## 1ukrea2024004-print-pdf

## Source details

**Canonical URL:** [1ukrea2024004-print-pdf](https://www.imf.org/-/media/files/publications/cr/2024/english/1ukrea2024004-print-pdf.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2024/english/1ukrea2024004-print-pdf.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2024/english/1ukrea2024004-print-pdf.pdf.json)

---

### Executive summary — context and human costs
- War context and uncertainty:
  - Russia’s war in Ukraine continues with exceptionally high uncertainty and ongoing attacks on energy infrastructure.
  - Humanitarian and social costs noted:
    - 6.75 million refugees already outside Ukraine (October figure).
    - nearly 4 million internally displaced persons.
    - nearly 12,000 civilians killed and almost 26,000 injured.
    - one-third of the population facing food insecurity.
- External support and recent program developments:
  - G7 agreed on the US$50 billion Extraordinary Revenue Acceleration Loans for Ukraine (ERA) Initiative; modalities being finalized.
  - Authorities enacted a tax package supporting restoration of fiscal and debt sustainability (Law #11416-d enacted November 28, 2024 — prior action).

### Recent economic performance and policy stance
- Growth and activity:
  - Real GDP expanded 3.7 percent y/y during 2024Q2 (0.7 pp above the Fifth Review assumption).
  - Early estimate for Q3 indicates growth of 3.8 percent (versus the 2½ percent Fifth Review assumption).
  - Real GDP growth (2024) revised to 4 percent y/y (lifted 1 pp from the Fifth Review).
  - Outward migration: refugees reached 6.75 million in October (from around 6.5 million in May).
- Inflation and expectations:
  - Inflation reached 9.7 percent y/y in October.
  - One-year ahead inflation expectations around 8 percent.
  - End-year inflation revised up 1pp to 10 percent for 2024; average inflation for 2025 revised to 10.3 percent y/y; end-2025 inflation expected 7½ percent under baseline.
- External sector and reserves:
  - Current account deficit for January–September widened by US$4.8 billion to reach US$11 billion.
  - Gross international reserves totaled US$36.6 billion (4.5 months of prospective imports) at end-October 2024.
  - Staff baseline gross reserves (US$ billion) series: 2024: US$42.3; 2025: US$43.3 (100.5 percent of ARA metric).
- Financial sector:
  - Banks’ liquidity healthy at more than four times minimum requirements; deposits show mild m/m downward trend.
  - Credit to corporates and households trended up; credit growth revised up to 11.6 percent Dec/Dec.
  - Prices of restructured sovereign Eurobonds rallied; spreads fell below 1,000 basis points in early November (volatile).
- Energy sector:
  - Authorities repairing infrastructure; EU import cap relaxed to 2.1GW (from 1.7GW) with additional 250MW emergency support.
  - Stockpiled gas consistent with target levels; energy situation remains very challenging with risk of blackouts depending on further attacks and winter severity.
- Fiscal and monetary implementation:
  - Cumulative fiscal deficit through end-3Q slightly narrower than expected; tax collections robust.
  - NBU held the KPR at 13 percent at October and November MPC meetings; readiness to tighten if shocks materialize or expectations de-anchor.
  - Exchange rate fluctuated in a narrow band since September with modest day-to-day flexibility; interventions remained elevated.

### Policy developments — tax package and fiscal outlook
- Timing and fiscal impact:
  - Tax package enacted November 28, 2024; measures take effect from December 2024.
  - Minor impact in 2024; expected to raise over 1½ percent of GDP in new revenues in 2025 (estimated yield ~ UAH 141 billion or around 1.6 percent of GDP).
- Main components:
  - Raise military tax rate and broaden applicability to taxpayers in the simplified system.
  - Presumptive taxation on fuel stations and currency dealers.
  - Align bank and non-bank corporate profit tax rates at the higher bank rate.
  - Administrative filing procedure changes; extension of 50 percent extraordinary corporate profit tax on bank profits for another year (with intention to avoid further windfall taxes thereafter).
- Implementation corrections:
  - Law #9319 added changes to avoid unintended retroactive taxation and exempt single taxpayers in temporarily occupied territories from military tax.

### Outlook, scenarios, and risks
- Baseline outlook (key projections and adjustments):
  - 2024 real GDP growth: 4.0 percent.
  - 2025 real GDP growth: unchanged at 2.5–3.5 percent.
  - Current account deficit (2024): 8.4 percent of GDP.
  - Overall fiscal balance (2024–2025): 2024: -18.9 percent of GDP; 2025: -18.9 percent of GDP (baseline series in report).
  - International reserves expected to reach US$43.3 billion at end-2025.
- Downside scenario (war extended):
  - Core assumption: war extends until mid-2026 with shock materializing 2025Q1.
  - Total external financing gap: US$177.2 billion (downside) versus US$148 billion (baseline).
  - Downside real GDP growth (2025): -2.5.
  - Downside end-of-period inflation (2025): 11.0 (eop).
  - Downside FX reserves (US$ billion) 2024–2027: 42.3, 41.1, 43.5, 45.5.
  - Downside overall fiscal balance (% GDP) (2024–2027): -18.9, -22.8, -18.4, -8.8.
  - Downside public debt (% GDP) (2024–2027): 92.2, 114.6, 128.2, 130.2.
- Principal risks:
  - War duration/intensity and repeated attacks on energy infrastructure.
  - Durability of international support.
  - Onset of reform fatigue at critical juncture.
- Staff assessment on enterprise risks to IMF:
  - Significant and increased enterprise risk stemming from uncertainty on war and financing assurances; monitoring and consultation with security experts ongoing.

### Fiscal policy and financing strategy
- 2024 Supplementary Budget and financing:
  - Above-the-line deficit excluding grants in 2024: around UAH 1,850 billion (24.3 percent of GDP).
  - Net domestic financing mobilized; targeted mobilization of domestic government bond issuance (UAH 151 billion issued in Oct–Nov with around a quarter benchmark bonds).
- 2025 Budget (adopted November 19):
  - Expenditures: UAH 5,065 billion (about 58 percent of GDP); national defense largest allocation.
  - Revenues: total revenues excluding grants expected UAH 3,340–3,355 billion; budget internalizes tax package.
  - 2025 overall deficit excluding grants: UAH 1,710 billion or 19.7 percent of GDP; mainly financed through external donor support with largest contribution from ERA financing (US$21.9 billion in 2025 phasing).
  - Contingency response: increase in main VAT rate identified as most appropriate response if needed.
- Multi-year planning and reconstruction financing:
  - RDNA-3 estimate: reconstruction needs US$486 billion over next ten years (published February 15, 2024).
  - Target medium-term primary balance after war: around ½-1½ percent of GDP.
  - ERA financing in baseline: US$33.1 billion through 2027Q1; downside includes full US$50 billion ERA.
- Debt restructuring strategy:
  - Eurobond exchange completed in August 2024; focus now on remaining commercial claims including GDP warrants and Ukrenergo guaranteed bond.
  - Flow relief from restructuring and ERA financing critical to reduce domestic borrowing needs.

### Program conditionality, performance criteria, and financing
- Performance:
  - Authorities met all end-September quantitative performance criteria (QPCs) and all end-October structural benchmarks (SBs) for the Sixth Review, as well as one end-December SB.
- Requested changes:
  - Modify a QPC by raising the floor for net international reserves for end-March 2025 to reflect positive reserves outlook in 2025Q1.
  - Add three SBs:
    - Prepare a strategy for the NSSMC by end-January 2025.
    - Prepare and submit to parliament a draft law on financial sector critical third-party risk by end-May 2025.
    - Complete and publish a third-party external assessment of NEURC by end-October 2025.
- Financing and purchase:
  - Staff supports completion of the Sixth Review enabling a purchase of SDR 834.88 million (41.5 percent of quota).
  - Baseline cumulative financing gap (2023Q2–2027Q1): US$148.0 billion; sources include Official financing (excl. IMF) US$121.7 billion and IMF prospective US$15.5 billion; flow relief from debt operations US$10.8 billion.
  - Baseline 12-month financing gap (25Q1–25Q4): Financing gap A. 42.3; Official financing (excl. IMF) B. 36.6 (ERA 21.9); IMF prospective C. 2.7; flow relief D. 3.0; residual E. 0.0.
- Capacity-to-repay assurances:
  - CtR assurance provided by a significant group of creditors/donors (G7 plus Belgium, Lithuania, the Netherlands, Poland, Slovakia, and Spain); staff judges ERA servicing residual liability risk sufficiently mitigated to carve out ERA for DSA purposes.
  - Indicators of Fund exposure: Fund credit stock expected to peak at 8 percent of GDP in 2024 and 35.8 percent of gross reserves in 2025 under baseline.

### Monetary policy, FX, and operational guidance
- Monetary stance:
  - KPR held at 13 percent in October and November MPC meetings; NBU ready to tighten if inflation expectations de-anchor.
  - Under the Monetary Policy Guidelines (MPG), policy horizon to bring inflation to 5 percent can extend out to three years through 2027.
- Instruments and operational measures:
  - KPR to increasingly serve as main instrument; FX interventions (FXI) to limit volatility and fill structural war-related FX deficit.
  - Reserve requirements (effective October 11): increased RR by 5 percentage points (except longer-term local currency household deposits) and increased share of RR that can be met with domestic government bonds from 50 to 60 percent — induced demand for UAH 40 billion in benchmark bonds in Oct–Nov and expected to induce demand for up to an additional UAH 110 billion through year-end.
  - NBU to monitor liquidity impact; share of government bonds allowed to meet RR should be phased out over time as conditions permit.
- FX liberalization:
  - Continue a cautious, conditions-based approach; limited liberalization measures passed in November (e.g., allowing enterprises to pay for old imports under monthly limits with participation of foreign ECA/state).
  - Monitor compliance and address circumvention of capital flow measures.

### Financial sector resilience, supervision, and contingent frameworks
- Supervisory reforms and resilience:
  - NBU implemented risk-based supervision reforms (Structural Benchmark met end-December 2024).
  - NBU completed a resilience assessment of banks covering 90 percent of system assets in December 2023; minor capital needs in five banks largely addressed; four banks submitted capital management plans to close ~ UAH 10 billion gap by March 2026.
- Bank rehabilitation and resolution:
  - DGF and NBU identified and closing operational gaps; Structural Benchmark met end-December 2024 for closing gaps including legislative amendments for information sharing and MoU updates.
  - Structural Benchmark: prepare bank rehabilitation framework (end-December 2024) — measures include updated early intervention, temporary administration, and resolution frameworks.
- Third-party and digital operational resilience:
  - NBU to prepare concept note on oversight of critical third-party risk and digital operational resilience by end-February 2025; draft law submitted by end-May 2025 (proposed SB).
- Securities regulator (NSSMC):
  - NSSMC to prepare reorganizational strategy, update Employees Code of Ethics, and conduct fit and proper reviews; SBs proposed end-January 2025 and completion by end-March 2025.
- Deposit Guarantee Fund and contingency:
  - DGF Administrative Board approved coverage target quantum and timeframe; working group to review DGF governance with legislative proposals by end-March 2025.

### Governance, anti-corruption, and SOE reforms
- Key governance actions and SBs:
  - Amend Criminal Procedural Code to strengthen anti-corruption investigation timelines (Structural Benchmark, end-December 2024).
  - Enact law establishing the High Public Disputes Court (HPDC) (Structural Benchmark, end-December 2024).
  - Amend Accounting Chamber (ACU) governance (Structural Benchmark, end-December 2024).
  - NABU external audit to be published (Structural Benchmark, end-February 2025).
  - Enact corporate criminal liability law by end-January 2025 to support OECD Anti-Bribery accession.
- SOE corporate governance:
  - Law #3587-IX adopted early 2024; produced SOP, dividend policy, and privatization strategy (Structural Benchmark met end-October 2024).
  - Full supervisory board of Ukrenergo expected restored by early December with independent majority (Structural Benchmark met end-December 2024); independent evaluation of supervisory boards of Ukrenergo, GTSO, and Naftogaz to be launched and concluded by March 2025.
  - Further work: triage SOE list, privatization framework, consolidated SOE management concept, and mandatory supervisory board legislation.

### Energy sector preparedness and reforms
- Near-term energy preparedness:
  - Commissioned 0.9 GW of reserve distributed generation; import capacity expanded to 2.1 GW.
  - Close to self-sufficiency for gas production and consumption; Naftogaz prepared to import additional gas if needed.
  - Review of DHC arrears completed (Structural Benchmark met end-October 2024); authorities to develop new tariff methodology with cost-reflective tariffs once war-related budget pressures subside.
- Regulatory reforms:
  - Amendments enacted to exempt NEURC regulatory decisions from state registration (Structural Benchmark met end-December 2024).
  - Authorities to develop accountability framework for NEURC; first external assessment to be completed and published by October-2025 (proposed SB).
- Risks:
  - Further attacks on energy infrastructure and a harsh winter remain high-risk channels that could materially increase humanitarian and economic costs.

### Debt sustainability analysis (DSA) and restructuring targets
- DSA assumptions and ERA treatment:
  - ERA financing included in public debt for conservative forecasting; ERA modeled with assumed terms: 10-year grace, 25-year final maturity, no interest for DSA purposes.
  - Staff judges ERA servicing risk sufficiently mitigated by assurances and ULCM mechanism to carve out ERA from restructuring targets.
- Restructuring targets:
  - Principal target: public and publicly guaranteed debt (ex. ERA loans) in 2033: 65 percent of GDP.
  - Complementary target: public and publicly guaranteed debt (ex. ERA loans) in 2028: 82 percent of GDP.
  - Gross financing needs (ex. ERA) average over 2028–33: 8 percent of GDP.
  - Annual flow relief over 2024–27: 1–1.8 percent of GDP.
- Staff assessment:
  - Debt assessed as sustainable on a forward-looking basis conditional on: (i) completing remaining restructuring with sufficiently deep treatments; (ii) fiscal adjustment (revenue-based); and (iii) substantial concessional financing and exceptional donor support.
  - Mechanical tools and stress tests indicate high sovereign stress risks; medium-term risk signal: High.

### Program monitoring, reporting, and TMU key parameters
- Monitoring framework:
  - Quarterly reviews through QPCs, indicative targets, and SBs; continuous PC on non-accumulation of external payments arrears.
  - Seventh, Eighth and Ninth Reviews expected on or after March 1, 2025; June 15, 2025; and August 31, 2025 respectively (based on QPCs for end-December 2024, end-March 2025, end-June 2025).
- TMU highlights and fixed program accounting rates:
  - Official exchange rate for program accounting: 36.5686 UAH per U.S. dollar (set March 13, 2023).
  - Reference exchange rates and SDR valuation listed in TMU (fixed for accounting purposes).
  - NIR definition and adjustors set out; NIR targets adjusted downward for shortfalls in external budget support and net issuance of domestic FX securities.
- Data provision and reporting obligations:
  - Extensive daily, weekly, monthly, quarterly reporting obligations for NBU, MoF, DGF, STS, Naftogaz, GTSO, MoE, and others with specified deadlines (e.g., monthly MoF reports no later than 25 days after month-end; NBU weekly and daily operational data).
  - Social assistance reporting: Ministry of Social Policy to submit quarterly program-level data (number of households, transfer values, outstanding HUS debt, income per capita).
  - TMU specifies ceilings and floors for QPCs and indicative targets with exact numeric sequences (e.g., floors on tax revenues, social spending, net international reserves, and ceilings on publicly guaranteed debt and arrears) as in program tables.

