responsibilities of involved government agencies.
- Relationship between government agencies, the supervisory board and management.
- Criteria of financial viability of SOEs, financial assessment of SOEs (including contingent liabilities, debts and risks to public finances).
- Critical gatekeeper role of Ministry of Finance to safeguard public finances and debt sustainability (via tracking financial viability of SOEs and fiscal risk analysis).
- Dividend policy (e.g., rationale, sectoral policy, impact on public finances, and post-war strategy) and remuneration policy for Board members and managers.
- The SOE state ownership policy will serve as a critical input and pre-condition into the triage and privatization strategy of SOEs.

### Energy sector reforms: priorities and measures
- Immediate priority: contain the adverse impact of the war on the energy sector and prepare for timely and ambitious reforms once conditions allow.
- Preparedness for winter attacks reported as: "no material impact on the energy supply."
- Potential reform measures:
  - Gradual tariff increases (subject to a new tariff methodology and social considerations during the war).
  - Securing external financing.
  - Providing transparent and exceptional direct budget support to energy SOEs pending available budgetary resources.
  - Restoring and enhancing competition in wholesale and retail gas markets (post-war).
  - Gradual increase in gas and electricity tariffs towards cost recovery while allocating adequate and well-targeted resources to protect vulnerable households.
- CMU will adopt a Roadmap for the gradual liberalization of gas and electricity markets, with a time-bound implementation plan for the post Martial Law period; the Roadmap will be based on technical analysis of the financial condition of the sector.
- Gas import and storage plans:
  - For the 2024/25 heating season, authorities do not plan additional gas imports for domestic consumption due to Naftogaz’s expanded production capacity.
  - Up to 3 bcm of additional gas for storing by non-residents for EU country needs could occur under the baseline.
  - Naftogaz has secured additional financing for gas imports through the EBRD and bilateral donors.
- PSO compensation and liquidity procedures:
  - If Naftogaz faces a liquidity shortfall, the amount of PSO compensation in 2024 will be assessed based on actual documentary proven expenditures of Naftogaz verified by the State Audit Service and other stakeholders.
  - Relevant calculations will be finalized by end-August 2024.
  - Potential spending pressure from gas imports and PSO compensation will be accommodated through an adjustor on fiscal balance targets, subject to the above assessment, the findings of the stock of arrears of District Heating Companies (DHCs) based on a desk audit, available financing, and capped at UAH 60 billion (about 1 percent of GDP).
- GTSO and transmission industry adjustments:
  - Updated strategies to rightsize the system and identify alternative sources of gas supply, preparing for the zero transit scenario when the transit contract expires at end-2024.
  - Adoption of draft law #6133 to allow a special regime of operations for GTSO to reduce operational expenditures and maintenance for non-critical gas transmission purposes.
- District Heating Companies (DHCs) arrears:
  - DHCs have accumulated a significant stock of arrears to Naftogaz before and since the start of the war, resulting from accumulated tariff differentials and the impact of the war.
  - A comprehensive approach will be taken once war-related budget pressures subside by developing a new tariff methodology.
  - Interim measure: establish the stock of arrears and financial condition of DHCs through a desk review by a reputable audit firm, distinguishing arrears before and after February 2022 (Structural Benchmark, end-June 2024). This will inform the situation ahead of the 2024/25 heating season.

### Program monitoring, reviews, and key timing
- Program implementation in 2024 will be monitored through quarterly reviews via quantitative performance criteria, indicative targets, and structural benchmarks.
- Authorities commit to provide IMF staff with all data needed for monitoring, including as detailed in the attached TMU.
- The fourth and fifth reviews are expected to take place on or after June 15, 2024, and September 1, 2024, respectively, based on quantitative performance criteria for end-March 2024 and end-June 2024, respectively, and corresponding structural benchmarks.
- Continuous performance criterion on the non-accumulation of external payments arrears and standard continuous PCs will apply.

### Selected quantitative figures and memoranda points (exact values preserved)
- Cap on potential accommodation for gas imports and PSO compensation: UAH 60 billion (about 1 percent of GDP).
- Possible additional gas storage by non-residents: up to 3 bcm.
- Draft law referenced: #6133.
- Structural Benchmark timing: desk review of DHCs arrears — End-June 2024.
- Fourth and fifth program reviews: on or after June 15, 2024, and September 1, 2024.
- Technical Memorandum of Understanding date: March 11, 2024.
- Program accounting official exchange rate of the Ukrainian hryvnia to the U.S. dollar: 36.5686 (set by NBU as of March 13, 2023).
- Reference exchange rates (as of March 13, 2023) preserved exactly:
  - Swiss Franc: 0.9107 Swiss Franc per U.S. dollar.
  - Euro: 0.933 euro per U.S. Dollar.
  - Pound Sterling: 0.8226 pound per U.S. dollar.
  - Australian Dollar: 1.5435 dollars per U.S. dollars.
  - Canadian Dollar: 1.3715 dollars per U.S. dollar.
  - Chinese Renminbi: 6.875 yuan per U.S. dollar.
  - Japanese Yen: 133.960 yen per U.S. dollar.
  - Norwegian Krone: 10.565 per dollar.
  - Accounting exchange rate for the SDR: 0.748641 SDR per U.S. dollar.
  - Official gold holdings valuation: 1,902.6 dollars per fine ounce.
- These accounting exchange rates are kept fixed over the program period.

*Source: IMF staff and Ukrainian authorities, as presented in the March 11, 2024 TMU and MEFP content.*

### 4. The general government is defined as comprising the central (state) government, including

### 1ukrea2024001 - 4. The general government is defined as comprising the central (state) government, including

### Definition of the general government
- The general government comprises:
  - the central (state) government, including the road fund;
  - all local governments;
  - all extra budgetary funds, including the Pension and Unemployment Funds of Ukraine;
  - special accounts which provide resources to key spending units.
- The budget of the general government comprises:
  - (i) the state budget;
  - (ii) all local government budgets; and
  - (iii) if not already included in (i), the budgets of the extra budgetary funds listed above, any other extra budgetary funds included in the monetary statistics compiled by the NBU, and special accounts.
- The government will inform IMF staff immediately of the creation or any pending reclassification of any new funds, programs, or entities.

### Definition of debt (program purposes)
- Debt definition consistent with paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to IMF Executive Board Decision No.16919-(20/103), adopted October 28, 2020.
- “Debt” is a current (not contingent) liability created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, requiring the obligor to make one or more payments in the form of assets (including currency) or services at some future point(s) to discharge principal and/or interest.
- Primary forms of debt:
  - loans (including deposits, bonds, debentures, commercial loans, buyers’ credits; repurchase agreements; official swap arrangements);
  - suppliers’ credits (deferral of payment after delivery of goods or services);
  - leases (debt is the present value at lease inception of all lease payments expected to be made during the agreement excluding payments for operation, repair, or maintenance).
- Under this definition, arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on obligations not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

### GDP and territorial scope
- For program purposes, Gross Domestic Product is compiled as per the System of National Accounts 2008 and excludes territories that are or were in direct combat zones and temporarily occupied by Russia.