### Staff recommendations and appraisal
- Staff supports:
  - Completion of the Sixth Review and modification of the QPC (raise end-March 2025 NIR floor).
  - Completion of the financing assurances review.
  - Purchase of SDR 834.88 million (41.5 percent of quota) subject to Board approval.
- Policy priorities emphasized:
  - Finalize 2025 Budget in line with program parameters and available financing; deepen domestic revenue mobilization via NRS implementation.
  - Maintain current monetary stance while ready to tighten if inflation expectations de-anchor; allow exchange rate to play shock-absorbing role.
  - Strengthen bank rehabilitation framework, risk-based supervision, stress testing, contingency plans, and NSSMC operational effectiveness.
  - Progress governance and rule-of-law reforms: criminal procedural code amendments, enact HPDC law, reform Accounting Chamber.
  - Continue energy preparedness for winter and strengthen governance at state-owned electricity transmission operator.

_Italic: Source: IMF — 1ukrea2024004-print-pdf (excerpts provided)._

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- This program review takes place as Ukraine approaches a critical juncture amid Russia’s war in Ukraine, with conditions of exceptionally high uncertainty and continuing attacks on energy infrastructure.
- Comprehensive efforts are underway to prepare for the ongoing winter, including the heating season.
- Humanitarian and social costs cited:
  - 6.75 million refugees already outside Ukraine (October figure).
  - nearly 4 million internally displaced persons.
  - nearly 12,000 civilians killed and almost 26,000 injured.
  - one-third of the population facing food insecurity.
- External environment uncertainty: political transitions or election cycles in key partners may trigger renewed efforts to end the war and changes in the degree or modalities of international support.
- Recent developments supporting completion of the review:
  - Authorities have steadfastly implemented reforms despite the war, including enacting a tax package supporting restoration of fiscal and debt sustainability.
  - The G7 has agreed on the US$50 billion Extraordinary Revenue Acceleration Loans for Ukraine (ERA) Initiative and is finalizing modalities, fulfilling an essential component of the program’s financing.

### Economic performance — recent indicators and policy stance
- Growth and activity:
  - Real GDP expanded 3.7 percent y/y during 2024Q2 (0.7 pp above the Fifth Review assumption).
  - Early estimate for Q3 indicates growth of 3.8 percent (versus the 2½ percent Fifth Review assumption).
  - Activity supported by agricultural exports (accelerated harvest) and a lower energy deficit in August and September.
  - Outward migration: refugees reached 6.75 million in October from around 6.5 million in May.
- Inflation and expectations:
  - Inflation reached 9.7 percent y/y in October, driven by higher raw food prices, rising wages, and energy costs.
  - One-year ahead inflation expectations remain well-anchored at around 8 percent.
- External sector and reserves:
  - Current account deficit for January–September widened by US$4.8 billion over the same period last year to reach US$11 billion, principally reflecting a reduction in grants and effects of migrants losing residency status.
  - Merchandise trade balance roughly flat.
  - Gross international reserves totaled US$36.6 billion (4.5 months of prospective imports) at end-October 2024.
- Financial sector and markets:
  - Banks’ liquidity remains healthy at more than four times the minimum requirements; deposits show a mild m/m downward trend.
  - Credit to corporates and households continued to trend up from low levels.
  - Prices of Ukraine’s restructured sovereign Eurobonds rallied since the bond exchange; spreads fell below 1,000 basis points in early November albeit volatile.
- Energy sector:
  - Authorities repairing infrastructure and bringing new electricity generating equipment online.
  - EU import cap relaxed to 2.1GW (from 1.7GW), with an additional 250MW of emergency support available.
  - Authorities have stockpiled gas for the heating season consistent with target levels.
  - Energy situation remains very challenging; electricity deficit and blackouts depend on extent of further attacks and winter severity.
- Fiscal and monetary policy implementation:
  - Tax collections performed robustly; cumulative fiscal deficit through end-3Q slightly narrower than expected.
  - Domestic financing mobilized, supported by adjustments to reserve requirements (increasing share of benchmark government bonds that can count toward RRs since October 11); around a quarter of UAH 151 billion in domestic government bond issuances in October and November have been benchmark bonds.
  - External partners broadly disbursed according to expectations through end-October.
  - NBU held the key policy rate (KPR) at 13 percent at the October and November MPC meetings; MPC members prepared to tighten if further shocks materialize or if inflation expectations de-anchor.
  - Exchange rate fluctuated in a narrow band since September with modest day-to-day flexibility; interventions remained elevated.

### Policy developments: tax package and fiscal outlook
- A newly enacted tax package will help ensure adequate budgetary resources in the near term and maintain progress toward restoring fiscal and debt sustainability.
- Timing and impact:
  - Measures take effect from December 2024 following enactment on November 28, 2024.
  - Only a minor impact in 2024; expected to raise over 1½ percent of GDP in new revenues in 2025.
- Main components broadly reflecting prior expectations:
  - Raising the military tax rate and broadening applicability of military tax to taxpayers in the simplified system.
  - Presumptive taxation on fuel stations and currency dealers.
  - Aligning the bank and non-bank corporate profit tax rates at the higher rate applicable to banks.
  - Administrative measures on filing procedures.
  - Extension by Parliament of the 50 percent extraordinary corporate profit tax on bank profits for another year.
- Implementing changes were added in law #9319 to avoid unintended retroactive taxation, exempt single taxpayers in temporarily occupied territories from paying military tax, and other technical corrections.

### Outlook and risks
- Recent activity indicators stronger than expected led to an upgrade of the 2024 growth forecast; moderation is expected in 2025 due to labor and energy shortages.
- Inflation is slightly above expectations; vigilance warranted if pressures persist.
- Medium-term outlook is little changed compared to the Fifth Review.
- Risks (not exhaustive and described in the report):
  - Exceptionally high risks mainly from uncertainty about the war’s outlook and its end.
  - Repeated attacks on energy infrastructure remain a high risk; while preparedness is a mitigant, sustained damage could increase humanitarian and economic costs.
  - Reform fatigue risk at a time when momentum is needed on wide-ranging transformative reforms.

### Focus of the review: policy priorities emphasized by staff
- Fiscal policy and revenue:
  - Finalize the 2025 Budget in line with program parameters, including a critical tax package, and ensure alignment with available financing.
  - Deepen efforts on domestic revenue mobilization to ensure a durable return to fiscal and debt sustainability.
  - Continue fiscal structural reforms, including public financial management, medium-term budgeting, and expenditure policies.
- Monetary and exchange rate policy:
  - Maintain the current monetary stance while ready to tighten should inflation expectations show signs of de-anchoring.
  - As set out in the Monetary Policy Guidelines, ensure the exchange rate continues to play a shock-absorbing role to prevent external imbalances and safeguard reserves.
  - Continue a careful, conditions-based approach to FX liberalization with strong monitoring of effectiveness.
- Financial stability:
  - Be vigilant to financial stability risks.
  - Strengthen the bank rehabilitation framework, introduce risk-based supervision, update stress testing frameworks, and contingency plans.
  - Swift action to address operational challenges at the National Securities and Stock Market Commission (NSSMC).
- Governance and rule of law:
  - Progress reforms to strengthen governance and rule of law to tackle corruption, support EU accession, and support growth.
  - Key near-term tasks: strengthen the criminal procedural code to assist anti-corruption institutions; adopt the law establishing the High Public Disputes Court (HPDC); enact legislation to reform the Accounting Chamber of Ukraine (supreme audit institution).
- Energy preparedness:
  - Continue efforts to prepare for the winter energy season.
  - Strengthen independence and governance at the state-owned electricity transmission operator.

### Program issues, conditionality, and staff recommendations
- Performance:
  - Authorities met all end-September quantitative performance criteria (QPCs) and all end-October structural benchmarks (SBs) for the Sixth Review, as well as one end-December SB.
- Requested modifications and new benchmarks:
  - Authorities request to modify a QPC by raising the floor for net international reserves for end-March 2025 to reflect the positive outlook for international reserves in 2025Q1, consistent with commitment to external sustainability.
  - Authorities propose adding three SBs:
    - Prepare a strategy for the NSSMC by end-January 2025.
    - Prepare and submit to parliament a draft law on financial sector critical third-party risk by end-May 2025.
    - Complete and publish a third-party external assessment of the National Energy and Utilities Regulatory Commission (NEURC) by end-October 2025.
  - Enactment of the package of tax measures is a prior action for this review.
- Financing and purchases:
  - Staff supports completion of the Sixth Review under the Extended Arrangement, enabling a purchase of SDR 834.88 million (41.5 percent of quota).

### Recent mission and report organization
- Discussions were held in Kyiv over November 11–18, 2024 with Finance Minister Sergii Marchenko, National Bank of Ukraine Governor Andriy Pyshnyy, and other senior officials.
- The report contains sections on Context and Recent Developments; Outlook and Risks (Baseline and Downside scenarios); Policy Discussions (Macro-Fiscal Policies, Fiscal Structural Reforms, Monetary and Exchange Rate Policies, Financial Sector, Governance, Energy); Program Issues (Conditionality, Debt Sustainability, Financing); Figures; Tables; Annexes; and an Appendix with the Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding.

*Source: IMF — EXECUTIVE SUMMARY (1ukrea2024004-print-pdf).*

### 9.      Updates to the baseline are modest. The scenario continues to assume the war winds

### 9.      Updates to the baseline are modest. The scenario continues to assume the war winds

### A. Baseline updates and short-term outlook
- Key maintained assumption: the war winds down by end-2025 and assumptions regarding energy sector developments and major policy objectives are maintained.
- 2024 revisions reflecting recent data:
  - Real GDP growth: lifted to 4 percent y/y, up 1pp from the Fifth Review.
  - Winter energy deficit economic consequences may be more limited due to business investments in own generation capacity, increased potential for imports from Europe, and efforts to repair and install additional generation capacity and distribution.
  - End-year inflation: revised up 1pp to 10 percent, driven by accelerating raw food prices, passthrough of past depreciation, rising wages and energy costs.
  - Current account deficit: 8.4 percent of GDP, reflecting data updates to primary income partially offset by a stronger trade balance.
  - International reserves: broadly unchanged at US$42.3 billion supported by official financing and stronger net FDI inflows driven by reinvested earnings.
  - Credit growth: revised up to 11.6 percent, Dec/Dec.
- 2025 minor revisions relative to the Fifth Review:
  - Real GDP growth projection: unchanged at 2.5–3.5 percent.
  - Average inflation: revised upwards by 1.3pp to 10.3 percent y/y due to carryover from 2024H1; end-of-year inflation expected to be 7½ percent assuming appropriate policies and transitory pressures subside in 2024H2.
  - Current account deficit: remains at around 14½ percent of GDP; increase relative to 2024 primarily reflects lower grants and elevated import needs.
  - International reserves: expected to reach US$43.3 billion (100.5 percent of ARA metric).
  - Overall fiscal deficit: remains broadly unchanged, reflecting the Parliament-approved 2025 Budget.
- Medium-term projections:
  - Real GDP growth expected to rise in the years right after the war and gradually converge to potential of 4 percent.
  - Inflation expected to converge to the NBU’s target level of 5 percent by 2027 as war-related inflation volatility subsides.
  - Current account expected to normalize faster than at the Fifth Review given somewhat faster post-war external adjustment; reserves remain adequate assuming increased private investment flows and policies resolving external imbalances.
  - Overall fiscal balances modestly wider over the forecast horizon, reflecting more elevated medium-term spending needs, with offsetting macroeconomic changes containing impacts on projected public debt ratios.

### B. Downside scenario (summary of updates)
- Core assumption update: the war is assumed to extend until mid-2026, with the shock now materializing in 2025Q1; projections for 2024 align with the baseline.
- Consequences relative to baseline:
  - Total external financing gap: US$177.2 billion compared with US$148 billion under the baseline.
  - Scenario entails: (i) a contraction in real GDP followed by a slow recovery; (ii) higher and more persistent inflation; (iii) a worsening in the current account balance excluding grants with international reserves remaining below 100 percent of the ARA metric through 2027; (iv) an overall deficit excluding grants still above 20 percent until 2026.
- Selected comparative figures from scenario tables (current forecasts):
  - Baseline real GDP growth (2024): 4.0; Baseline (2025): 2.5-3.5.
  - Downside real GDP growth (2024): 4.0; Downside (2025): -2.5.
  - Baseline inflation, eop (2024): 10.0; Baseline (2025): 7.5. Downside inflation, eop (2025): 11.0.
  - Baseline FX reserves (US$ billion) (2024–2027): 42.3, 43.3, 47.9, 50.1. Downside FX reserves (US$ billion) (2024–2027): 42.3, 41.1, 43.5, 45.5.
  - Baseline overall fiscal balance (% GDP) (2024–2027): -18.9, -18.9, -9.9, -3.6. Downside overall fiscal balance (% GDP) (2024–2027): -18.9, -22.8, -18.4, -8.8.
  - Baseline public debt (% GDP) (2024–2027): 92.2, 104.3, 105.8, 101.8. Downside public debt (% GDP) (2024–2027): 92.2, 114.6, 128.2, 130.2.
- Source for scenario estimates: IMF staff estimates.

### C. Risks to the outlook
- Principal risk factors: the war, durability of international support, and reform momentum.
- Specific risk channels:
  - War could intensify or last longer, creating headwinds for economic performance, policy implementation, and medium-term outlook; further attacks on energy infrastructure compounded by a harsh winter and adverse demographics are highlighted risks.
  - International support may not be durable; reduced partner support could force abrupt policy shifts or suboptimal responses to financing gaps, worsening the war trajectory and causing weaker economic performance, eroded policy buffers, fragile security, and social disruption.
  - An earlier end to the war could produce a wide set of outcomes: upside conditional on support and reforms (return migration, private investment, EU accession benefits), or adverse outcomes if security does not stabilize or damages are larger than understood (lower private investment, higher migration, weaker reform momentum).
  - Onset of reform fatigue is a vulnerability; delivering program objectives requires steadfast policy adjustment and structural reforms over many years and could challenge social cohesion.

### D. Enterprise risks to the Fund
- Staff assessment: the Fund faces significant and increased enterprise risk from Ukraine’s Extended Arrangement under the EFF, primarily due to uncertainty on war duration/intensity, durability of international support, and post-war outcomes.
- Possible tail scenarios could render existing financing assurances and safeguards insufficient.
- Staff actions: continued monitoring and consultation with security experts; assessment that legal and policy requirements to proceed with the review are met at this stage.

### E. Policy discussions — Macro-fiscal policies and financing
- 2024 Supplementary Budget and financing:
  - Above-the-line deficit excluding grants in 2024: around UAH 1,850 billion (24.3 percent of GDP; MEFP ¶11), consistent with the Fifth Review.
  - Revenues performing well; expenditures should be implemented consistent with the Supplementary Budget. New priorities must be fully offset by savings in other expenditures.
  - Identified savings: for the UAH 1,000 eSupport initiative (up to UAH 10 billion).
  - Financing: mobilize substantial net domestic financing through the end of the year (MEFP ¶18) to insulate implementation from timing risks of external disbursements and assure adequate cash balances early next year.
- 2025 Budget:
  - Adopted on November 19; contains limited changes relative to the Fifth Review; reflects expectation that the war will begin to wind down only toward the end of next year.
  - Expenditures: national defense receives the largest allocation; payroll tightly controlled but includes salary adjustments for customs officers, ACU staff, teachers (bonuses), and space for social expenditures with strict eligibility verification and fewer beneficiaries due to population dynamics.
  - Revenues: budget internalizes tax package and legislation to gradually align tobacco excises with EU directives. Enactment of the tax package (Law #11416-d) is a prior action for Board consideration of this review.
  - Contingency: authorities remain ready to respond through offsetting measures, prioritizing revenue actions if needed; an increase in the main VAT rate is identified as the most appropriate response if necessary (MEFP ¶12).
  - Financing for 2025: overall deficit excluding grants will remain high at UAH 1,710 billion or 19.7 percent of GDP; mainly financed through external donor support with largest contribution from ERA financing (US$21.9 billion).
  - Flow relief on remaining external commercial obligations in the restructuring perimeter could reduce domestic borrowing needs and rebuild domestic market absorption capacity.
- Multi-year fiscal planning:
  - Timely preparation of the 2026–28 Budget Declaration is critical; Structural Benchmark end-June 2025 (MEFP ¶14).
  - Key priorities: recovery and reconstruction plans, defense preparedness, adequate social protection, and plans for domestic revenue mobilization including aligning tax policies with EU directives and reforming environmental taxation ahead of EU CBAM definitive phase.
- ERA financing management:
  - Baseline incorporates US$33.1 billion of ERA disbursements through 2027Q1; downside includes full US$50 billion.
  - Authorities committed to using ERA resources consistent with program parameters and managing flows transparently through the treasury single account (MEFP ¶13, third bullet).
- Fiscal sustainability:
  - Authorities committed to primary surpluses of ½ to 1½ percent of GDP as critical to fiscal and debt sustainability (MEFP ¶15); both scenarios assume primary surpluses at the upper end of this range toward end of horizon.
  - Remaining steps of the restructuring strategy are necessary, alongside a medium-term primary balance toward 1½ percent of GDP, to meet debt targets under the Sixth Review financial programming baseline.

### F. Fiscal structural reforms
- National Revenue Strategy (NRS):
  - Authorities must continue strengthening domestic revenue mobilization through NRS implementation (NRS adopted December 2023).
  - Monitoring: progress should be tracked using a unified and transparent reporting framework starting in March 2025 (MEFP ¶23).
  - IT systems reform: authorities updating strategy for digital development, transformation, and digitalization of public finance management by end-December 2024 to align with NRS (MEFP ¶23).
- Tax policy and administration:
  - Streamline the Simplified Tax system (ST): reverse its expanding scope, curb systematic abuse, and exclude certain groups from eligibility (MEFP ¶25).
  - Near-term measures: introduce tax reporting requirements for digital platform operators (Structural Benchmark, end-April 2025).
  - Tax expenditures: regular reviews per approved methodology and updated comprehensive reporting on tax privileges alongside annual budget documentation (MEFP ¶24).

*Source: IMF staff estimates.*

### 20.      The authorities have committed to implementing the reformed customs code by

### 1ukrea2024004-print-pdf - 20.      The authorities have committed to implementing the reformed customs code by

### Customs reform and ESBU leadership
- Findings:
  - The authorities have adopted a reformed customs code and committed to implementing it by appointing a new customs head and leveraging centralization and standardization of customs functions (MEFP ¶27).
- Structural benchmarks and timing:
  - A new head of customs should be appointed (Structural Benchmark, end-June 2025) as per the customs code requirements.
  - Momentum on the ESBU reform needs to continue after the selection commission for the new ESBU head was approved in October so that the new head can be appointed based on the selection process and in time (Structural Benchmark, end-February 2025).

### Public Financial Management (PFM) and Public Investment Management (PIM)
- Findings:
  - Completion of a diagnostic review of pre-war MTBF policies and practices (Structural benchmark, met, October-2024) prepares the authorities to implement reforms to enhance budgetary planning, including improving expenditure baseline estimates and policy costing (MEFP ¶29).
  - Strategic Investment Council, chaired by the Prime Minister, has endorsed a priority list of projects for budget funding in the 2025 Budget.
- Structural benchmarks and timing:
  - Updating the Budget Code (Structural Benchmark, end-January 2025).
  - Approving a new methodological framework underpinning the PIM process (Structural Benchmark, end-February 2025) (MEFP ¶38).

### Fiscal risk management
- Findings:
  - Government committed to strengthen fiscal risk reporting in next year’s Budget Declaration and in the Fiscal Risk Statement.
  - Measures to strengthen governance of the Business Development Fund (BDF) and the 5-7-9 program, including passed legislation to align asset declaration obligations of the BDF’s foreign independent supervisory board members with those of the SOBs.
- Near-term actions and timing:
  - Review and update, as needed, of the BDF guarantee framework by end-February 2025 (MEFP ¶35).
  - External assessment of the draft law on the National Development Institution and related legislation by September 2025; assessment to compare against international best practice, consult IFIs, lay out fiscal implications and risks, and provide recommendations to be implemented before the SME development finance institute is created.

### Pension reform and support to vulnerable groups
- Findings:
  - Authorities will start the pension reform process by July 2025 to implement a system sustainable and compliant with the EU Acquis, reduce numerous special pension arrangements, and reduce legal risks stemming from the current complex pension system (MEFP ¶31).
  - By end-2024, draft legislation will be sent to Parliament to enhance support mechanisms for vulnerable groups, including consolidation of different social assistance programs.

### Monetary policy and exchange rate guidance
- Policy stance:
  - Monetary policy settings are appropriate but vigilance is warranted with readiness to tighten if needed; the NBU has kept the KPR unchanged while adjusting forward guidance to tighten should inflation pressures be longer lasting or inflation expectations de-anchor.
- Inflation outlook and policy horizon:
  - Main contribution to the pickup in inflation comes from food prices, which should decelerate sharply in 2025H2 as base effects from low food prices observed in 2024H1 fade.
  - Under the Monetary Policy Guidelines (MPG, MEFP ¶44), the policy horizon to bring inflation to the 5 percent target can extend out to three years (i.e., through 2027).
- Operational guidance:
  - KPR should increasingly serve as the main instrument to achieve the inflation target; FXI should serve primarily to limit FX market volatility and fill the structural war-related deficit of FX (MEFP ¶45).
  - FX interventions should be appropriately calibrated through FX intervention rules supporting consistency with the program objectives (MEFP ¶47 and MEFP ¶48).
  - An over-reliance on FXI to achieve price stability could impede the transition to full-fledged inflation targeting.

### Reserve requirements and domestic borrowing
- Recent measures and impact:
  - Effective October 11, the NBU increased RR by 5 percentage points (except for longer-term local currency household deposits) and increased the share of RR that can be met with domestic government bonds from 50 to 60 percent.
  - This measure helped induce demand for UAH 40 billion in benchmark bonds (BB) issued in October-November and is expected to induce demand for up to an additional UAH 110 billion through year-end.
- Monitoring and recommendations:
  - Final impact on liquidity expected to be largely neutral once enough BB are issued and resources raised by the government are returned to the banking system in the form of deposits.
  - The NBU should continue to monitor the impact on liquidity to ensure consistency with the monetary stance.
  - The share of government bonds allowed to meet RR should be phased out over time as conditions permit (MEFP ¶46).

### FX liberalization and capital flow management
- Findings and recent measures:
  - Cautious approach to further FX liberalization remains warranted given need to preserve international reserves amid heightened risks.
  - Limited liberalization measures passed in November: allowing enterprises to pay for old imports under monthly limits provided transactions involve participation of a foreign ECA, a foreign state, or a foreign state-owned bank; broadening counterparts for transfers against provision of technical assistance.
- Compliance and enforcement:
  - NBU should continue monitoring compliance with existing capital flow management measures and swiftly address circumventions.
  - In November, NBU addressed violations of the cap on dividend repatriation and circumventions involving use of FX loans to purchase FX-denominated securities (see also ¶31).

### Safeguards assessment and NBU governance
- Findings and actions:
  - Work continues to implement 2023 safeguards assessment recommendations, including aligning collective fitness criteria and appointment processes for NBU Council and Board members with best practices.
  - With IMF TA, progress is being made on strengthening counterparty eligibility in refinancing operations and emergency liquidity assistance as part of the end-December SB on strengthening the bank rehabilitation framework.
- Staffing benchmark:
  - Authorities committed to promptly fill vacant positions in the NBU Council (3 out of 9 are currently vacant) by end-April 2025 to enable effective functioning and proper oversight (MEFP ¶52).

### Financial sector resilience and supervision
- Risk monitoring and contingency planning:
  - NBU’s risk analysis and contingency planning identified vulnerabilities, updated high-frequency monitoring, set response triggers, and prioritized supervisory, monetary policy, and capital flow management measures (Structural Benchmark, end-October 2024, met) (MEFP ¶56).
- Financial safety nets and resolution frameworks:
  - DGF and NBU, in consultation with MoF and IFIs, identified and are closing operational gaps in bank intervention and resolution frameworks (Structural Benchmark, end-December 2024), including:
    - Legislative amendments to facilitate information sharing between NBU and DGF.
    - Updating the MoU for coordination and information sharing.
    - An operational workplan to transition to full implementation of the MoU, involving regular coordination meetings (MEFP ¶58).
- Securities market regulator (NSSMC) actions:
  - NSSMC will: (i) propose a reorganizational and operational strategy in consultation with IFIs; (ii) update and implement its Employees Code of Ethics in line with international best practice; (iii) initiate an advance independent fit and proper review of NSSMC Chair and Commissioners in accordance with Article 12 of the above law and disclosures made in line with the Code of Ethics; and (iv) in consultation with the NBU, take steps by end-December 2024 to ensure effectiveness of capital flow management measures, including regulatory harmonization and aligning capital flow restrictions for securities operations with those applied to bank operations.
  - Proposed Structural Benchmark, end-January 2025; the Commission will complete the independent fit and proper review by end-March 2025 (MEFP ¶63).
- Supervisory reforms:
  - NBU implemented risk-based supervision reforms (Structural Benchmark, end-December 2024) including organizational restructuring of supervision teams, supervisory ‘challenge panels’, ICT risk expertise, and professional development initiatives (MEFP ¶62).
- Third-party and digital operational resilience:
  - NBU will: (i) prepare a concept note on oversight of critical third-party risk and digital operational resilience by end-February 2025; and (ii) develop and submit a draft law to Parliament prepared in consultation with IFIs, including measures for detection, containment, and mitigation under both going- and gone-concern conditions; entities identified as critical third parties will be subject to NBU’s fit and proper rules (proposed Structural Benchmark, end-May 2025) (MEFP ¶62).
- Tax policy signal:
  - The decision to extend the bank windfall tax into 2025 is noted as potentially discouraging future investment into the banking system; authorities signaled their intention to avoid any further windfall taxes on banks (MEFP ¶12).

### Governance, anti-corruption, and SOE reforms
- Governance and anti-corruption measures (MEPF ¶66–72):
  - Legislative reforms on the governance and mandate of the Accounting Chamber of Ukraine (Structural Benchmark, end-December 2024).
  - Amendments to the criminal procedural code to enhance capacities to investigate high-level corruption, including removing mandatory dismissal of pre-trial investigations due to lapse of time limits (Structural Benchmark, end-December 2024).
  - Timely publication of the inaugural audit of the National Anti-Corruption Bureau of Ukraine (Structural Benchmark, end-February 2025). On December 4, Parliament approved the law to enhance corporate criminal liability.
  - Strengthening AML/CFT tools: enhanced due diligence for politically exposed persons and transparency of beneficial ownership information.
  - Creation of the High Public Disputes Court and robust selection processes for its judges with decisive vote of independent experts (Structural Benchmark, end-December 2024).
- SOE corporate governance:
  - Law #3587-IX adopted in early 2024 established modern principles for SOE governance; implementation has progressed with support from international partners.
  - Regulations for financial indicators for template for independent supervisory board evaluation approved by CMU in August and November.
  - Comprehensive state ownership policy (SOP), dividend policy, and privatization strategy produced (Structural Benchmark, end-October 2024, met).
  - Further work needed: triage SOE list (e.g., identifying strategic SOEs), framework for privatization, concept for consolidated SOE management, and legislation for mandatory supervisory boards.
- Ukrenergo governance:
  - Full supervisory board of Ukrenergo expected to be restored by early December (MEFP ¶74) with independent board members constituting the majority (Structural Benchmark, end-December 2024).
  - Independent evaluation of supervisory boards of Ukrenergo, GTSO and Naftogaz to be launched by March 2025.
  - Review of appointment procedures for independent SOE board members (Resolution 777) by September 2025.

### Energy sector stability and reforms
- Current situation:
  - Energy situation has improved due to faster repairs, firms’ adaptability, new capacities (including imports), decisive actions by authorities, and donor support (see ¶5). Downside risks remain, including risk of further Russian attacks and a harsh winter.
  - Country is close to self-sufficiency for gas production and consumption; Naftogaz prepared to import additional gas if needed.
  - Impact of expiry of the gas transit corridor end-2024 should be closely monitored for orderly transition in the gas sector.
- Reform steps and benchmarks:
  - Review of arrears and debts of District Heating Companies (DHCs) by an external audit firm completed (Structural Benchmark, end-October 2024, met); authorities commit to address arrears comprehensively once war-related budget pressures subside by developing a new tariff methodology with cost-reflective tariffs.
  - Legal amendments enacted to exempt NEURC’s regulatory decisions from the state registration procedure to ensure functional independence (Structural Benchmark, end-December 2024, met).
  - Authorities will develop an accountability framework for NEURC in the law to allow external assessments by the Energy Community Secretariat every 2–3 years; the first external assessment of NEURC will be finalized and published by October-2025 (proposed Structural Benchmark, October-2025).
  - Selection process for remaining NEURC Commissioner vacancy should be concluded transparently and merit-based consistent with the law.

*Source: 1ukrea2024004-print-pdf - 20.      The authorities have committed to implementing the reformed customs code by*

### 40.      The authorities are requesting the following changes to program conditionality:

### 1ukrea2024004-print-pdf - 40.      The authorities are requesting the following changes to program conditionality:

### Program conditionality changes
- Request to modify a quantitative performance criterion:
  - Authorities request to increase the floor on net international reserves for end-March 2025 in light of the positive outlook for international reserves in 2025Q1, their commitment to preserve external sustainability, and the need to maintain adequate buffers in view of near-term risks.
- Structural benchmarks (SBs) proposed to be added (Table 4):
  - (i) prepare a strategy for the National Securities and Stock Markets Commission (NSSMC) by end-January 2025 (including to ensure the effectiveness of capital flow management measures by end-December 2024);
  - (ii) prepare and submit to Parliament a draft law on financial sector critical third-party risk by end-May 2025;
  - (iii) complete and publish a third-party external assessment of the National Energy and Utilities Regulatory Commission (NEURC) by end-October 2025.
  - The authorities are committed to these reforms, and have the capacity to implement them.
- Prior action:
  - Authorities enacted the package of tax measures (Law #11416-d) ahead of the IMF Executive Board’s consideration of the Sixth Review.

### Debt restructuring strategy and status
- External commercial claims excluding Eurobonds:
  - With the Eurobond exchange completed, focus shifts to remaining commercial claims in the perimeter.
  - Authorities have presented a commercial creditor with proposals to restructure claims; discussions will continue.
  - A planned debt operation involving a guaranteed bond of Ukrenergo is expected to move ahead after the supervisory board is fully reinstated.
  - A committee of GDP warrant holders has formed; discussions have been initiated ahead of the next scheduled payment in May 2025.
  - All three claims are subject to a moratorium law passed in August, preventing payments while discussions are ongoing.
- Official bilateral debt:
  - An official export credit agency has requested treatment in line with the approach for other bilateral claims.
  - For bilateral claims held by the Group of Creditors of Ukraine (GCU), the December 2023 standstill remains in place until 2027.
  - Authorities committed to keep the GCU apprised and seek their endorsement for agreements reached with other creditors.
- Debt restructuring presentation:
  - Figure 5 referenced: Ukraine: Debt Restructuring Strategy (source: IMF staff).