### External financing (program purposes)
- External financing is defined as:
  - Budget support loans and grants: unearmarked financial support for general government financing from official multilateral creditors and official bilateral creditors (examples cited: World Bank, European Commission).
  - Project support loans and grants: earmarked financing for specific projects and appear as part of government financing (examples cited: European Investment Bank, World Bank Group, European Bank for Reconstruction and Development).

### Defense expenditures (program purposes)
- Defense expenditures include expenditures of the defense and security sector pursuant to the Law of Ukraine “On National Security of Ukraine”.
- This includes total amounts of all current (including goods and services, wage bill, social payments, etc.) and capital expenditures, and includes expenditures through the state budget general fund.

### Own revenues of budgetary institutions
- Defined in Item 15, Part 1, Article 2 of the Budget Code.
- Own revenues comprise revenues received in accordance with the established procedure by budgetary institutions as payment for services, performance of works, targeted activities, grants, gifts, charitable contributions, proceeds from the sale of products or property, and other activities in the prescribed manner.

### Proceeds of sales of confiscated Russian assets
- For program purposes, proceeds of sales of confiscated Russian assets or bank accounts balances (including those directed toward the Fund for the Liquidation of the Consequences of the Armed Aggression) are recorded below the line as deficit financing sources with counter-entry into deposits of the Treasury Single Account.

### Overdue accounts payables (domestic arrears)
- Arrears defined per Order of the Ministry of Finance No. 372 dated April 2, 2014:
  - Arrears are the amount of payments due on the 30th day after the deadline for mandatory payment per the legal contract. If no payment deadline is specified, the 30th day after confirmation of goods received, works done, and/or services rendered.
- Specific arrears definitions:
  - Budgetary arrears on social payments and wages: all arrears of the consolidated budget on wages, pensions, and social benefits of the central or local governments; timeframe uses the 30-day rule. Information on arrears in the security and defense sector can be presented in an aggregated form given Martial Law specifics.
  - Wages: all forms of remuneration for work performed for standard and overtime work in all subcategories, including defense and security service.
  - Arrears of social funds (Pension and Unemployment Fund of Ukraine): arrears with regard to all insurance benefits of these funds; arrears refer to payments not executed at the 30th day after the deadline for payment. Excludes unpaid pensions to individuals who continue to reside in territories that are or were in direct combat zones and temporarily occupied by Russia.

### Net International Reserves (NIR) — quantitative performance criterion
- Definition:
  - NIR of the NBU are the dollar value of the difference between usable gross international reserve assets and reserve-related liabilities to nonresidents, evaluated at program exchange rates.
- Usable gross international reserves comprise all readily available claims on nonresidents denominated in convertible foreign currencies consistent with the Balance of Payments Manual (Sixth Edition) and the SDDS (Table 6.1, item A).
- Exclusions from usable reserves include:
  - any assets denominated in foreign currencies held at, or claims on, domestic institutions; all foreign currency claims of the NBU on domestic banks; NBU deposits held at the Interbank Foreign Currency Exchange Market and domestic banks for trading purposes;
  - any precious metals or metal deposits, other than monetary gold and gold deposits, held by the NBU;
  - any assets that correspond to claims of commercial banks in foreign currency on the NBU and any reserve assets that are (i) encumbered; or (ii) pledged as collateral (insofar as not already included in foreign liabilities, or excluded from reserve assets); or (iii) frozen; and,
  - any reserve assets that are not readily available for intervention in the foreign exchange market, inter alia, because they are not fully under the control of the NBU or because of lack of quality or lack of liquidity that limits marketability at the book price.
- Reserve-related liabilities comprise:
  - all short-term liabilities of the NBU vis-à-vis nonresidents denominated in convertible foreign currencies with a remaining maturity of one year or less;
  - the stock of IMF credit outstanding;
  - the nominal value of all derivative positions (including swaps, options, forwards, and futures) of the NBU and general government, implying the sale of foreign currency or other reserve assets;
  - all foreign exchange liabilities of the NBU to resident entities which are not already excluded from reserve assets, but excluding foreign exchange liabilities to the general government, or related to deposit guarantees.
- Adjustors to NIR targets:
  - NIR targets adjusted downward by the full amount of the cumulative shortfall in external budget support financing disbursements (defined in paragraph 7) relative to the baseline projection (Table B).
  - NIR targets adjusted downward by the full amount of the cumulative shortfall in net issuance (gross issuance minus redemption) of central government’s domestic foreign exchange securities relative to baseline (Table C).
  - Symmetric adjustor for conversion of non-reserve currency provided under a central bank swap into a reserve currency via outright sale: upward adjustment by the amount converted at time of conversion; downward adjustment by the amount of reserve currency (principal and interest) when NBU repays the non-reserve currency provided under a central bank swap agreement.
  - Symmetric adjustor if NBU draws reserve currency under a central bank swap agreement with maturity over 1 year: NIR targets adjusted upward by amount used with maturity over 1 year and downward when repaid.

### Table B — Gross Disbursements from IFIs and Official Sources (cumulative in USD millions, at program exchange rates)
- Presented flows cumulative from January 1, 2024 for 2024 and from January 1, 2025 for 2025; prospective IMF disbursements under the EFF are excluded.
- Selected cumulative figures by test dates (columns correspond to end-Mar., end-Jun., end-Sep., end-Dec., end-Mar.):
  - Total official support: 9,743 17,686 26,855 33,911 5,509
  - Budget support: 9,267 16,825 25,654 32,414 5,183
  - Loans: 8,250 11,883 15,180 20,332 3,447
  - Grants: 1,017 4,942 10,474 12,082 1,735
  - Project support: 476 861 1,200 1,497 326
- Footnotes:
  - Project support is in the form of loans.
  - Totals differ from Ukrainian authorities' projections under the budget due to different exchange rate assumptions.

### Table C — Issuance of Central Government Domestic FX Securities (cumulative in USD millions, at program exchange rates)
- Net issuance of central government domestic FX securities: 0 0 0 0 0
- Gross issuance: 1,372 1,972 2,387 3,342 402
- Redemption: 1,372 1,972 2,387 3,342 402
- Flows cumulative from January 1, 2024 for 2024 and from January 1, 2025 for 2025, calculated at program exchange rates.

### Ceiling on General Government Direct Borrowing from the NBU (Indicative Target)
- Definition:
  - General government direct borrowing from the NBU, net of redemptions and repayments, is the cumulative change in the stock of outstanding claims on the general government held by the NBU, including general government securities, direct loans and credits, other accounts receivable, and overdraft transfers from the NBU in accounts of the general government.
  - Stock of general government securities held by the NBU measured at face value as reported on the NBU’s balance sheet.
  - Excludes securities acquired as collateral under loans provided by the NBU during the measurement period; loans exclude those to the Deposit Guarantee Fund.
  - Change measured relative to the stock as of end September 2023 and adjusted for exchange rate valuation effects using program exchange rates.
- Additional precondition for activating monetary financing: the drawing down of government deposits (consistent with ¶44 of MEFP), with criteria set out in a discussion between the NBU and the Ministry of Finance.

### Adjustors for the ceiling on borrowing from the NBU
- If there is a shortfall in external financing (Table B) and primary issuances on government bonds (measured at face value, excluding short-term issuances with primary maturities less than 3 months) during the 3-month period prior to the request for monetary financing exceed 132 percent of actual redemptions over the same period, then the ceiling will be adjusted upward by the smaller of:
  - the amount of the shortfall in external financing adjusted for additional primary issuances of government bonds, or
  - a cap on general government borrowing from the NBU, equivalent to gross borrowing of UAH50 billion every quarter.
- The ceiling resets every quarter (March 31, 2024; June 30, 2024; September 30, 2024; December 31, 2024 for 2024 targets and March 31, 2025 for the 2025 target) and is not carried over.
- The shortfall in external financing is assessed as the total cumulative shortfall from:
  - end-March 31, 2023 for 2023 targets;
  - end-December 2023 for 2024 targets;
  - March 31, 2024 for the June 30, 2024 target.
- Projected redemptions are shown in table D.

### Table D — Adjustors for the Ceiling on General Government Direct Borrowing from the NBU (in UAH billion)
- For the test date of:
  - 2025 Mar 31, Jun 30, Sep 30, Dec 31, Mar 31: 132 132 132 132 132
  - Adjustment to ceiling on general government borrowing from the NBU, net of redemptions is the smaller of external financing as defined in Table B (if any) or this amount (in UAH billion) as of February 21, 2024: 40.5 0 47.1 16.5 05 049 (note: values presented in-source)
  - Memo: Projected redemptions (in UAH billions), as of February 21, 2024: 89.0 107.0 81.0 168.0 150.2
  - Actual rollover rate on three month period prior to requesting monetary financing: 2024 (presented in source as context)
- Note: The table text contains the exact strings as presented in the source; the precise alignment and some multi-field entries are preserved verbatim.

### Floor on Overall Cash Balance of the General Government excluding Budget Support Grants (Indicative Target)
- Definition:
  - The overall cash balance of general government excluding budget support grants is defined as a balance measured in paragraph 19, adjusted by the amount of budget support grants (Table B) recorded above the line in non-tax revenues. Balance measured on a cumulative basis starting from January 1 of a calendar year. For program target computational purposes, a positive number is a surplus and negative number is deficit.
- Measurement (paragraph 19): overall cash balance is measured by net financing flows excluding valuation changes as the sum of:
  - Total net treasury bill sales (in hryvnias and foreign currency) as measured by the NBU registry of treasury bill sales (net treasury bill sales are defined as the cumulative total funds realized from sales of treasury bills at primary auction and government securities issued for recapitalization of banks and SOE, less cumulative total redemption of principal on treasury bills). Treasury bill issuances and redemptions for the purposes of calculating the overall cash balance exclude bonds issued to recapitalize Naftogaz and other SOEs (including State Housing Financial Corporation).
  - Other net domestic banking system credit to general government (as measured by monetary statistics provided by the NBU): all non-treasury bill financing in either domestic or foreign currency extended to general government by banks less the change in all government deposits in the banking system, as well as any other financing by entities not reflected in NBU monetary statistics.
  - Total receipts from privatization (including change in stock of refundable participation deposits and sale of nonfinancial assets) and proceeds from uncompensated seizures.
  - Total proceeds from sales of confiscated Russian assets and bank account balances.
  - Change in sub-accounts 3551 and 3559 for pre-payments ahead of delivery of goods and services.
  - Difference between disbursements and amortizations on any bond issued by the general government or the NBU to nonresidents for purposes of financing the general government.
  - Difference between disbursements of foreign loans attracted by the State (including budget support, project support, including on lent to public enterprises) and the amortization of foreign credits by the general government (including on lent project loans, e.g., budgeted payments on behalf of the Agency for the Restoration and Development of the Infrastructure of Ukraine per paragraph 95 of this TMU).
  - Net sales of SDR holdings in the IMF’s SDR department.
  - Net change in general government deposits in nonresident banks, or other nonresident institutions.
  - Net proceeds from any promissory note or other financial instruments issued by the general government.

*Source: INTERNATIONAL MONETARY FUND — UKRAINE (technical memorandum excerpt).*

### 20. For the purposes of measuring the balance of the general government, all flows to/from the

### 1ukrea2024001 - 20. For the purposes of measuring the balance of the general government, all flows to/from the

### Measurement rules for general government balance
- All flows to/from the budget in foreign currency (including from the issuance of foreign currency denominated domestic financial instruments) will be accounted for based on paragraph 3 of this TMU.
- Financing changes resulting from exchange rate valuation of foreign currency deposits are excluded from the computation of balance.
- Government deposits in the banking system exclude VAT accounts used for electronic administration and escrow accounts of taxpayers used for customs clearance.

### Floor on Non-Defense Cash Primary Balance of the General Government Excluding Budget Support Grants (Quantitative Performance Criterion)
- Definition:
  - Non-Defense Cash Primary Balance of the General Government excluding budget support grants = Overall Balance of the General Government excluding budget grants (as defined in section C) less interest payments (total interest paid on domestic and external debt) less defense spending of the state budget general fund as defined in paragraph 8 of this TMU.
  - Measured on a cumulative basis, starting from January 1st of each calendar year.
- Adjustors (applied to the floor on the overall cash balance excluding grants and the non-Defense Cash Primary Balance):
  - Upward adjustment by the full amount of any increase above the projected stock of budgetary arrears (overdue account payables) in state budget and social funds. This definition excludes domestic arrears in the territories that are or were in direct combat zones and temporarily occupied by Russia.
  - Automatic adjustor downward corresponding to the full amount of any shortfall in cumulative proceeds from external budget support loans (in hryvnia evaluated at program exchange rates) relative to program projections.
  - Automatic downward adjustor corresponding to the full amount of government bonds issued for the purposes of bank recapitalization and DGF financing, up to a cumulative maximum amount to be set in future reviews. The amount included in the targets is zero.
  - Automatic upward adjustment corresponding to the full amount of profits transferred by the NBU in excess of UAH 71.6 billion in 2023 and UAH 30 billion in end-March 2024 and UAH 38 billion for the remaining test dates in 2024.
  - Automatic downward adjustment to accommodate gas purchases, PSO compensation and transfer to GTSO up to a cumulative maximum amount of UAH 60 billion in 2023 and UAH 60 billion in 2024, conditional upon availability of financing.
  - For test dates in 2023: automatic downward adjustor up to a cumulative maximum amount of UAH 25.8 billion corresponding to receipts from sales of confiscated Russian assets and transfers of bank accounts; for test dates in 2024 the cumulative maximum downward adjustment is UAH 23.7 billion. This amount reflects the balance of the Fund for the Liquidation of the Consequences of the Armed Aggression, which stood at UAH 24 billion as of December 31, 2023. For the period of the Martial law, data from territories that are or were in direct combat zones and temporarily occupied by Russia are excluded from the adjustor.