### Debt sustainability, lending-into-arrears (LIA), and financing assurances review
- DSA and ERA financing treatment:
  - Updated debt sustainability analyses reflect current status of ERA financing; program debt sustainability objectives remain the same.
  - Staff maintained conservative forecasting assumption from the Fifth Review and incorporated ERA financing in public debt.
  - ERA loans expected to be serviced by distributions from the Ukraine Loan Cooperation Mechanism (ULCM) collecting proceeds from extraordinary profits qualifying CSDs derive from immobilized Russian assets (Figure 6).
  - Based on assurances from the European Commission and the G7, staff judges risks of Ukraine having to assume residual liability for ERA servicing to be sufficiently mitigated so ERA financing can be carved out from the assessment of debt restructuring targets.
  - The US has formally cancelled half of the repayable economic assistance (US$4.65 billion) provided under the Ukraine Security Supplemental Appropriations Act; the remainder continues to be treated as a contingent liability for debt sustainability analysis purposes.
- Staff assessment that policy requirements met and safeguards in place for Fund lending:
  - Debt sustainability: debt assessed as sustainable on a forward-looking basis given (i) fiscal adjustment under the program; (ii) concessional financing commitments from donors and G7 steps to insulate Ukraine from burden of ERA repayments; and (iii) a credible ongoing debt restructuring process. Second-stage restructuring remains credible owing to retention of advisors, information sharing, and commitment to undertake any such debt operation by the end of EHU or the penultimate review of the program.
  - Lending into arrears (LIA): With arrears accumulating on loans from a commercial creditor and the Ukrenergo bond, Fund’s LIA policy applies. Staff assesses requirements are met because (i) prompt Fund support is essential for program implementation; and (ii) Ukraine is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with private creditors. Ongoing discussions indicate adequacy of information sharing and opportunity for private creditors to provide input.
  - Financing assurances review: Process continues broadly in line with original timeline. Developments indicate restructuring will take place consistent with program and along expected timeline, reflecting:
    - (i) authorities’ ongoing dialog with a commercial supplier;
    - (ii) request by an official export credit agency for treatment in line with bilateral restructuring;
    - (iii) work on engaging warrant holders to reach an agreement by the time of the next payment in May 2025;
    - (iv) efforts to restructure Ukrenergo’s bond when its supervisory board is fully installed;
    - (v) regular efforts to keep the GCU apprised and seek their endorsement ahead of definitive restructuring.
- Principal and complementary debt restructuring targets (Text Table 4 excerpt):
  - Principal targets:
    - Public and publicly guaranteed debt (ex. ERA loans) in 2033 65 percent of GDP
    - Gross financing needs (ex. ERA loans), average over 2028-33 8 percent of GDP
  - Complementary targets:
    - Public an publicly guaranteed debt (ex. ERA loans) in 2028 82 percent of GDP
    - Annual flow relief over 2024-27 1-1.8 percent of GDP

### Financing needs, baseline and downside scenarios
- Cumulative financing gap:
  - Baseline cumulative financing gap little changed at US$148 billion.
  - Downside scenario cumulative financing gap projected at US$177.2 billion.
- Key revisions and updates to financing sources:
  - Reduced official financing by US$3.5 billion.
  - A new loan from South Korea to co-finance the World Bank Health Enhancement and Lifesaving (HEAL) project (US$100 million).
  - Fresh grant financing from Norway (€11 million).
  - Revised cross exchange rate assumptions.
- Allocation and phasing:
  - Phasing of ERA financing updated to reflect staff’s current understanding of disbursement timing of individual G7 components.
- IMF policy change impact:
  - An estimated US$382 million of savings over the program period arising from the IMF’s review of charges and the surcharge policy has been reflected in the framework.
- Downside scenario:
  - As at the Fifth Review, US$50 billion in ERA financing is included to cover downside financing needs.
- Baseline Scenario Financing Gap and Sources (Table 1 highlights, cumulative prog. period 2023Q2–2027Q1):
  - A. Financing gap 148.0 (Billions of U.S. dollars)
  - Underlying BoP Gap 2/ 131.9
  - Gross international reserves (+ = accumulation) 16.1
  - B. Official financing (excl. IMF) 121.7
    - EU 54.4
    - US 13.2
    - Japan 7.9
    - Canada 3.5
    - UK 3.5
    - Norway 0.5
    - World Bank 5.3
    - Other 0.3
    - ERA 33.1
  - C. IMF (prospective) 15.5
  - D. Flow relief from debt operations 10.8
  - E. Residual financing gap (A-B-C-D) 0.0
  - Memorandum items:
    - IMF (net disbursements) 4.0
    - Gross international reserves 48.4
- Baseline 12-month basis (Table 2, 25Q1 thru 25Q4):
  - A. Financing gap 42.3
  - Underlying BoP Gap 1/ 41.4
  - Gross international reserves (+ = accumulation) 1.0
  - B. Official financing (excl. IMF) 36.6
    - EU 13.7
    - UK 1.0
    - ERA 21.9
  - C. IMF (prospective) 2.7
  - D. Flow relief from debt operations 3.0
  - E. Residual financing gap (A-B-C-D) 0.0

### Capacity-to-repay assurances and Fund exposure
- Capacity-to-repay (CtR) assurance:
  - CtR assurance provided by a significant group of creditors/donors at program approval remains valid due to exceptionally high uncertainty around the war.
  - Group comprises countries in the G7 plus Belgium, Lithuania, the Netherlands, Poland, Slovakia, and Spain.
  - Assurance understood by management and staff to:
    - (i) reaffirm recognition of the Fund’s preferred creditor status in respect of amounts currently outstanding to Ukraine, plus any purchases under the proposed extended arrangement; and
    - (ii) further undertake to provide adequate financial support to secure Ukraine’s ability to service all obligations to the Fund, in accordance with the Fund’s preferred creditor status and complementing the Fund’s multilayered risk management framework.
  - Staff will continue outreach with members interested in joining the CtR assurance.
- Indicators of capacity to repay:
  - Under the baseline scenario, stock of total Fund credit expected to peak at 8 percent of GDP in 2024 and 35.8 percent of gross reserves in 2025.
  - Debt service to the Fund would peak at 1.8 percent of GDP and 8 percent of gross reserves in 2024.
  - Under a materialization of downside risks: outstanding credit to the Fund would peak at 8.1 percent of GDP and 37.7 percent of gross reserves in 2025; debt service to the Fund would still peak at 1.8 percent of GDP and 8 percent of gross reserves in 2024.

### Staff appraisal: assessment and risks
- Context and near-term tasks:
  - Sixth Review occurs as Ukraine approaches a critical juncture with upcoming political transitions and election cycles in several partners that may affect efforts to end the war and international support.
  - G7’s ERA financing is instrumental to close Ukraine’s financing gaps.
  - Immediate tasks: navigate near-term uncertainty to maintain economic stability, preserve buffers, and continue implementing strong policies for a return to medium-term external viability.
- Performance under the program:
  - Authorities delivered strong performance: met all continuous PCs and all end-September QPCs.
  - Implementation of all structural benchmarks for this review have taken place on time.
- Risks:
  - Near-term risks remain exceptionally high; principal adverse shocks relate to the duration and intensity of the war and implications for the macro framework and financing.
  - Other risks: further attacks to energy infrastructure; durability of international support; reform fatigue given complex and wide-ranging structural reforms in challenging circumstances.

*Source: Extracted from the provided IMF Country Report content.*

### 50.      The 2025 budget is in line with program parameters, but concrete steps are required

### The 2025 budget is in line with program parameters, but concrete steps are required

### Fiscal stance and 2025 budget
- The 2025 budget is in line with program parameters and is well calibrated to Ukraine’s policy priorities and committed financing under the program.
- Any deviations from the budget will need to be compensated for by offsetting measures.
- At this time, an increase in the standard VAT rate remains the most appropriate response to budget shocks.
- Decisively restoring fiscal and debt sustainability requires additional and sustained efforts on domestic revenue mobilization, with a focus on aligning taxation with EU requirements, which would entail potentially substantial yields and support the goal of accession.

### Debt restructuring
- Prompt completion of the debt restructuring strategy is essential.
- With the Eurobond exchange now complete, focus should shift to timely treatment of remaining commercial claims in the restructuring perimeter, particularly the GDP warrants, to provide critical flow relief during the program period and help restore sustainability.
- On-going discussions between the authorities and creditors should continue to progress with a view toward delivering the program’s debt sustainability objectives.

### Fiscal structural reforms and public financial management
- Authorities have started implementing public investment management and medium-term budgeting reforms.
- Effective implementation of the customs code will help modernize the SCS by increasing efficiency and transparency, and tackling corruption and fraud.
- Continued progress on reforms pertaining to the NRS and pension reform is essential to position Ukraine with strong frameworks to support recovery, reconstruction, and social protection needs now and after the war.

### Monetary policy and exchange rate
- The monetary stance is appropriate, with readiness to tighten if warranted.
- The NBU should remain vigilant for risks to inflation and be prepared to tighten in the near term should inflation drivers be of a more persistent nature or expectations become unanchored.
- The exchange rate should be allowed to fulfill its shock absorbing role, safeguard reserves amid heightened risks, and prevent external imbalances.
- Implementation of flexible inflation targeting will need to internalize Ukraine’s challenging circumstances and align with the Monetary Policy Guidelines, the NBU’s Strategy, and program objectives.
- The cautious, conditions-based approach to FX liberalization remains appropriate.

### Financial stability
- Authorities need to remain vigilant to financial stability risks.
- Progress is required on strengthening the bank rehabilitation framework, introducing risk-based supervision, updating stress testing frameworks, and strengthening contingency plans in view of heightened risks.
- Swift action to address critical operational challenges of the National Securities and Stock Market Commission (NSSMC) is important.

### Governance, anti-corruption, and rule of law
- Irreversibility of governance and anti-corruption reforms will help improve societal and economic outcomes and make progress on EU accession.
- Independent and accountable governance institutions contribute towards levelling the playing field and sustaining economic growth.
- Transparency, accountability and effective law enforcement will be critical to mitigate corruption risks as Ukraine accelerates reconstruction efforts.
- Building a strong rule-of-law culture will support the investment climate and ensure that post-war reconstruction is inclusive and benefits the most affected and vulnerable.

### Energy sector and corporate governance
- Efforts must continue to address the energy deficit while strengthening corporate governance in the energy sector.
- Considerable uncertainty remains on the size of the potential energy deficit this winter, but comprehensive efforts to close the gap are welcome and will help mitigate the risk of prolonged blackouts.
- Steps to ensure Ukrenergo’s supervisory board is fully appointed, with independent members constituting the majority, are welcome.
- Next steps should focus on reforming the energy regulator and containing financial risks of energy operators and utilities.

### Program outlook and financing
- The program remains on track to meet its objectives and the requisite policies and safeguards are met for the Fund to proceed with financing.
- The program provides an anchor for restoring medium-term external viability by entailing a framework for policies consistent with sustainability, guiding the ongoing debt restructuring, and catalyzing large-scale donor financing.
- Authorities need to continue delivering on policy commitments and external partners will need to provide their committed support in a timely manner and on appropriate terms, including to ensure that the program remains fully financed and medium-term external viability can be restored across both program scenarios.
- Full implementation by all parties continues to provide prospects for success.

*UKRAINE — INTERNATIONAL MONETARY FUND (pages 33–34).*

### 58.      Staff supports the authorities’ request for a modification of a quantitative

### 1ukrea2024004-print-pdf - 58. Staff supports the authorities’ request for a modification of a quantitative performance criterion and the completion of the Sixth Review Under the Extended Arrangement

### Program status and staff recommendations
- Staff supports the authorities’ request for a modification of a quantitative performance criterion and the completion of the Sixth Review Under the Extended Arrangement.
- Staff recommends completing the financing assurances review.
- Staff assessment: “The authorities’ strong performance under the program and commitments from donors signify the program remaining on track to meet its objectives.”

### Structural benchmarks (selected findings and implementation status)
- Table presents 51 structural benchmarks (numbered 1–51) across sectors: Fiscal; Monetary and Exchange Rate; Financial Sector; Energy/Corporate Governance; Governance/Anti-Corruption; SOE Corporate Governance.
- Examples of benchmarks and status (timing and status preserved exactly as in source):
  - 1 Enact the second supplementary Budget 2023 — Fiscal — End-April 2023 — Met
  - 2 Submit to Parliament a draft law to restore and strengthen Article 52 of the Budget Code to minimize ad hoc amendments to the budget law — Fiscal — End-May 2023 — Met
  - 6 Prepare a conditions-based strategy to move to a more flexible exchange rate, ease FX controls and transition to inflation targeting — Monetary and Exchange Rate — End-June 2023 — Met
  - 7 Adopt the draft law on tax policy and administration prepared under the PMB — Fiscal — End-July 2023 — Not Met (implemented with delay)
  - 9 Enact the law to restore asset declaration of public officials not directly involved in the mobilization and war efforts and reinstating the NACP’s function to examine and verify them — Governance/Anti-Corruption — End-July 2023 — Not Met (implemented with delay)
  - 12 Amend the AML/CFT Law to re-establish enhanced due diligence measures on politically exposed persons consistent with the risk-based approach consistent with the FATF standards. — Governance/Anti-Corruption — End-September 2023 — Not Met (implemented with delay)
  - 18 Review the current PIM procedures and develop a roadmap of measures so that: (i) all public investment projects follow unified PIM approaches, including PPPs; (ii) investment projects are selected on a competitive basis, with transparent selection criteria, and consistent with the medium-term budget framework; (iii) stronger powers are provided to MOF, including a clear gatekeeping role during the different stages of the investment project cycle. — Fiscal — End-December 2023 — Met
  - 21 Based on findings of the revenue working group, prepare short-term revenue measures (tax and non-tax) with yields of at least 0.5 percent of GDP ready to be included in budget 2024 — Fiscal — End-February 2024 — Met
  - 24 Adopt a new law on the ESBU that has a clear mandate and scope for investigative powers consistent with good practice by focusing on major economic crimes; ... The law will respect the existing delineation between the investigative powers of the ESBU and the National Anti-corruption Bureau of Ukraine (NABU). — Fiscal — End-June 2024 — Met
  - 33 Produce a SOE state ownership policy, dividend policy and privatization strategy — SOE Corporate Governance — End-October 2024 — Met
  - 51 Enact the tax package (Law #11416-d) — Fiscal — Prior Action — Met
- Several benchmarks scheduled through end-2025 and mid-2025 are listed (e.g., items 34–50) with timings such as End-January 2025, End-February 2025, End-April 2025, End-June 2025, End-October 2025. Status entries for these later items in the table are blank in the excerpt.