### Floor on Tax Revenues (excluding SSC) (Quantitative Performance Criterion)
- Measured on a cumulative basis starting from January 1st of each calendar year.
- Includes total tax revenues and fees as defined by the national tax legislation, including pension fees imposed on certain transactions, excluding Social Security Contributions tax.
- The cumulative targets defined in this manner are set out in Table 1 of the MEFP.

### Floor on the General Government Social Spending (Indicative Target)
- Social spending of general government = spending on social programs through the General Fund and Special Funds, covering categories reflected in budget treasury code 2700.
- Includes social insurance and social assistance programs on budget (including but not limited to social assistance to low-income families, housing utility subsidies, child support, support to internally displaced persons, etc.), and transfers to the Pension Fund.
- The Indicative Target is set in hryvnias on a cumulative basis starting January 1st of each calendar year.

### Ceiling on the General Government Domestic Arrears (Indicative Target)
- Derived based on the definition provided in paragraph 11 of this TMU and reporting format set in paragraph 79 of this TMU (excluding arrears of local governments).
- Target is cumulative starting January 1st of each calendar year and covers arrears of the state budget (general and special funds) and social funds (as defined in paragraph 11).
- The stock of arrears measured in that way will not exceed the stock of arrears at end December 2022.
- Arrears computation excludes arrears accrued in territories that are or were in direct combat zones and temporarily occupied by Russia as of the applicable test date.

### Ceiling on Non-Accumulation of New External Debt Payments Arrears by the General Government (Continuous Performance Criterion)
- Definition:
  - Arrears = external debt obligations of the general government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods).
  - Excludes arrears on external financial obligations of the government subject to rescheduling.
  - “External” is defined as debt payments to non-residents.

### Ceiling on Publicly Guaranteed Debt (Quantitative Performance Criterion)
- Definition and ceilings:
  - Applies to the amount of guarantees issued by the central (state) government once the underlying debt is disbursed.
  - For test dates between June 30, 2023, and December 31, 2023, the ceiling is UAH 37 billion, consistent with 3 percent of current year revenues of the state budget general fund and applies to the cumulative amount of guarantees issued by the central (state) government from January 1st of 2023 calendar year including guarantees to priority sectors.
  - For test dates in 2024, the ceiling is UAH 47.9 billion.
  - The program exchange rates apply to all non-UAH denominated debt.
  - This ceiling excludes guarantees for NBU borrowings from IMF.
- Automatic upward adjustor for guarantees signed for selected projects financed by multilateral and bilateral donors:
  - For test dates in 2023: eligible loans include working capital loan to UkrEnergo; loan to UkrEnergo to modernize the electricity grid and substations; loan to Ukrainian Railways for emergency support; loan to Ukrhydroenergo for emergency restoration of hydropower plants; loan to Ukrenergo for special capital structure support; loan to Naftogaz for additional procurement of natural gas; and loan to Ukrhydroenergo for installation of hybrid systems for electricity production. The adjustor was capped at UAH 44.82 billion in 2023 and discussed in program reviews.
  - For test dates in 2024: eligible loans include loan to UGV to purchase equipment for gas extraction; loan to Naftogaz for additional procurement of natural gas; loan to Ukrhydroenergo for emergency restoration of hydropower plants; working capital loan to Ukrenergo; and loan for Boryspil International Airport for reconstruction of flight zone 2. The adjustor will be capped at UAH 38.7 billion in 2024 and discussed in program reviews.

### Other Continuous Performance Criteria
- During the period of the EFF, Ukraine will not:
  - (i) impose or intensify restrictions on the making of payments and transfers for current international transactions;
  - (ii) introduce or modify multiple currency practices;
  - (iii) conclude bilateral payments agreements that are inconsistent with Article VIII; and
  - (iv) impose or intensify import restrictions for balance of payments reasons.

### Official Exchange Rate
- The official exchange rate of the hryvnia against U.S. dollar was UAH/USD 36.5686 as set by the NBU, effective 9am on July 21, 2022, until October 3, 2023.
- Since October 3, 2023, the NBU is transitioning to a regime of managed flexibility. The official exchange rate against the USD is determined based on series of transactions in the interbank FX market.
- Until more observations determine a new trend, the de facto exchange rate arrangement remains classified as stabilized.
- Official exchange rates for other currencies are determined by the NBU on the basis of the official exchange rate against USD and cross rates of the relevant foreign currencies.
- The official exchange rates are published daily on the NBU’s website no later than 3:30 pm of the day of the calculation and take effect the next business day.
- Ukraine's de jure exchange rate arrangement is floating.

### Reporting Requirements — National Bank of Ukraine (NBU)
- Frequency and key items to be provided to the IMF:
  - Monthly sectoral balance sheets for the NBU and other depository corporations (banks) according to SRFs, no later than the 25th day of the following month (except SRFs for the end of the reporting year, no later than the 41st day after the reporting year).
  - Weekly: daily operational data on the stock of net and gross international reserves, at both actual and program exchange rates; full breakdown of NBU accounts included in net international reserves; any additional information needed for IMF monitoring.
  - Monthly, no later than 20th of the following month: balance data on the stock of net and gross international reserves and flows affecting net international reserves.
  - Monthly, no later than the 25th of the following month: data on the currency composition of reserve assets and liabilities.
  - Daily: total foreign exchange sales (including total from nonresidents and sales by clients in the interbank market, as well as any obligatory sales, if any) and approved foreign exchange demand in the interbank market, including Naftogaz foreign exchange purchases; official foreign exchange interventions and intervention quotations; results of any foreign exchange auctions.
  - Quarterly: information on indicators of FX interventions approved by the NBU Board (in case of any changes). Immediate notification of any updates to the FX interventions methodology documentation and any decisions that define these indicators.
  - Daily: balances held in analytical accounts 2900 “Accounts payable per transactions for the foreign exchange, banking and precious metals purchase and sale on behalf of banks’ clients.”
  - Continued public provision on the NBU web site: daily holdings of domestic government securities and information on primary auctions and secondary market sales.
  - Detailed information on government securities to IMF: daily holdings broken down by type of holders at primary market prices at the rate fixed on the day of auction; domestic government securities sales from the beginning of the year at the official rate as of the date of placement; domestic government securities in circulation by principal debt outstanding at the official exchange rate as of the date of placement; reports on each government securities auction; data on purchase and redemption of domestic government bonds from the Ministry of Finance in the NBU’s portfolio; monthly report on government securities holdings, broken down by currencies and by holders—non-resident investors, resident non-bank, and resident banks (State Participation, Foreign Banking, and Private Capital).
  - Daily: transactions (volumes and yields) on the secondary market treasury bills (including over-the-counter transactions and breakout for any NBU transactions).
  - NBU financial statements (income and expenses, balances on the general reserves and the calculations of the profit distribution to the budget) for the current and, if available, projections for the following two years, as approved by the NBU’s Board. IMF to be notified immediately of any update.
  - Daily and monthly: data on the NBU financing operations (including swaps or refinancing) of the banks of Ukraine, and on operations of mopping up (absorption) of liquidity from the banking system (including through the CDs issuance) in formats and timeliness agreed with IMF staff.
  - Monthly: information on collateral pledged to the NBU for loans (by bank and loan type as well as by collateral type, haircut, and currency).
  - Monthly: bank-by-bank information on NBU refinancing, broken down by operations (with indications of their settlement and maturity dates), and collateral pools, broken down by asset types and securities (with values before and after haircuts). Monthly reporting will separately identify banks under temporary administration or liquidation.
  - Monthly, no later than 30 days after the expiration of the reporting month (except end-of-year data by the 41st day): core FSIs for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group.
  - Daily and monthly, not later than the 25th day after the termination of the report month (except end-of-year data by the 41st day): depository corporations surveys, including domestic claims, NBU loans and liabilities with banks, detailed information on loans of the banking sector to the general government with breakdowns by indebtedness of the central (state) government and local budgets and the DGF, including in national and foreign currency, by loan and by security, and balances of government funds held at the NBU (including account 3240 L and account 3513 L) and computation of Target on General Government Borrowing from the NBU based on monthly reporting data.
  - Monthly: projections for external payments falling due in the next 12 months. Actual settlement data reflecting separately principal and interest payments and actual outturns for public and private sectors to be provided quarterly, within 80 days following the end of the quarter.
  - Quarterly: stock of short- and long-term external debt for both public and private sectors. Stock of external arrears to be reported on a continuous basis.
  - Daily: data on foreign exchange export proceeds and foreign exchange sales; data on import transactions for goods and services; data on amounts of foreign exchange transferred from abroad to the benefit of physical persons—residents and nonresidents—to be paid in cash without opening an account; data on foreign exchange wires from Ukraine abroad for current foreign exchange nontrade transactions on the basis of the orders of physical persons; data on sales and purchases of foreign exchange cash by individuals (incl. through banks, exchange offices, and UkrPoshta).
  - Weekly: volumes of noncash foreign exchange purchases on behalf of banks’ clients and banks broken down by reasons.
  - Monthly: data on certain transfers of non-cash FX from Ukraine to the benefit of non-residents; aggregated data on the number and amounts of e-limits granted to legal entities and physical individuals and on the transfer and purpose of foreign exchange outside Ukraine within the e-limits.
  - Daily: data on foreign assets and liabilities of the overall banking system (excl. the NBU); banks’ open foreign exchange positions by main groups of banks; deposits on aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities, maturity, and by national and foreign currency; loans on aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities and by national and foreign currency.
  - Daily: deposits and credits for the overall banking system (excl. the NBU) without deposits and credits of banks in liquidation starting from the beginning of 2014, broken down by households and legal entities, and by national and foreign currency.
  - Weekly: data on foreign assets and foreign liabilities (broken down by domestic and foreign currency) for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group.
  - Monthly: foreign assets for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group broken down by type (cash and deposits, government securities, nongovernment securities, loans, other) and foreign liabilities by type, holder (banks, other financial institutions, nonfinancial corporate, and individuals) and remaining maturity (less than one month, one to three months, three to 12 months and over 12 months). For foreign credit lines from banks and for securities, rollover rates will also be provided.

*Source: TMU content in the provided PDF chapter.*

### 44. T

### 44. T

### National Bank of Ukraine (NBU) — daily and monthly reporting requirements
- Daily, bank-by-bank data for the largest 35 banks on:
  - liquidity ratio and amounts of cash and cash equivalents;
  - available funds in NBU accounts (excl. reserve requirements);
  - correspondent accounts with well-known international banks (excl. encumbered accounts);
  - deposits from customers.
- Daily, bank-by-bank data for State Participation Group, Foreign Banking Group, and Private Capital Group banks on:
  - total assets and liabilities;
  - loans and claims (by households, legal entities, and banks);
  - foreign exchange net open position.
- All above data to be reported by domestic and foreign currency.
- Deposits data to be reported by households and legal entities and by maturity (current accounts, saving accounts, and time deposits).
- For the aggregate of the banking sector and for groups of banks, provide data on deposits and credits excluding those banks in liquidation since 2014.
- Monthly, bank-by-bank data on liquidity coverage ratio in all currencies and in foreign currency.

### NBU — additional daily and monthly foreign currency and market flow reporting
- Daily aggregated data on main currency flows, including government foreign receipts and payments by currencies and interbank market operations by currencies.
- Continue daily information on exchange market transactions including the exchange rate.
- Monthly information on reserve requirements at the individual bank level, including breakdown between reserve requirements fulfilled by reserves and that by government securities.

### NBU — interest rates, risk exposures, and capital metrics
- Monthly, bank-by-bank for State Participation Group, Foreign Banking Group and Private Capital Group banks:
  - average interest rate on deposits to customers (by domestic and foreign currency; by non-financial corporations and households; by maturity—demand and time accounts).
- Weekly (after Martial Law is cancelled), average interest rate on interbank borrowings (by domestic and foreign currency; by maturity—overnight, 1–7 days, and over one week).
- Monthly, in an agreed format, data for the entire banking sector and aggregated and bank-by-bank for the specified bank groups on:
  - risk weighted assets and other risk exposures (for ratio H2 and H3 calculation), including excess of long-term asset to funding and foreign exchange open position;
  - total regulatory (Tier 1 and Tier 2) and core (Tier 1) capital;
  - capital adequacy ratio for total regulatory (H2) capital and core capital (H3);
  - loans and claims by maturity buckets for households, legal entities, and banks in domestic and foreign currencies;
  - deposits by maturity buckets for households, legal entities, and banks in domestic and foreign currencies;
  - foreign exchange net open position, split between total foreign exchange assets (long position) and foreign exchange liabilities (short position), and between on- and off-balance sheet.

### NBU — loan-level, collateral, provisioning, and related-party reporting
- Monthly, in an agreed format, bank-by-bank for the specified bank groups:
  - amount of loans and claims (by households in domestic and foreign currency; legal entities in domestic and foreign currency; banks in domestic and foreign currency; maturity; and by borrower classification categories);
  - collateral for loans and claims (by type of collateral; legal entities in domestic and foreign currency; households in domestic and foreign currency; banks in domestic and foreign currency; and by borrower classification categories);
  - provisions on loans and claims (by households in domestic and foreign currency; legal entities in domestic and foreign currency; banks in domestic and foreign currency; and by borrower classification categories);
  - large exposures (loans equal to or greater than 10 percent of equity), refinanced loans, and restructured loans (by households, legal entities, and banks) (after Martial Law is cancelled);
  - average interest rate on new loans to customers (by non-financial corporations and households; accrued interest on loans by domestic and foreign currency);
  - securities and debt financial instruments, with government securities reported separately (by domestic and foreign currency).