### Macroeconomic projections and key statistics (baseline scenario, selected)
- Real GDP (percent change) path (selected years):
  - 2021: 3.4
  - 2022: -28.8
  - 2023 Act.: 5.3
  - 2024 EFF 5th Review: 4.0
  - 2025 Proj.: 2.5
  - 2026 EFF 5th Review: -3.5
  - 2027 Proj.: 2.5
  - 2028 Proj.: -3.5
  - 2029–2033 Proj.: 5.3, 4.5, 4.3, 4.2, 4.1, 4.0, 4.0, 4.0 (year-to-year as shown)
- Nominal GDP (billions of Ukrainian hryvnias):
  - 2021: 5,451
  - 2022: 5,239
  - 2023: 6,538
  - 2024: 7,542
  - 2025: 7,629
  - 2026–2033 provided through 18,653 in 2033 (intermediate values included in table)
- Inflation (consumer prices, period average and end of period):
  - Period average: 2021: 9.4; 2022: 20.2; 2023: 2.9; 2024: 5.8; 2025: 6.2; subsequent years: 9.0, 10.3, 7.7, 5.0, 5.0, 5.0, 5.0, 5.0
  - End of period: 2021: 10.0; 2022: 26.6; 2023: 5.1; 2024: 9.0; 2025: 10.0; subsequent years: 7.5, 7.5, 6.6, 5.0, 5.0, 5.0, 5.0, 5.0
- Unemployment rate (ILO definition; period average, percent):
  - 2021: 9.8
  - 2022: 24.5
  - 2023: 19.1
  - 2024: 14.2
  - 2025: 13.3
  - 2026–2033: values trending downward to 8.5 in later years as per table

### Fiscal outlook and general government finances (selected figures)
- General government fiscal balance (percent of GDP):
  - 2021: -4.0
  - 2022: -15.6
  - 2023: -19.6
  - 2024 EFF 5th Review: -18.7
  - 2025 Proj.: -18.9
  - 2026 EFF 5th Review: -19.2
  - 2027 Proj.: -18.9
  - 2028–2033 Proj.: -9.9, -3.6, -2.8, -2.7, -1.6, -1.3, -1.0, -0.7 (year-by-year from table)
- Fiscal balance, excluding grants (percent of GDP):
  - 2021: -4.0
  - 2022: -24.8
  - 2023: -26.1
  - 2024: -24.5
  - 2025: -24.3
  - 2026: -20.0
  - 2027: -19.7
  - 2028–2033: -10.1, -4.6, -3.6, -3.3, -2.2, -1.9, -1.5, -1.2
- Public and publicly-guaranteed debt (percent of GDP):
  - 2021: 50.5
  - 2022: 77.7
  - 2023: 82.3
  - 2024: 95.6
  - 2025: 92.2
  - 2026: 106.6
  - 2027: 104.3
  - 2028–2033: 105.8, 101.8, 96.9, 93.6, 88.4, 84.3, 79.3, 75.0
- General government finances (billions of Ukrainian Hryvnia), selected lines:
  - Revenue: 2021: 1,990; 2022: 2,609; 2023: 3,583; 2024: 3,402; 2025: 3,868; later years rising toward 7,628 in 2033
  - Expenditure: 2021: 2,207; 2022: 3,426; 2023: 4,865; 2024: 4,815; 2025: 5,313; later years up to 7,762 in 2033
  - Budget support grants (billions of Ukrainian Hryvnia): 2021: 148; 2022: 142; 2023: 543; 2024: 640; 2025: 574; subsequent values included in table

### Monetary and external sector indicators (selected)
- Gross reserves (end of period, billions of U.S. dollars):
  - 2021: 30.9
  - 2022: 28.5
  - 2023: 40.5
  - 2024: 42.6
  - 2025: 42.3
  - 2026–2033: values up to 74.9 in 2033 (table provides annual series)
- Months of next year's imports of goods and services:
  - 2021: 4.5
  - 2022: 3.8
  - 2023: 5.3
  - 2024: 5.1
  - 2025: 5.3
  - 2026–2033: range 5.4 to 6.6 depending on year per table
- Current account balance (percent of GDP), baseline summary:
  - 2021: -1.9
  - 2022: 4.9
  - 2023: -5.4
  - 2024: -8.1
  - 2025: -8.4
  - 2026–2033: -14.3, -14.6, -10.1, -5.3, -4.1, -4.1, -4.1, -4.1, -3.9, -3.9 (as in tables)
- Balance of Payments (selected, percent of GDP):
  - Financial account balance (percent of GDP): 2021: -5.5; 2022: 8.5; 2023: -20.9; 2024: -18.9; 2025: -18.5; subsequent projections provided in table

### Gross external financing requirements and official financing (selected)
- Total financing requirements (A, billions of U.S. dollars), selected years:
  - 2021: 20.3
  - 2022: 31.9
  - 2023: 39.7
  - 2024 EFF 5th Review: 46.9
  - 2025 Proj.: 48.9
  - 2026–2033 series provided in table
- Total financing sources (B, billions of U.S. dollars), selected years:
  - 2021: 20.0
  - 2022: 0.7
  - 2023: 9.6
  - 2024: 11.0
  - 2025: 12.2
- Financing needs (C = A - B, billions of U.S. dollars), selected years:
  - 2021: 0.3
  - 2022: 31.1
  - 2023: 30.1
  - 2024: 35.9
  - 2025: 36.7
- Official financing (D, billions of U.S. dollars), selected years:
  - 2021: 1.0
  - 2022: 29.2
  - 2023: 39.9
  - 2024: 39.0
  - 2025: 38.4
- IMF-related lines and memorandum:
  - Gross international reserves: series repeating as above (e.g., 30.9; 28.5; 40.5; 42.6; 42.3; ...)

### IMF program financing, EFF schedule, and performance criteria (selected)
- Table 11: EFF Schedule of Reviews and Available Purchases — cumulative and periodic purchase amounts listed by date (values in Millions of SDR and Millions of USD 1/ and percent of quota). Total line: Total 11,608.25 (Millions of SDR) and 15,506.69 (Millions of USD) and 577.0 (Percent of quota). Memorandum item: Quota 2,011.8.
- Table 12: Quantitative Performance Criteria and Indicative Targets (end of period; millions of Ukrainian hryvnia, unless indicated otherwise). Selected entries preserved exactly:
  - I. Quantitative Performance Criteria:
    - Floor on the non-defense cash primary balance of the general government, excluding budget support grants (- implies a deficit) 2/: Sep 2025 QPC Adjustor Adjusted QPC: 368,3130 368,313 — Actual Status EBS/24/108 QPC EBS/24/108 QPC Proposed QPC EBS/24/108 Proposed IT Proposed IT: multiple quarterly targets listed, e.g., Met 415,410 415,410 254,800 254,800 546,800 547,200 751,000 752,400 822,000
    - Floor on tax revenues (excluding Social Security Contributions): 1,398,6000 1,398,600 1,527,903 Met 2,042,250 2,042,250 485,000 485,000 1,019,600 1,019,600 1,622,200 1,622,200 2,491,045
    - Ceiling on publicly guaranteed debt: 47,90013,71861,61822,667 Met 47,900 47,900 62,860 62,860 62,860 64,357 62,860 64,357 64,357
    - Floor on net international reserves (in millions of U.S. dollars) 3/: 28,800-4,43524,36524,988 Met 26,300 26,300 23,800 24,300 24,800 24,800 23,000 23,000 23,000
  - II. Indicative Targets and other lines are listed with exact numeric sequences (e.g., Ceiling on general government arrears 1,8000 1,800 1,687 Met 1,800 1,800 ...; Floor on social spending 390,0000 390,000 427,680 Met 537,800 537,800 ...)
- Memorandum items in Table 12 include External project financing and External budget financing (in millions of U.S. dollars), e.g.:
  - External project financing (in millions of U.S. dollars): 271......271...1,4961,496191191572 5721,1441,1441,906
  - External budget financing (in millions of U.S. dollars): 21,310......21,310...35,36735,367 9,1059,10519,28219,28227,28027,28035,813
  - Budget support grants (in millions of U.S. dollars): 6,556......6,556...10,01210,0124294299659651,2861,2861,608
  - Budget support loans (in millions of U.S. dollars): 14,754......14,754...25,35525,3558,6778,67718,31818,31825,99425,99434,206

*Italic: Source: 1ukrea2024004-print-pdf (excerpt provided).*

### Annex I. Risk Assessment Matrix

### Annex I. Risk Assessment Matrix

### Overview
- The Risk Assessment Matrix (RAM) identifies events that could materially alter the baseline path.  
- Staff subjective likelihood categories: "low" = probability below 10 percent; "medium" = between 10 and 30 percent; "high" = between 30 and 50 percent.  
- Non-mutually exclusive risks may interact and materialize jointly.  
- RAM reflects staff views as of the time of discussions with the authorities.

### External Risks — Key Findings and Policy Responses
- Intensification of regional conflicts
  - Likelihood: High
  - Expected impact: High. Consequences include: increased loss of life; destruction of capital stock (including the energy system); outward migration and internal displacement; stalled recovery and sharply lower growth amid loss of confidence and uncertainty; weakened medium-term prospects; curtailed export recovery due to port access/logistics restrictions; higher import needs (defense, energy, infrastructure repair) widening fiscal and external financing needs; potential monetary financing, price and exchange rate pressures; 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 implement contingency plans for downside risks.
    - Mobilize domestic financing and seek additional external financing that is grant-based or on highly concessional terms.
    - Enhance and update contingency plans, including for the energy and financial sectors.
- Global growth slowdown
  - Likelihood: Medium
  - Expected impact: High. Recessions in key donor countries could reduce or delay disbursement of committed external financing and shift financing mix toward less advantageous, more expensive sources (monetary financing, non-concessional borrowing).
  - Policy response:
    - Prioritize spending and seek additional revenue measures.
    - Mobilize domestic financing to plug gaps.
    - Diversify external financing sources and obtain grant-based or highly concessional financing.
- Commodity price volatility
  - Likelihood: High
  - Expected impact: Medium. High energy prices could further strain consumption and business activity and widen fiscal and external needs; low/volatile agricultural prices amid logistical costs could alter sowing decisions.
  - Policy response:
    - Continue rationing energy to priority areas and further expand gas production.
    - Secure alternative sources and storage for gas through the heating season.
    - Target transfers to most vulnerable groups within the existing budget envelope.
    - Build on and deepen alternative export routes.
- Shortfalls in availability of external and domestic financing
  - Likelihood: High
  - Expected impact: High. Shortfalls/delays could produce larger financing gaps, financial repression, monetary financing, sharp spending compression, intensified macro-financial risks, and dampened recovery.
  - Policy response:
    - Prioritize spending and seek additional revenue measures.
    - Mobilize domestic financing to plug gaps.
    - Diversify external financing and obtain grant-based or highly concessional financing.
    - Implement contingency plans.

### Domestic Risks — Key Findings and Policy Responses
- Social unrest
  - Likelihood: Medium
  - Expected impact: High. Declining real incomes and worsening inequality could amplify social unrest, undermine national unity, prompt populist policies that widen fiscal and external imbalances, delay adjustment, and stall reform momentum.
  - Policy response:
    - Maintain appropriate macroeconomic policies to safeguard stability and consistently explain rationale for measures.
    - 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 external funding could reduce reform incentives, exacerbate financing gaps, reduce future external financing inflows, and lead to donor fatigue.
  - Policy response:
    - Adhere to governance reforms and maintain progress in anti-corruption and judicial institutions.
    - Implement critical reforms to support competitiveness and increase productivity.
    - 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 Black Sea corridor or prolonged closure of other transit routes through central Europe could severely impact balance of payments, exacerbate financing gaps and FX market strains, curtail exports, and weigh on future farming decisions.
  - Policy response:
    - Urge partners for quick resolution to minimize disruption.
    - Diversify supply chains.
    - Accelerate reconstruction of Danube Deep Sea shipping lanes, repair railroads with external financing, and further expand the Black Sea corridor.

### Structural Risks — Key Findings and Policy Responses
- Deepening geoeconomic fragmentation
  - Likelihood: High
  - Expected impact: High. Broader conflicts, inward-oriented policies, weakened international cooperation could lead to less efficient trade/FDI configuration, supply disruptions, protectionism, technological and payments systems fragmentation, rising shipping and input costs, financial instability, fracturing of international monetary system, and lower growth. Ukraine, being trade dependent, is exposed to supply chain disruptions.
  - Policy response:
    - Maintain appropriate macroeconomic policies to safeguard stability and ensure adequate resources for core state functions.
    - Diversify trade products, supply chains, and partners.
    - Continue reforms to support competitiveness and increase productivity.

---

### Annex II. Sovereign Risk and Debt Sustainability Analysis (SRDSA) — Summary

### Baseline and Scenario Structure
- SRDSA updated based on a baseline scenario and a downside scenario. Only agreed debt restructurings are incorporated; the August 2024 Eurobond restructuring terms are included while other claims in the authorities’ restructuring perimeter maintain pre-restructuring terms.
- Restoration of debt sustainability requires: (i) completing remaining restructuring with sufficiently deep treatments; (ii) fiscal adjustment; (iii) financing on sufficiently concessional terms during and after the program.
- Under the program, authorities plan a revenue-based fiscal adjustment and have enacted important tax measures. Official donors provided commitments for exceptional financial support and assurances of a debt restructuring before the final program review.
- Staff assesses debt as sustainable on a forward-looking basis contingent on completing the above elements.

### Key Macroeconomic and Financing Assumptions and Figures
- Real GDP growth:
  - Revised: Real GDP growth marked up 1 pp to 4.0 percent in 2024.
  - 2025: unchanged.
  - Projection: real GDP exceeding its pre-war level starting in 2031.
- Inflation: risen recently a little more than expected; minor revisions to projections.
- Downside scenario: war continues to extend until mid-2026.
- Total official external financing (baseline, excluding IMF): US$121.7 billion over the program period.
- ERA financing component: US$33.1 billion of the total; phasing updated to reflect G7 information.
- Assumed ERA debt terms for DSA modeling: 10-year grace period, 25-year final maturity, and no interest.
- U.S. 2024 budget support: first half of this financing was formally cancelled upon becoming eligible for such cancellation; second half is treated as a contingent liability.
- Portion of U.S. financing for 2024 channeled through World Bank’s SPUR facility.
- After the program: expected budget support disbursements from partners around US$5–12 billion per year.
- Coverage: disputed claims excluded from debt stock per Fund procedures:
  - 2013 Eurobonds under dispute: US$3 billion (ongoing UK legal proceeding).
  - Two bilateral loans with Russia: about US$0.6 billion.
- End-2023 debt outturn estimate: 82 percent of GDP.
- Relative to the Fifth Review: gross financing needs slightly higher due to assumed higher inflation and higher borrowing costs on domestic government bonds.

### Stress, Risks, and Mechanical Tool Results
- Mechanical tools and staff concur: debt remains unsustainable in a pre-restructuring baseline and downside; risks are high.
- Medium-term tools indicate high risk levels; long-term risks are also assessed as high given extreme uncertainty and refinancing risks of concessional debt after the program.
- Debt and GFN trajectories: debt-to-GDP ratios rise initially then resume a downward trend in the medium run, similar to the last SRDSA.

### Debt Restructuring Targets and Policy Conditions
- ERA financing treated as neutral for DSA targets given ERA’s extraordinary nature and risk mitigation assurances from G7 members and the EC via the Ukraine Loan Cooperation Mechanism (ULCM).
- Debt restructuring targets:
  - Public debt excluding ERA liabilities should reach 65 percent of GDP by 2033.
  - Gross financing needs excluding ERA debt service should average 8 percent of GDP in the post-program period (2028–33).
  - Complementary targets:
    - Public debt (excluding ERA liabilities) to 82 percent of GDP by 2028.
    - Achieve debt service flow relief on external obligations of 1–1.8 percent of GDP per year.
- Eurobond restructuring delivered substantial progress toward realizing these savings.