- Monthly, bank-by-bank for the specified bank groups, on related-party exposures:
  - amount of deposits of related parties (by domestic and foreign currencies, and households and legal entities);
  - deposits of related parties pledged as (cash cover) collateral (by domestic and foreign currencies, and households and legal entities);
  - other liabilities to related parties (by domestic and foreign currencies);
  - related-party loans (by households, legal entities, and banks);
  - counterparty names and amounts of the largest 20 loans to related parties;
  - collateral for loans and claims on related parties (by type of collateral; legal entities, households, and banks in domestic and foreign currencies; and by borrower classification categories);
  - provisions on loans and claims on related parties (by households, legal entities, and banks in domestic and foreign currencies; and by borrower classification categories).

### NBU — aggregated regional and NPL, income statement, liquidity and capital reporting
- Monthly, aggregate and bank-by-bank and by region data on:
  - loans and provisions (by households and legal entities; domestic and foreign currencies; by debtor classification categories; and by asset class e.g. corporate, and retail);
  - deposits (by households and legal entities; domestic and foreign currencies);
  - due from banks (by domestic and foreign currencies).
- Monthly, for the entire banking sector and bank-by-bank for specified bank groups, data showing nonperforming loans (NPLs), including:
  - migration from NPLs to performing loans (PLs);
  - migration from PLs to NPLs;
  - form of NPL repayments (cash, loan sales, collateral sales, etc.);
  - write-offs; and other factors (e.g., exchange differences and revaluations) (and compared with banks’ respective timebound plans for reducing NPLs once these are approved).
- Monthly, cumulative income statement data for the entire banking sector and bank-by-bank for specified bank groups, including:
  - total revenues;
  - interest revenues (from loans to households, loans to legal entities, interbank loans, placements with the NBU, securities);
  - revenues from fees and commissions;
  - total expenses;
  - interest expenses (on deposits to legal entities, deposits to households, interbank borrowing, borrowing from NBU, securities issued);
  - fees and commissions paid;
  - salaries and other staff compensation;
  - other operational expenses;
  - net earnings before loan loss provisions;
  - loan loss provisions;
  - net earnings after loan loss provisions;
  - taxes paid; and
  - net earnings.
- Upon request, banks’ net expected outflow of cash for a 30-day period.

- Monthly, bank-by-bank the amount by which the specified bank groups' regulatory capital has been increased, disclosing the instrument or transactions by which regulatory capital has been increased (e.g., capital injection, conversion of subordinated debt to equity, etc.)
- Monthly, data for the entire banking sector and bank-by-bank by bank groups on liquid assets in local currency and all currencies, including holdings of cash, correspondent accounts with banks, government bonds, benchmark government bonds, funds held at the NBU in correspondent accounts, NBU instruments held, and details of free liquidity.
- Monthly notification of any regulatory and supervisory measures against banks violating NBU regulations on capital adequacy, liquidity ratio, large exposures, and related or connected lending, as well as decisions on declaring a bank as problem or insolvent, including banks whose license has been revoked without declaring the bank insolvent.

### NBU — balance of payments, Treasury defaults, reserve requirements, accounting changes, and audit
- Continue to provide detailed quarterly balance of payments data in electronic format within 80 days after the end of the quarter.
- Inform IMF staff if the Treasury does not pay interest or principal on domestic government bonds due to the NBU, banks, or nonbank entities and individuals; provide information on outstanding interest and principal payments in such case.
- Inform IMF staff of any changes to reserve requirements for other depository corporations.
- Communicate (electronically) to IMF staff any changes in accounting and valuation principles applicable to balance sheet data and notify staff before introducing any changes to the Charts of Accounts and reporting forms of the NBU and commercial banks.
- NBU Internal Audit Department to provide an assurance report to the Fund, no later than six weeks after each test date, confirming that:
  - (i) the monetary data are in accordance with program definitions and have been verified and reconciled to accounting records; and
  - (ii) that there have been no changes to the chart of accounts or valuation methods that would impact the data reporting.
- Provide a copy of the annual management letter from the external auditor within six weeks of completion of each audit; this will remain in effect for the duration of the arrangement and for as long as credit remains outstanding.

### NBU — government securities and coupon reporting
- Monthly, provide to the IMF and the Ministry of Finance data on the monthly coupons and principal to be paid for the period till the end of current and next year (in hryvnia and foreign currency, separately) on the outstanding stock of government securities held by NBU and the public (broken down by resident banks, resident non-bank; and non-resident investors).
- Data on resident banks to be further broken down by bank group (State Participation, Foreign Banking, and Private Capital) and include ISIN-level.
- Annually, provide information on hryvnia-denominated securities that are indexed (i.e., to inflation; USD), broken down by the type of the owner.

### Deposit Guarantee Fund (DGF) reporting
- Monthly, data on the total number and volume of household deposits broken down in groups by deposit size; reported bank-by-bank for the largest 35 banks and on aggregate for the remaining banks.
- Monthly, bank-by-bank for all banks in the banking system the amount of insured deposits and total household deposits; reported by domestic and foreign currency in an agreed format.
- Monthly, bank-by-bank the total insured deposits and remaining insured deposits to be paid by the DGF for banks under liquidation and under provisional administration; reported by domestic and foreign currency in an agreed format.
- Monthly, financial position of the DGF, including information about the cash balance, bond holdings, credit lines, and loans; reported in an agreed format.
- Monthly, financing arrangements of the DGF, including information about contracted financing from MoF; reported in an agreed format.
- Monthly, a one-year forecast of the amount and type of financial resources that the DGF expects to receive from MoF, NBU and other entities; the amount that DGF expects to pay out to insured depositors in banks in liquidation; and the amount of asset recoveries expected by DGF; reported in an agreed format.