### Overall Assessment and Conditions for Sustainability
- Staff continues to assess debt as sustainable in a forward-looking sense conditional on three ingredients:
  - (i) Fiscal adjustment (notably a revenue-based adjustment under the program).
  - (ii) Substantial concessional financing and exceptional donor support.
  - (iii) Debt restructuring, including treatment of GDP warrants.
- With program policy implementation, donor assurances, and a credible restructuring process for remaining external commercial debt consistent with staff targets, debt can return to sustainable ranges.

### SRDSA Diagnostic Signals and Conclusions
- Overall risk of sovereign stress: High.
- Medium-term risks: High; fanchart indicates very high uncertainty around the debt trajectory; financeability tool finds high liquidity risks.
- Unsustainable in a pre-restructuring scenario: Yes.
- Restoring medium-term external viability requires policy commitments and specific, credible safeguards, commitments, and exceptional financing, including debt relief, to achieve manageable GFNs and sustainable debt stabilization.
- Final assessment: Ukraine's debt continues to be assessed as unsustainable pending full implementation of the authorities' debt restructuring strategy. Debt sustainability on a forward-looking basis is contingent on treatment of remaining external commercial claims, strong policy commitments, financing assurances, and achieving GFNs averaging 8 percent of GDP over 2028–33 and public debt of 65 percent of GDP by 2033 (post-restructuring and excluding ERA financing).

*Source: IMF staff (Annex I and Annex II, Risk Assessment Matrix and Sovereign Risk and Debt Sustainability Analysis).*

### Annex II. Figure 2: Ukraine: Debt Coverage and Disclosures

### Annex II. Figure 2: Ukraine: Debt Coverage and Disclosures

### Debt coverage in the DSA
- Coverage label shown: 1/CGGGNFPSCPSOther
- 1a. If central government, are non-central government entities insignificant? n.a.

### Subsectors included in the chosen coverage
- Subsections captured in the baseline — Inclusion:
  - 1 Budgetary central government — Yes
  - 2 Extra budgetary funds (EBFs) — No
  - 3 Social security funds (SSFs) — Yes
  - 4 State governments — Yes
  - 5 Local governments — Yes
  - 6 Public nonfinancial corporations — Yes
  - 7 Central bank — Yes
  - 8 Other public financial corporations — Yes

### Holder / Issuer reporting (as presented)
- Holder / Issuer table entries (verbatim):
  - Budget. central govt0
  - Extra-budget. funds0
  - Social security funds0
  - State govt.0
  - Local govt.0
  - Nonfin pub. corp.0
  - Central bank0
  - Oth. pub. fin. corp0
  - Total000000000

### Instrument coverage, accounting principles, and valuation (as presented)
- Currency & deposits — Basis of recording: Not applicable
- Valuation of debt stock — Inc. projected IMF BOP support
- Debt securities — Loans IPSGSs 3/
- Reporting bases listed in table headings (verbatim):
  - Non-cash basis 4/
  - Cash basis
  - Nominal value 5/
  - Face value 6/
  - Market value 7/ (Market value definition provided)
- Notes provided (verbatim excerpts):
  - 2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable.
  - 3/ Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities.
  - 4/ Includes accrual recording, commitment basis, due for payment, etc.
  - 5/ Nominal value at any moment in time is the amount the debtor owes to the creditor. It reflects the value of the instrument at creation and subsequent economic flows (such as transactions, exchange rate, and other valuation changes other than market price changes, and other volume changes).
  - 6/ The face value of a debt instrument is the undiscounted amount of principal to be paid at (or before) maturity.
  - 7/ Market value of debt instruments is the value as if they were acquired in market transactions on the balance sheet reporting date (reference date). Only traded debt securities have observed market values.

### Debt consolidation across sectors
- Data unavailable

### Reporting on intra-government debt holdings (table headings preserved)
- Reporting on Intra-Government Debt Holdings (columns listed verbatim):
  - Nonfin. pub. corp.
  - Central bank
  - Oth. pub. fin corp
  - Budget. central govt
  - Extra-budget. funds
  - Social security funds
  - State govt.
  - Consolidated

### Summary statement on coverage (verbatim content)
- The coverage of the DSA includes: (i) central government direct debt; (ii) domestic and external government-guaranteed debt (loans and bonds) extended to state-owned enterprises (SOEs); (iii) debt of local governments; and (iv) Ukraine's liabilities to the IMF that are not included in central government direct debt. It does not include non-guaranteed domestic and external liabilities of SOEs or disputed debts. Data concerning debt consolidation across sectors are not available.

*International Monetary Fund staff presentation (Annex II. Figure 2).*

### Annex II. Figure 10. Ukraine: Medium-Term Risks (Post-Eurobond Restructuring Downside)

### Annex II. Figure 10. Ukraine: Medium-Term Risks (Post-Eurobond Restructuring Downside)

### Medium-term risk indices and key metrics
- Debt fanchart module:
  - Fanchart width199.92.9 (percent of GDP)
  - Probability of debt non-stabilization 20.90.2 (percent)
  - Terminal debt-to-GDP x 86.81.9
  - Debt fanchart index (DFI) 5.0
  - Risk signal: High
- Gross Financing Needs (Pct of GDP) — GFN module:
  - Average baseline GFN 23.78.1 (percent of GDP)
  - Banks' claims on the gen. govt 22.9 7.4 (pct bank assets)
  - Chg. In banks' claims in stress 85.328.5 (pct banks' assets)
  - GFN financeability index (GFI) 44.0
  - Risk signal: High
- Medium-Term Index (Index Number):
  - Debt fanchart index 5.0
  - GFN financeability index 44.0
  - Medium-term index: Risk signal: 5/High
  - Final assessment: High
  - Prob. of missed crisis, 2024-2029, if stress not predicted: 100.0 pct.
  - Prob. of false alarms, 2024-2029, if stress predicted: 0.0 pct.

### Downside scenario: shock assumptions and macro effects
- Scenario assumptions and timing:
  - Shock assumed to start in 2025Q1 with a more intense war running through mid-2026 (war assumed to wind down by mid-2026 versus in the last quarter of 2025 in the baseline).
- Macroeconomic impacts relative to baseline:
  - Real GDP growth would be weaker than in the baseline: - 2.5 percent in 2025 (versus 2.5–3.5 percent in the baseline).
  - The updated downside scenario involves the same GDP losses for 2025 as at the Fifth Review in percentage terms, which translate into larger losses in absolute terms.
  - High defense needs and weaker economic activity would cause the fiscal deficit to further increase in 2025–26, despite some assumed adjustment measures; the fiscal balance would improve gradually thereafter.
  - Imbalances in the FX market would resurface and be expected to persist for longer, leading to higher nominal depreciation in coming years before converging to the baseline trend.
  - Some FX intervention (FXI) is assumed especially for 2025–26, which contributes to a lower path of reserves compared to the baseline.
  - Recovery in output would be more subdued than in the baseline due to greater damage to the capital stock, worsened labor force dynamics, and weakened balance sheets; output would remain below pre-war levels for longer.

### Financing, debt sustainability, and indices outcomes
- Cumulative financing gap and financing needs:
  - Updated cumulative financing gap in the downside scenario: US$177.2 billion.
  - This is US$29.2 billion higher than the baseline forecast for 2023Q2–27Q1 (US$148 billion).
  - Additional financing would need to be in the form of highly concessional loans (close to grant terms), including full use of financing from the US$50 billion ERA initiative (assumed neutral for the DSA).
- Debt sustainability measures required:
  - The scenario would require a mix of additional grants in the program period, highly concessional financing consistent with assurances received, and a further definitive debt treatment entailing the available restructurable debt to ensure debt sustainability.
  - These measures would bring total public debt and gross financing needs to targets consistent with sustainable debt on a forward-looking basis.
- Index and module implications:
  - In the Debt Fanchart Index (DFI), all three components are worse than in the baseline.
  - The GFN Financeability Index also remains very high and well above the baseline, reflecting higher levels of average GFNs and change in bank claims in the stress scenario (the initial bank claims on the government is a data outturn and is common across both scenarios).

### Policy response and contingency measures outlined
- Authorities’ preparedness and past actions:
  - Since the start of the war, the authorities have introduced revenue measures, streamlined capital expenditure and lower-priority expenditures, identified additional financing, and implemented measures to maintain financial stability and protect international reserves, including through FX controls.
  - Authorities have demonstrated the ability to take on additional reforms and measures since program approval.
- Contingency measures reconfirmed (from the Fifth Review and updated):
  - Increase tax revenues (bulk of adjustment in 2025 Budget expected from tax measures similar in nature to the baseline, such as VAT increases).
  - Accelerate excise tax alignment with the EU.
  - Seek further external financing on highly concessional terms and mobilize grants.
  - Monetary tightening.
  - Mobilization of domestic financing (both in UAH and FX if required) to close near-term fiscal financing gaps without compromising economic, financial, and monetary stability.
  - Likely further adjusting FX policies and CFMs (to be justified and temporary); temporary pressures may require the reintroduction of some FX controls used earlier in the war.
  - Make some spending contingent on available financing (e.g., constrain capital and social expenditures to highest priority categories).
- Additional contingency measures if shocks exceed the downside scenario:
  - Further revenue measures (examples cited): further increasing the military tax supplement to the PIT, additional taxes on luxury goods (such as jewelry, automobiles, and precious metals), or excise duties/fees.
  - Mobilizing domestic bond financing on an even larger scale.
  - Monetary financing options, including administrative measures requiring banks to hold a stipulated amount in or a minimum holding period of government securities (possibly differentiating among banks), and secondary purchases of government bonds by the NBU to serve as a backstop for the primary market.
  - Consideration of instruments such as inflation or exchange-rate linked bonds.
  - If exchange-rate pressures renew but reserves remain adequate, consider a combination of expanded FX controls and proactive FX policies while adjusting monetary policy stance.
  - Ultimately, spending under certain categories would be contingent on the flow of highly concessional/grant-based external financing.

### Staff assessment and outlook
- The medium-term modules signal high risks of sovereign stress, in line with the baseline and the Fourth Review's SRDSA.
- The program is assessed as robust in the face of the downside scenario, supported by:
  - Authorities’ strong policy commitments and track record.
  - Renewed financing assurances from international partners.
  - Expected debt relief.
- Under the downside scenario, additional financial assurances from international partners would restore debt sustainability on a forward-looking basis.

*Source: IMF staff estimates and projections (Annex II. Figure 10 and Annex III text and tables).*

### Annex III. Table 3a. Ukraine: Balance of Payments (Downside Scenario), 2021–33

### Annex III. Table 3a. Ukraine: Balance of Payments (Downside Scenario), 2021–33

### Current account and main components
- Current account balance (2021–2033): -3.9 8.0 -9.6 -15.9 -24.5 -22.6 -9.6 -6.9 -7.2 -9.7 -10.4 -11.1 -11.6
- Goods (net) (2021–2033): -6.6 -14.7 -29.1 -29.5 -34.2 -31.8 -31.9 -31.3 -32.0 -33.6 -33.1 -33.2 -33.0
- Exports (2021–2033): 63.1 40.9 34.7 40.1 34.5 42.7 47.8 50.2 54.0 57.5 63.0 68.6 74.9
- Imports (2021–2033): -69.8 -55.6 -63.8 -69.6 -68.7 -74.5 -79.7 -81.5 -85.9 -91.2 -96.1 -101.9 -107.8
- Services (net) (2021–2033): 4.0 -11.1 -8.7 -5.8 -11.2 -6.9 7.1 13.1 14.8 15.6 16.0 16.3 16.6
  - Receipts (2021–2033): 18.4 16.6 16.6 17.1 15.0 16.5 23.2 27.1 29.9 31.7 33.0 34.3 35.7
  - Payments (2021–2033): -14.4 -27.7 -25.3 -22.9 -26.2 -23.4 -16.1 -14.0 -15.1 -16.0 -17.0 -18.0 -19.1
- Primary income (net) (2021–2033): -5.8 8.5 5.0 -0.3 2.9 1.7 1.7 0.8 0.1 -1.3 -2.0 78 -2.6 -3.1
  (Note: sequence contains "78" as provided in source)
- Secondary income (net) (2021–2033): 4.6 25.2 23.3 19.7 18.0 14.4 13.6 10.5 9.9 9.6 8.8 8.4 7.9

### Capital and financial accounts
- Capital account balance (2021–2033): 0.0 0.2 0.1 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Financial account balance (2021–2033): -5.5 8.5 -20.9 -18.5 -24.0 -25.3 -12.0 -10.0 -10.9 -14.9 -15.5 -15.2 -16.8
  - Direct investment (net) (2021–2033): -7.5 -0.2 -4.4 -4.7 -2.1 -2.5 -6.9 -10.0 -9.1 -9.2 -10.1 -10.1 -10.3
  - Portfolio investment (net) (2021–2033): -1.0 2.0 2.7 1.7 0.8 0.1 0.4 0.2 1.2 -1.0 -1.6 -1.4 -1.6
  - Financial derivatives (net) (2021–2033): 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
  - Other investment (net) (2021–2033): 2.9 6.7 -19.1 -15.4 -22.7 -23.0 -5.5 -0.2 -3.1 -4.7 -3.9 -3.7 -5.0
    - Other investment: assets (2021–2033): 7.7 21.0 11.4 14.9 15.8 8.2 6.1 2.4 2.3 2.0 2.2 2.0 2.1
    - Other investment: liabilities (2021–2033): 4.9 14.3 10.6 30.3 38.5 31.2 11.6 2.6 5.3 6.7 6.1 5.8 7.0
  - Net use of IMF resources for budget support (2021–2033): 0.2 2.3 3.6 3.9 1.2 0.3 0.2 -0.8 -1.8 -1.1 -1.3 -1.4 -1.1

### Sectoral financial flows (selected)
- Central Bank (2021–2033): 2.7 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- General government (2021–2033): 1.5 14.7 26.0 25.5 36.4 29.1 10.3 2.8 6.5 7.2 6.7 6.5 7.5
- Banks 3/ (2021–2033): 0.4 -0.4 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Other sectors (2021–2033): 0.0 -2.2 1.1 0.9 0.9 1.8 1.0 0.6 0.6 0.6 0.6 0.6 0.6

### Errors, overall balance, and financing
- Errors and omissions (2021–2033): 1.8 -0.3 1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Overall balance (2021–2033): 3.5 -0.6 13.0 2.8 -0.5 0.8 2.4 3.2 3.8 5.2 5.2 4.1 5.2
- Financing (2021–2033): -3.5 0.6 -13.0 -2.8 0.5 -2.8 -2.4 -3.2 -3.8 -5.2 -5.2 -4.1 -5.2

### Reserves and IMF use for BOP support
- Gross official reserves (increase: -) (2021–2033): -2.5 2.3 -11.4 -1.8 1.3 -2.4 -2.0 -3.2 -3.8 -4.1 -3.9 -2.7 -4.2
- Net use of IMF resources for BOP support (2021–2033): -0.9 -1.6 -1.6 -1.0 -0.8 -0.3 -0.4 0.0 0.0 -1.1 -1.3 -1.4 -1.1

### Memorandum items (levels and ratios)
- Current account balance (percent of GDP) (2021–2033): -1.9 4.9 -5.4 -8.4 -12.9 -11.8 -4.8 -3.3 -3.2 -4.2 -4.2 -4.3 -4.2
- Goods and services trade balance (percent of GDP) (2021–2033): -1.3 -15.9 -21.2 -18.6 -23.9 -20.2 -12.4 -8.6 -7.8 -7.7 -7.0 -6.5 -6.0
- Gross international reserves (USD billions) (2021–2033): 30.9 28.5 40.5 42.3 41.1 43.5 45.5 48.7 52.5 56.5 60.4 63.2 67.3
- Months of next year's imports of goods and services (2021–2033): 4.5 3.8 5.3 5.4 5.0 5.4 5.7 5.8 5.9 6.0 6.0 6.0 6.0
- Percent of the IMF composite metric (float) (2021–2033): 104.4 103.6 124.1 112.0 96.9 90.3 90.1 94.2 97.0 102.2 105.3 107.0 110.3

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

### 7. We continue to  implement wide-ranging reforms, and as a demonstration of this

### 7. We continue to implement wide-ranging reforms, and as a demonstration of this commitment we propose three additional structural benchmarks

### Structural benchmarks (commitment and timing)
- Prepare a comprehensive operational strategy for the NSSMC, including initiating an independent fit and proper review (by end-January 2025).
- Prepare and submit to parliament a draft law on financial sector critical third-party risk (by end-May 2025).
- Complete a third-party external audit of NEURC, enshrined in the law, and publish it (by end-October 2025).

### Debt sustainability, restructuring strategy, and financing assurances
- International partners have assured continued support to help ensure that debt sustainability is restored and the program is fully financed.
- In March 2023, the authorities announced the intention to undertake a treatment of external public debt, in line with program parameters.
- An exchange of outstanding government and Ukravtodor bonds was completed in August (date implied in text).
- Authorities commit to undertake a further external commercial debt treatment as needed to restore debt sustainability in line with program parameters, if macroeconomic and debt outlooks worsen.
- Such a treatment is expected to take place once conditions of exceptionally high uncertainty abate, or at the latest by the penultimate review of the program.
- In light of collaborative creditor discussions, the authorities request the completion of the financing assurances review.

### Request for Sixth Review and disbursement
- Request completion of the Sixth Review and a disbursement in the amount of SDR 834.88 million (41.5 percent of quota), to be channeled for budget support.
- A memorandum of understanding between the National Bank of Ukraine (NBU) and the Ministry of Finance (MOF) has been established to govern the mechanism of servicing the government’s obligations to the Fund by the NBU on behalf of the MOF.

### Commitment to program policies, monitoring, and transparency
- Authorities state that policies in the attached MEFP are adequate to achieve program objectives in both the baseline and downside scenario and commit to adapt policies as conditions evolve.
- Authorities will consult with the IMF in advance of any revisions to the policies in the MEFP, in line with the IMF’s policies on consultation.
- Authorities will refrain from policies inconsistent with the program’s objectives and commitments presented in the MEFP.
- Authorities will continue to provide IMF staff with data and information needed to monitor program implementation, including by adhering to data provision requirements in the attached Technical Memorandum of Understanding (TMU).
- Authorities consent to IMF publication of this letter, the MEFP, the TMU, and accompanying Executive Board documents.

*Signatories: Volodymyr Zelenskyy (President of Ukraine); Denys Shmyhal (Prime Minister); Sergii Marchenko (Minister of Finance of Ukraine); Andriy Pyshnyy (Governor, National Bank of Ukraine).*

### I. Background, recent developments, and outlook — context and financing
- Russia’s invasion continues to cause large human, social, and economic costs: civilian casualties rising, around a quarter of the population displaced, and missile strikes nationwide including on electricity infrastructure.
- Despite destruction and challenges, macroeconomic, financial, and external stability have been preserved.
- Fiscal deficit remains very high, entailing large external and domestic financing needs and tight financing constraints.
- The Extended Fund Facility (EFF) arrangement anchors policies and has helped mobilize an external financing package totaling US$148 billion over the program period (2023Q2–27Q1).
- External partners have provided assurances of adequate resources, including US$50 billion via the Extraordinary Revenue Acceleration (ERA) Loans for Ukraine Initiative, consistent with restoring debt sustainability.
- EU accession negotiations launched in June provide a framework for regulatory convergence (EU acquis) and support for recovery and reconstruction; the Ukraine Plan, €50 billion Ukraine facility, and ERA financing will support budgetary needs, recovery, reconstruction, and modernization in 2024–27.

### Economic outlook and near-term macro dynamics (key projections and indicators)
- 2024H1 activity remained resilient despite energy and labor market strains; 2024Q3 growth is estimated at 3.8 percent y/y.
- Growth projections:
  - Growth is expected at around 4 percent in 2024.
  - Growth in 2025 is expected between 2.5 and 3.5 percent.
- Inflation and forecasts:
  - Inflation decelerated from 26.6 percent y/y in end-2022 to 3.3 percent y/y in May, then rose to 9.7 percent y/y in October.
  - Inflation is expected to edge up further to up to 10 percent by end-year (2024).
  - Inflation is expected to decelerate to 7.5 percent by the end of 2025.
- Current account and reserves:
  - For 2024, the current account deficit is expected to widen to US$15.9 billion (from US$9.6 billion in 2023).
  - Reserves are expected to end 2024 at US$42.3 billion (112 percent of the ARA metric).
  - In 2025, the current account deficit is projected to widen to US$29.3 billion.
  - Gross reserves are projected to reach US$43.3 billion at end-2025 or 100.5 percent of ARA.
- Exchange rate and FX operations:
  - After depreciating through end-July 2024 by a cumulative 12.2 percent since transition to managed exchange rate flexibility, the hryvnia has remained broadly stable.
  - FX interventions remain sizeable to fill the structural deficit amid increased net FX demand of the private sector and structural FX surplus of the public sector.
- Banking and credit:
  - Credit growth continues to recover; role of state support in lending (5-7-9 program) declining.
  - Mortgage lending dominated by subsidy program (eOselya).
  - Gross non-performing loans continue to fall; banking system remains profitable and highly liquid with strong deposit growth.

### Risks, scenarios, and policy readiness
- Risks are tilted to the downside amid exceptionally high uncertainty: prolonged or more intense war could pressure fiscal position, financing needs, exchange rate, inflation expectations, migrant return, private investment, and supply routes.
- Authorities stand ready to take additional feasible fiscal measures under a downside scenario, including tax policy measures guided by the National Revenue Strategy (NRS) and spending measures building on efficiency gains.
- Authorities will identify additional domestic financing as needed, can deploy foreign reserves, adjust monetary policy stance, and recalibrate FX controls to maintain macrofinancial stability.
- External partners have indicated readiness to provide additional resources to close financing gaps under the downside scenario.
- Authorities also pursue upside policies aiming for high and sustained growth through structural reforms, EU integration, reconstruction frameworks to absorb official resources and catalyze private capital, and measures to boost investment, migrant return, human capital, and TFP growth.

### II. Macroeconomic and structural policies for 2025–27 — overview and strategy
- Program goals: restore fiscal and debt sustainability, maintain external and financial stability, and restore medium-term external viability to enable long-term growth in post-war reconstruction and EU accession context.
- Two-phased approach:
  - Phase 1: preserve stability and advance necessary structural reforms while planning for broader reforms once the war tapers off.
  - Phase 2 (post-war tapering, expected in late 2025 under baseline): shift focus to expansive structural reforms, reconstruction, and reverting to pre-war policy frameworks as conditions allow.
- Policy instruments and priorities include robust 2025 budget implementation, a strong medium-term budget framework, managed exchange rate flexibility, appropriate monetary policy, and well-targeted structural measures across public finances, financial sector, monetary and exchange rate policies, governance, anti-corruption, and energy sector.
- Social spending will be safeguarded to the extent possible.

### II.B Fiscal policy — end-September 2024 fiscal outturns and targets met
- Tax revenues (excluding social security contributions) reached UAH 1,527.9 billion, exceeding the floor of UAH 1,398.6 billion (Quantitative Performance Criterion).
- End-September non-defense cash primary balance of the general government excluding grants: UAH 651.0 billion (at program exchange rates), above the program’s floor of UAH 368.3 billion (Quantitative Performance Criterion).
- Overall balance excluding grants: UAH 898.1 billion (at program exchange rates), exceeding the floor of UAH -1,123.1 billion (Indicative Target).
- Issuance of government guarantees: UAH 22.7 billion, below the adjusted ceiling of UAH 61.6 billion (Quantitative Performance Criterion).
- Accumulation of overdue accounts payable (domestic arrears): UAH 1.7 billion as of end-September, below the ceiling of UAH 1.8 billion (Indicative Target).
- Social spending amounted to UAH 427.7 billion at end-September, respecting the floor of UAH 427.7 billion (floor referenced in text).

*Attachment I. Memorandum of Economic and Financial Policies (excerpt), Ukraine — International Monetary Fund.*

### 390.0 billion (Indicative Target).

### 390.0 billion (Indicative Target).

### Fiscal outlook and 2024 implementation
- Implementing fiscal policies consistent with the 2024 Supplementary Budget, which authorizes additional expenditures to provide for national defense while tightly prioritizing other categories.
- Commitment to safeguard the social safety net, including needs of war veterans and vulnerable groups; a floor on social spending (Indicative Target) underscores this commitment.
- Continued efforts to ensure revenues, especially taxes, achieve the plan for the rest of the year to ensure appropriate burden sharing.
- 2024 expectations:
  - Overall balance of the general government excluding grants: UAH -1,850 billion or around 24.3 percent of GDP.
  - Progress monitored by:
    - Floor on the non-defense primary balance of the general government excluding grants (Quantitative Performance Criterion).
    - Floor on the overall cash balance of the general government excluding grants (Indicative Target).

### Recent and contingency tax measures to secure revenues
- Key measures adopted (Parliament package adopted October 10, second reading):
  - Raise the Military Tax rate from 1.5 to 5 percent.
  - Broaden the base of Military Tax by extending it to taxpayers in the Simplified Tax System.
  - Introduce presumptive taxation on fuel stations.
  - Increase the corporate tax rate applied to non-bank financial institutions (excluding insurance) to that already applied to banks (25 percent).
  - Package contained a second year of an exceptional profit tax on banks (50 percent), which authorities intend to avoid repeating in favor of high-quality, permanent measures.
- Harmonization with EU directives:
  - Legislation enacted in September to gradually align fuel excises with EU levels.
  - Parallel legislation on tobacco excises adopted on December 4.
  - Plan to begin discussions with EU counterparts on next steps to adjust taxes to meet EU requirements next year.
- Contingency planning:
  - Prepared to respond to budgetary shocks with increases in taxes if needed.
  - Increases in the main VAT rate are viewed as the most efficient potential source of additional revenue and central to contingency planning.
  - Commitment to pursue revenue-based fiscal adjustment to preserve stability and restore fiscal and debt sustainability.

### 2025 Budget: assumptions, expenditures, revenues, and balance
- Process:
  - First reading of the 2025 Budget law occurred October 31; revised budget for second reading submitted November 8; parliamentary adoption expected by the end of the month.
- Expenditures:
  - Budget authorizes expenditures of UAH 5,065 billion or about 58 percent of GDP, reflecting expectation that the war will continue into the next year and prioritization of defense.
  - Commitment to adequate social protection with appropriate allocations.
- Revenues:
  - Expected yield from tax measures: around UAH 141 billion or around 1.6 percent of GDP.
  - Total revenues excluding grants expected to be UAH 3,340 billion, with the vast majority comprised of tax collections.
  - Prior action: enacted package of tax measures (Law #11416-d) as adopted by Parliament on November 28.
- Balance:
  - 2025 overall deficit excluding grants expected to be UAH 1,710 billion (19.7 percent of GDP).
  - Financing will mainly come from external partners, with the largest external disbursements coming from the G7's ERA mechanism.
  - ERA financing will be administered as budget support and: (i) transparently incorporated in the budget, (ii) accounted for in treasury reporting, (iii) disbursed into the treasury single account, and (iv) not directed to any special fund without prior agreement from the donor country.

### Medium-term fiscal framework and sustainability targets
- Preparing the 2026-28 Budget Declaration on schedule as a critical anchor for post-war fiscal policies (end-June 2025 Structural Benchmark).
- Target for medium-term primary balance after the end of the war:
  - Primary surplus of around ½-1½ percent of GDP.
- Commitment to sustained revenue effort to generate sufficient tax revenues for post-war spending needs (recovery, reconstruction, social priorities) while reducing the need for external financing in line with the strategic objectives of the NRS.

### Reconstruction needs and approach to financing
- RDNA-3 estimate (published February 15, 2024): reconstruction needs of US$486 billion over the next ten years.
- Attacks on energy and other infrastructure have pushed damages up further since RDNA-3.
- Largest needs concentrated in housing, transport, and commerce and industry; addressing these is vital for public services, productive capacity, social protection, and return of refugees.
- Financing principles:
  - Ensure reconstruction activities are consistent with return to fiscal and debt sustainability.
  - Carefully evaluate the financing mix and seek financing on highly concessional terms.
  - Ensure reconstruction financing mechanisms adhere to integrated public investment management principles and fit into the medium-term budget framework.

### Financing strategy and recent financing outcomes
- Financing gap over the program period stands at US$148 billion.
- Donor support since program start:
  - Total received: US$60.6 billion, of which US$27.3 billion was disbursed between January and November 14, 2024.
  - Expected additional receipts for the remainder of the year: US$13.6 billion.
- Firm financing assurances for January 2025-December 2025:
  - US$36.6 billion of financing (excluding IMF financing), including a portion amounting to US$21.9 billion from the US$50 billion ERA mechanism.
- Prospects beyond December 2025:
  - Key partners have assured continued support to help ensure the program remains fully financed.

### Domestic debt market, bond issuance, and liquidity management
- Domestic bond issuance:
  - Over the first ten months of 2024, mobilized net domestic bond financing of UAH 480.5 billion (around US$11.8 billion), implying a rollover rate of 152 percent so far this year.
  - About UAH 85 billion issued year-to-date as designated benchmark bonds that banks may use to meet reserve requirements.
  - Adjustments to reserve requirement regulations at the NBU’s September MPC meeting to support absorption of external debt placements (¶46).
  - Stand ready to strengthen efforts as needed to meet financing needs for the remainder of 2024.
- Measures to support bank financing and domestic uptake:
  - Study liquidity flows into the banking system, including bank-by-bank and bank-group analysis.
  - Develop targeted strategies to encourage increased uptake of government bonds, supported by the joint Working Group under the Financial Stability Council (FSC).
  - With appropriate approaches, such measures could contribute to net domestic financing over the program.
- Objectives of successful placements and timely external financing:
  - Execute the budget as planned, avoid arrears, continue to avoid monetary financing.
  - Finance the budget in a manner consistent with safeguarding macroeconomic and financial stability and restoring debt sustainability.

### Public debt management and treasury liquidity improvements
- Debt management:
  - Ensure debt management strategy remains consistent with program’s debt sustainability objectives.
  - Update the Medium-Term Debt Strategy (MTDS) upon completing plans for treatment of external commercial claims, including GDP-linked securities.
  - Strengthen debt management capacity via increased staffing and training.
  - Support development of domestic debt market, maintain attractiveness of locally-issued instruments, diversify investors (including encouraging non-resident participation), and facilitate international capital market access in the medium term consistent with debt sustainability objectives.
- Treasury cash and liquidity management:
  - Strengthen liquidity forecasting and cash management to avoid vulnerabilities and strengthen budget execution and commitment controls.
  - Review findings of a diagnostic assessment of treasury cash and liquidity management conducted with IMF TA and identify next steps based on international best practices regarding roles of finance ministries, treasuries, central banks, and debt management agencies.