### Ministry of Finance — treasury, budget execution, arrears, and debt reporting
- Monthly consolidated balances (end-month) of other non-general government entities, including SOEs, holding accounts at the Treasury no later than 25 days after the end of the month.
- Treasury to provide daily operational budget execution indicators, daily inflow of borrowed funds (by currency of issuance) to the state budget and expenditures related to debt service (interest payments and principals) including data on government foreign exchange deposits, in a format agreed with IMF staff; 10-day and monthly basis data on the execution of the state, local, and consolidated budgets on the revenue side and data on revenues from the social security contributions, including by oblast breakdown; monthly data on funds deposited with the Single Treasury Account; information on balance of funds as of the 1st day of the month on the account #3712 “accounts of other clients of the Treasury of Ukraine”; inflow to the State budget from placing Treasury or any other liabilities to households in foreign and domestic currency and their redemption.
- Monthly and quarterly treasury reports in electronic form, including on accounts payable by budget institutions no later than 25 and 35 days after the end of the period, respectively.
- Final fiscal accounts at the end of each fiscal year in electronic form no later than March of the following year; reports to provide expenditure data by programs and key spending units, and based on standard functional and economic classifications. Quarterly reports to contain standard information on budget expenses to cover called government guarantees.
- Report data on the public wage bill (excluding SOEs) in line with the template agreed with IMF staff, including all payment categories, including defense wages. Provide quarterly Treasury reports on expenditure under the medical guarantee program by economic classification.
- Quarterly information on municipal borrowing and amortization of debt in format agreed with IMF staff.
- Together with NBU, monthly information about redemptions of domestic bonds and bills in favor of residents (banks, non-banks) and non-residents. Together with NBU, weekly information on face value of government bonds redeemed and face value of government bonds placed during the week.
- Monthly, no later than 15 days after the end of the month, the cash balance of the general government, with details on budget execution data for privatization receipts of the state and local governments; disbursements of external credits (including budget support and project loans including on lending) to the consolidated budget and amortization of external debt by the consolidated budget; net domestic borrowing of the general government, including net T-bill issuance, issuance of other government debt instruments, and change in government deposits.
- Quarterly, no later than 25 days after the end of the quarter, an updated list of project financing credits (distinguishing grant and loan financing) to be disbursed to the special fund of the State Budget of Ukraine (project-by-project basis), as well aggregated cash expenditures for such projects through the most recent month.
- Monthly data on the stock of all budgetary arrears, no later than on the 1st day of the second subsequent month, including separate line items for wages, pensions, social benefits accrued by social funds, energy, communal services, and all other arrears on goods and services and capital expenditures.
  - Treasury to report monthly data on accounts payable for state and local budgets (economic classification of expenditures).
  - Pension Fund to provide monthly reports on net unpaid pensions to the individuals who resided or continue to reside in the territories that are or were in direct combat zones and temporarily occupied by Russia. The provided information will include defense and law-enforcement.
  - (Table headings listed in source: Overdue account payables general government March 30, 2024; June 30, 2024; September 30, 2024; December 31, 2024; March 30, 2025 — Wages; Other budgetary spending; Social spending, including; Pension and Social Insurance; Unemployment; Local governments.)
- Decomposition of own revenues of budgetary institutions (budget treasury code 25000000) into proceeds from fees for services provided by budget institutions in accordance with the law (budget treasury code 25010000) and other sources of own revenues of budgetary institutions (budget treasury code 25020000) no later than 25 days after the end of the quarter.
- Monthly information, no later than 25 days after the end of each month, on the amounts and terms of all external debt contracted or guaranteed by the central government, including external and domestic credit to key budgetary spending units as well as nongovernment units that is guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients).
- Monthly information, no later than 25 days after the end of each month, on the balances of sub-accounts 3551 and 3559.
- Quarterly, in electronic form, no later than 25 days after the end of the quarter, provide:
  - (a) data on the outstanding stock of domestic and external debt of the state and local budgets (including general and special funds);
  - (b) the monthly forecasts of planned and actual external debt disbursement, amortization, and interest payments (including general and special funds), broken down in detail by creditor categories and currency as agreed with Fund staff.
  - Also report the accumulation of any budgetary arrears on external and domestic debt service.
- Semi-annually, no later than 25 days after the end of Q2 and Q4, provide disaggregated bond-by-bond (loan-by-loan) data regarding the debt stock, associated payments, and disbursements.

*Source: 1ukrea2024001 - 44. T*

### 85. The Ministry of Finance will provide data on external and domestic credit to key budgetary

### 1ukrea2024001 - 85. The Ministry of Finance will provide data on external and domestic credit to key budgetary

### Fiscal reporting and data provision requirements
- Ministry of Finance will provide data on external and domestic credit to key budgetary spending units and nongovernment units guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients) on a monthly basis no later than 25 days after the end of the month.
- Ministry of Finance will provide approved budgets and quarterly operational data (daily for the Pension Fund only) on revenue, expenditures, arrears, and balance sheets of:
  - Pension Fund (detailed breakdown of revenues and expenditure by main categories expected), Employment Fund (detailed breakdown expected), and any other extra budgetary funds managed at the state level — no later than 50 days after the end of each quarter (each month in case of the Pension Fund).
  - Any within-year amendments to these funds’ budgets will be reported within a week after approval.
  - Annual financial statement including final fiscal accounts of those funds at the end of each fiscal year, no later than April of the following year.
- Ministry of Finance will provide monthly data, no later than 15 days after the end of each month, on budgetary costs associated with recapitalization of banks and SOEs, including upfront cash impacts and costs associated with payment of interests, and provide quarterly performance reports for the Fund for Entrepreneurship Development. Registry of fiscal risks to IMF staff semi-annually or sooner if available.
- STS and State Customs Service (SCS) to provide quarterly, no later than two months after quarter-end, a listing of all tax exemptions specifying beneficiary, duration, and estimated revenue loss for the current fiscal year (revenues foregone include losses from the simplified tax regime by groups of beneficiaries).
- STS monthly reporting, no later than 25 days after month-end:
  - VAT refunds format: (i) beginning stock of refund requests; (ii) refund requests paid in cash; (iii) refunds netted out against obligations; (iv) denied requests; (v) new refund requests; (vi) end-of-period stock of requests; and (vii) stock of VAT refund arrears (unsettled VAT refund claims submitted to STS more than 74 days before end of period).
  - Monthly reports 1.P0 on actual tax revenue and 1.P6 on tax arrears (inclusive of deferred payments, interest and penalties outstanding) no later than 25 days after month-end.
  - Quarterly, no later than 25 days after quarter-end, information on number of tax appeals and associated disputed amounts, number of internally resolved appeals and their resolution outcomes.
- Ministry of Finance to provide monthly information about number and amount of loans under the 5-7-9 program and breakdown by sectors of loans.
- Naftogaz Group and GTSO to provide monthly cash-flow information no later than the 25th of the following month, with Naftogaz additionally reporting volumes and prices of gas purchases and sales, main revenue/expenditure/financing items, and updated schedule of loan-by-loan interest and principal payments.
- Ministry of Economy to provide consolidated quarterly information (no later than 80 days after quarter-end) from financial statements of the 10 largest SOEs including: (a) gross profit/losses; (b) net financial results; (c) subsidies received from the budget; (d) guarantees granted from the budget; (e) stock of debt, broken down by domestic and foreign; (f) taxes and dividends paid; (g) wage arrears; and (h) other payment arrears.
- Agency for the Restoration and Development of the Infrastructure of Ukraine to provide monthly reports on execution of budgetary programs associated with road construction and maintenance, including borrowing (disbursements, interests, and amortization) in agreed format.
- State Statistics Service to provide revised quarterly GDP data (nominal, real, deflator) and components no later than 10 days after any revisions.
- Ministry of Social Policy to collect and submit quarterly data on social assistance programs (including IDPs) in agreed excel format showing, for each program: (a) number of households receiving help under HUS and other support categories and privileges in reporting month; (b) total value of transfers; (c) total value of outstanding HUS debt; (d) income per capita of participants, both for HUS and privileges.

### Macroeconomic outlook and key macro figures (Statement by Mr. Vladyslav Rashkovan)
- War impact and reconstruction:
  - Rapid Damage and Needs Assessment estimates reconstruction costs at US $486 billion (230 percent of pre-war GDP) over the next decade.
- Growth and output:
  - Real GDP returned to annual growth in Q2 2023, reaching 5.7 percent for the whole of 2023 (NBU estimates).
- Agriculture and trade logistics:
  - Ukraine collected about 60 million tons of grains, an increase of about 11 percent compared to 2022.
  - Exports contributed to global food security despite logistical changes; border blockades with some EU countries restrained activity in some sectors and adversely affected budget revenues mainly due to lower imports.
- Inflation and monetary conditions:
  - Consumer inflation decelerated to 5.1 percent y/y in December 2023 and further to 4.3 percent y/y in February 2024.
  - NBU committed to maintaining appropriate monetary policy stance, managing inflation expectations, safeguarding exchange rate sustainability, and maintaining international reserves.
- External sector:
  - Current account ran a deficit of US $9.6 billion in 2023 compared to a surplus of US $8 billion in 2022.
  - Goods trade deficit widened to US $29 billion from US $14.7 billion in 2022.
  - Exports of goods decreased by 15.6 percent y/y; imports of goods grew by 14.3 percent y/y.
  - Significant international aid restrained further widening of the current account deficit.
- Migration:
  - As of mid-February 2024, almost 6.5 million Ukrainian migrants; about 3.6 million registered as internally displaced persons (IDPs).
  - UNHCR survey (January-February 2024): 65 percent of migrants abroad will return to Ukraine once economic factors, security, and housing improve (declined from 77 percent a year ago).

### Fiscal policy, financing strategy, and revenue measures
- 2023 fiscal outcome and adjustments:
  - Overall deficit in 2023 capped at UAH 1,282 billion, or 19.7 percent of GDP in 2023.
  - Authorities repealed some Martial Law provisions to relaunch mid-term budget framework starting 2024, reinstate a fiscal rule ringfencing risks from state guarantees, and limit reasons for budget amendments.
  - Plans to enhance expenditure planning, medium-term budget framework, SOEs stress-testing, and fiscal risks assessment with IMF TA.
- Monetary financing and domestic debt:
  - Avoidance of monetary financing during program supported macro stability; authorities committed to avoiding monetary financing in 2024 subject to rhythmic international support.
  - In 2023 net debt issuance on domestic market amounted to UAH 183 billion, or US $5 billion, bringing implied rollover rate to 149 percent.
  - About 57 percent of gross hryvnia issuance was in the form of designated benchmark bonds banks may use to meet NBU reserve requirements.
- Revenue mobilization and tax measures:
  - National Revenues Strategy (NRS) developed with IMF TA and approved by Cabinet at end-2023.
  - Working group identified measures to accumulate additional revenues of 0.5 percent of GDP.
  - Extraordinary one-time tax on bank profits (50 percent) introduced for 2024 expected to generate about 0.3 percent of GDP.
  - Going forward, banks will be taxed at a permanently higher corporate income tax rate (25 percent).
  - Budget contains provision to reallocate personal income taxes between state and local budgets.
- Public investment and PIM reform:
  - December 2023 approved roadmap for reforming public investment management system, incorporating World Bank, IMF, and European practices and addressing rapid recovery and post-war reconstruction needs.

### Financing, reserves, and exchange rate policy
- Financing and external support:
  - Budget deficit for 2024 expected to remain at same level as 2023; authorities working with partners on conditionality and timing for disbursements in 2024.
  - Volatility and delays in external financing created liquidity gap at start of 2024; EU “Ukraine Facility” approval of €50 billion reduced uncertainty.
  - In 2023 Ukraine received more than US $42.5 billion in grants and loans.
- International reserves:
  - International reserves increased by 42 percent to US $40.5 billion by end of 2023.
  - Delays in some aid disbursements at beginning of 2024 led to a decline to US $37.1 billion, but net international reserves exceeded the floor comfortably.
- Exchange rate transition:
  - Transition from a peg to managed ER flexibility in line with NBU strategy; since transition to a managed float in October 2023, FX market conditions broadly stable.
  - Exchange rate depreciated by a cumulative 4.5 percent since the transition through end-February.
  - Spread between cash and official exchange rates remains compressed to below 5 percent.
  - Further easing of FX controls to continue gradually under the FX liberalization roadmap.
  - Three previously approved multiple currency practices (MCPs) considered eliminated as of February 1st.

### Financial sector and banking
- Deposit and lending developments:
  - Banks experienced further inflows of retail and corporate deposits; share of term retail deposits increased.
  - Retail lending rise since Q2 2023; hryvnia retail portfolio increase in 2023 was over 20 percent.
  - Corporate lending in hryvnia gradually recovering since June, driven by government programs like “5-7-9” and lending outside these programs is also picking up.
- Banking sector profitability and resilience:
  - Banks generated over UAH 86 billion in profits in 2023.
  - NBU completed bank resilience assessment finding sufficient capital and substantial safety margin system-wide.
  - Based on assessment, NBU set higher required capital adequacy ratios for five of the twenty largest banks; two already above required level in December 2023.
  - Banks will have to restart updating business recovery plans to NBU in the year.

### Governance, anticorruption, and structural reforms
- Anticorruption and rule of law:
  - Authorities committed to anticorruption and good governance reforms to sustain public confidence and support EU accession goals.
  - New head of National Agency for Corruption Prevention (NACP) appointed in February; selections for new anti-corruption judges underway with independent international experts’ participation.
  - Asset declarations made publicly accessible end-January and are undergoing risk-based verification by NACP.
  - Planned amendments to criminal procedural code to enhance corruption investigations, mutual legal assistance, and reasonableness of pre-trial time limits.
- SOE governance:
  - Parliament adopted an SOE corporate governance law broadening power of SOE supervisory boards while respecting PFM principles to mitigate SOEs’ fiscal risks.
  - Authorities remain committed to energy market reforms including corporate governance measures.

### Concluding assessment and program implementation
- Authorities maintained economic stability amid invasion through policymaking and external support.
- Authorities met all four structural benchmarks for end-February in time and advanced important structural reforms; all but one quantitative performance criterion were met.
- Authorities consider MEFP policies adequate to achieve program objectives in baseline and downside scenarios and request completion of the Third Review while reiterating commitment to program policies and EU accession path.

*Source: Excerpt from the provided PDF content.*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1ukrea2024001.pdf_