### Fiscal structural reforms and revenue mobilization (NRS implementation)
- Public finance reform priorities:
  - Raise revenues to meet reconstruction and social spending needs while enhancing efficiency, fairness, and simplicity of the tax system via the home-grown NRS.
  - Improve public investment and public financial management frameworks (project management cycle, commitment controls).
  - Reform and strengthen the pension system and social safety net.
  - Enhance fiscal transparency and management of fiscal risks.
  - Strengthen the medium-term budget framework (MTBF) to ensure fiscal sustainability and predictability.
- NRS (adopted December 2023) goals and implementation:
  - Establish a fair and competitive tax framework to generate sufficient revenues for post-war development while maintaining fiscal and debt sustainability.
  - Strategic goals: close opportunities for tax evasion, increase compliance, and combat the shadow economy.
  - Developed detailed implementation plans with timetables for tax administration, customs, and tax policy reforms.
  - Publish a comprehensive annual status report each March starting in 2025 to reflect reform progress and ensure accountability.
  - Created NRS Steering Committees at SCS and STS to supervise reform implementation.
  - Will abstain from tax policy and administrative measures that may adversely affect the tax base and refrain from introducing new categories of taxpayers in existing preferential regimes.
  - Developing amendments to the strategy of digital development and digitalization of public finance management (approved by CMU in 2021) to align with the NRS till 2030; plan to submit amendments for CMU approval by end-2024.
- Near-term tax policy focus:
  - Raise revenues from excises, align with EU acquis, and streamline tax privileges.
  - Recently increased excise rates as a first step in a gradual increase to EU minimum levels over the medium term.
  - Adopted a formal assessment methodology for tax privileges with standardized templates and publication processes; compile an updated comprehensive inventory of all tax expenditures for publication alongside budget documentation starting with the 2026 annual budget.
- Planned medium-term tax policy reforms:
  - Develop a comprehensive post-war package to reform taxation of carbon emissions.
  - Analyze and assess taxation of extractive industries.
  - Define principles of taxation of virtual assets aligned with EU rules and OECD Global Forum initiatives.
  - Consider future reforms for greater equity, e.g., a more progressive personal income tax (PIT), when conditions allow.
  - Comprehensive reform of the Simplified Tax (ST) system to limit application scope and abuse, including measures to:
    - Limit the possibility for entities to return to ST after transition to general taxation (starting at the latest by the start of 2027).
    - Revise approaches to determine and index thresholds for ST.
    - Narrow eligibility of ST by excluding certain activities.
  - PIT and ST reforms require administrative safeguards, including confidentiality of tax data in STS systems and tax authority access to data on funds in taxpayers’ bank accounts.
- Digital reporting and anti-evasion measures:
  - Developing legislative amendments to introduce reporting requirements for digital platform operators and international data exchange in line with EU Council DAC 7 Directive / OECD Model reporting rules; will submit relevant legislative amendments to Parliament by end April 2025 (Structural Benchmark, end-April 2025).
  - Developing legislative amendments to implement rules to combat tax evasion practices consistent with the EU Anti-Tax Avoidance Directive (EU ATAD) and international best practices to prevent tax evasion, protect the tax base from erosion and profit shifting.

*Source: 1ukrea2024004-print-pdf - 390.0 billion (Indicative Target).*

### 26. Near-term reform efforts at the State Tax Service (STS) focus on building public trust

### 26. Near-term reform efforts at the State Tax Service (STS) focus on building public trust

### STS: transparency, digitalization, and compliance risk management
- Publish results of a taxpayer survey conducted earlier this year by an independent company by end-2024 and no later than 2 weeks after we receive the results.
- Improve excise tax administration, including for tobacco:
  - Develop a track and trace system in cooperation with the Ministry of Digital Transformation; on track to operationalize by January 1, 2026.
- Approve a long-term Digital Development Plan for the STS in accordance with the NRS’s implementation plan by the end of 2024:
  - Plan will include measures for gradual consolidation of IT platforms and information resources, and their administration by an independent administrator.
- Ensure confidentiality and protection of data in STS systems (including information received from taxpayers and tax agents):
  - Develop the concept of using de-personified data on taxpayers by tax authorities by end-2024 (see NRS section 4.2.3), to be used until the risk of tax non-compliance is detected.
  - These changes to systems will be operational by end-2026.
- Strengthen risk-based tax administration:
  - Developed methodological documents to operationalize the tax risk management system.
  - Will adopt an Overall Compliance Improvement Plan as a comprehensive document on identification, assessment, analysis, and mitigation of major types of tax risks.
  - Launched a pilot of the new compliance risk management system in July 2024.
- IT modernization for compliance and reporting:
  - Finalizing the IT framework for the e-audit program to automatically verify consistency of tax declarations with other data; e-audit program to be fully operational by end-2025.
  - Implement IT solutions for SAF-T UA (electronic format of data submission) for large taxpayers by end-March 2025.
- Organizational and international measures:
  - Organizational restructuring to reflect the functional review by end-2024 to align structure with functional tax administration and modern Compliance Risk Management practices.
  - Improve efficiency of information exchange with foreign competent authorities.
  - Obtained a positive assessment from OECD Global Forum on Informational Security Management Maturity in June 2024.

*Source: 1ukrea2024004-print-pdf - 26. Near-term reform efforts at the State Tax Service (STS) focus on building public trust*

### 38. We are implementing the 2023 Roadmap to reform our public investment

### We are implementing the 2023 Roadmap to reform our public investment

### Public Investment Management (PIM) reforms and Action Plan
- Objective: Gradually address weaknesses in (i) strategic planning, (ii) integrating public investment into the MTBF, (iii) procedures for preparing, appraising, selecting, and implementing projects, (iv) institutional capacity, and (v) monitoring and evaluating implementation.
- Principles guiding reforms: budget unity, coherence, predictability; strengthen coordination between the MOF, MOE, Ministry of Infrastructure, and other line ministries; gatekeeper role for the MOF in all stages of public investment management.
- Action Plan timeframe: The first stage covering 2024–25 is being executed.
- Institutional measures:
  - Established the Strategic Investment Council (SIC) to define the project pipeline and endorse public investment projects for the annual budget.
  - Enact legal amendments (Action 1) to:
    - integrate PIM into the budget process so only projects appraised and selected in the prescribed manner are included in the budget;
    - define functions of participants in the PIM process;
    - introduce medium-term planning of public investment, including prioritization of ongoing projects;
    - establish mandatory use of a unified IT platform (DREAM; IT systems of the MOF and the MOE).
  - Structural Benchmark: amended Budget Code to give MOF mandate to verify—and report in annual budget documents—that all projects financed from the budget (and all PPPs and guarantee-backed projects) were appraised and selected in the prescribed manner (Structural Benchmark, end-January 2025).
  - Cabinet will approve secondary legislation required to implement Budget Code amendments by end-February 2025.
- Methodological framework upon Budget Code adoption:
  - CMU to approve procedures and criteria (Actions 17–22) for: (i) preparation of projects, (ii) formation of the single project pipeline, (iii) appraisal of projects, (iv) selection of projects, (v) determining sources and mechanisms of financing, and (vi) implementation, monitoring, and evaluation (Structural Benchmark, end-February 2025).
  - Key procedural principles:
    i. Degree of scrutiny commensurate with scale and complexity of the project.
    ii. Project review decisions will be timely to speed up delivery.
    iii. Procedures will include mechanisms to abandon or modify projects at any stage; MOF, in its gatekeeper role, will have the right to trigger such mechanisms, especially for larger projects.
    iv. Conflicts of interest will be avoided (e.g., when officials appraise projects from their own ministry).
    v. The source of financing will be considered only after the decision to proceed; availability of finance will not inform the decision, including for externally financed projects.
    vi. MOF, MOE and MOI will review project proposals in an integrated fashion to capture interdependencies between technical, economic, and financial reviews.
- Legal and operational upgrades by end-2025:
  - Enact legal amendments (Action 31) to improve integration of PIM into medium-term budget planning and fiscal risk management covering: (i) use and recording of multiannual budget commitments and contingent liabilities for public investment projects; (ii) determination of contingent liabilities that may arise from PPPs; (iii) management and disclosure of fiscal risks related to public investments; and (iv) public investment budgeting at the local level.
  - Finalize required IT infrastructure by end-2025.
  - Increase institutional capacity of agencies participating in the PIM process.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### External Debt Strategy
- Strategy guidance: efforts to restore debt sustainability on a forward-looking basis guided by the strategy announced in March 2023.
- Rationale: Treatment of external public debt necessary to close financing gaps during the program period, reduce gross financing needs to manageable levels (including after the program), and place public debt on a sustainable path.
- Recent milestone: successful Eurobond exchange completed in August 2024.
- Next components (post-Eurobond exchange):
  - Commercial claims other than Eurobonds to be pursued: (i) GDP warrants; (ii) government guaranteed bonds of Ukrenergo; (iii) external commercial loans owed to a commercial creditor included in the March 2023 restructuring perimeter.
  - Contact with holders of these claims initiated; moratorium on government payments on the respective instruments introduced in August 2024.
  - Commitments: prompt implementation of the strategy consistent with program debt sustainability objectives; use of external financial advisors; credible, transparent restructuring process.
- Official bilateral debt:
  - Group of Creditors of Ukraine (GCU) committed to a two-step process: extension of the debt standstill coupled with a separate assurance to deliver a final debt treatment sufficient to restore debt sustainability before the final review of the IMF-supported program.
  - First stage—extension of the standstill until 2027—formally concluded in December 2023.
  - Plan: seek treatments on comparable terms with other official creditors, including guaranteed loans, and definitive restructuring of these claims.
- Contingency and further treatments:
  - Full implementation of the strategy expected to deliver debt sustainability targets under the program’s baseline scenario.
  - Commitment to undertake further treatment of external commercial claims as needed to restore debt sustainability, in line with program parameters.
  - If the scenario at the penultimate review of the program (or if exceptionally high uncertainty abates later) is worse than the present restructuring basis, a further treatment of external commercial claims would be required alongside restructuring of official bilateral claims.
  - Timing: further treatment expected once conditions of exceptionally high uncertainty abate, or at the latest by the penultimate review of the program.
  - Retain legal and financial advisors; continue to share information regularly with creditors about potential ranges of outcomes and timelines.
- Guarantees and fiscal discipline:
  - Continue to strictly limit the issuance of guarantees (Quantitative Performance Criterion).
  - Provide adequate space to facilitate guarantees on loans from International Financial Institutions (IFIs) and foreign governments for projects, including recovery and reconstruction.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### Monetary Policy and operational framework
- Objectives: safeguard price and external stability and ensure an adequate level of international reserves; adapt monetary and exchange rate policies while cautiously continuing FX liberalization to restore external viability.
- Recent policy actions:
  - Rapid disinflation supported an easing cycle in the first half of the year, allowing a cut of the key policy rate (KPR) by 200 bps.
  - Since the July MPC, KPR has been kept on hold at 13 percent due to accelerating inflation from energy and labor costs, food supply shocks and passthrough of currency depreciation.
  - Policy stance: maintain tight monetary stance pending resolution of recent inflationary shocks; ready to tighten if inflation accelerates above forecast or expectations de-anchor; resume easing once pressures abate.
- Inflation outlook and targets:
  - Plan to steer monetary policy towards sustaining moderate inflation through 2025, followed by return toward the target of 5 percent over the policy horizon of up to three years.
  - NBU will adapt policy if the balance of risks to inflation and the economic outlook changes significantly.
  - Intention to maintain sufficiently positive real interest rates to support price and external stability.
- Inflation targeting framework:
  - Use of an interim flexible inflation targeting regime as per updated Monetary Policy Guidelines (MPG); managed flexibility of the exchange rate and accommodation of short-term deviations from the inflation target in response to shocks.
  - Continue strengthening KPR effectiveness as main policy instrument; main role of FXI is to cover structural private sector FX deficit and avoid excessive FX volatility.
  - Allow sufficient exchange rate flexibility as a shock absorber while preventing external imbalances and safeguarding reserve buffers.
- Operational design and liquidity management:
  - Adoption of the floor system assigning KPR to the overnight CD to support monetary transmission.
  - Use of 3-month CDs, access linked to retail hryvnia term deposit growth, supported real returns and deposit volumes, enhancing FX market sustainability and bank funding.
  - October adjustment: increased reserve requirements and the share of these requirements that can be met with eligible domestic bonds to 60 percent; aimed at strengthening banks’ liquidity flexibility and supporting uptake of government bonds in the primary market for 2024 financing needs.
    - Expected impact: broadly neutral on liquidity and an increase in banks’ benchmark bond holdings by about UAH 150 billion relative to before this adjustment to the RR.
  - Over time, may consider introducing instruments beyond an overnight maturity to increase average maturity of sterilization operations, considering implications for the primary government bond market.
  - Further changes to operational design will be based on analysis of impacts on banks’ behavior and monetary policy conditions to maintain hryvnia assets’ attractiveness and monetary stability.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### Exchange rate policy and reserves
- Exchange rate regime: managed flexibility to enhance FX market self-balancing and strengthen exchange rate as shock absorber while safeguarding reserves.
- Market developments:
  - Since transition to managed flexibility, transactions excluding the NBU’s participation have more than tripled and their share more than doubled.
  - Spread between exchange rates on the cash and official exchange rates remained compressed, not exceeding 0.9 percent in September-October 2024.
  - Allowing exchange rate to adjust in both directions enhances resilience and helps reduce sensitivity to short-term volatility.
- FX intervention policy:
  - Interventions used to fill war-related structural FX deficit of the private sector (while accommodating structural surplus of FX in the public sector) and to reduce excessive volatility; otherwise exchange rate determined by market conditions.
  - Continue to calibrate FX intervention policy to achieve external stability and consistency with program NIR targets.
  - Facilitate functioning of FX cash market to ensure a low and stable spread, including by easing access to noncash FX and increasing cash FX supply depending on market conditions.
- Reserves and NIR performance:
  - Met the end-September 2024 Quantitative Performance Criterion on net international reserves (NIR) despite unexpected increase in demand for FX cash, thanks to increase in FX supply—especially from the agricultural sector—and positive net issuance of domestic FX securities.
  - Commitment to achieve established NIR targets at the end of the year and through 2025 to ensure adequate reserves given balance of risks.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### FX liberalization and monitoring
- Approach: carefully adjust FX controls to support economic recovery while maintaining FX market stability and accommodating national and international security considerations.
- Recent easing: further eased external loan repayments for corporates’ Eurobond financing.
- Goals: improve investment environment, facilitate debt management, and promote capital inflows while ensuring consistency with macroeconomic conditions and overall policy mix.
- Safeguards: remain vigilant and align with FX liberalization roadmap under the Strategy; continue close monitoring via bank-level data to identify and address potential circumvention.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### NBU Independence and governance
- Commitment to avoid monetary financing:
  - If unexpected critical needs arise or external disbursements are delayed, first explore drawing down excess government deposits or tapping the government debt market.
  - Request monetary financing from the NBU only as a last resort and in strictly limited amounts, underpinned by a framework agreed between the MOF and NBU in consultation with the IMF.
  - NBU resolution on the framework was adopted in September 2024.
  - Avoid indirect forms of monetary financing outside core NBU functions, such as directed provision of liquidity to banks for the purchase of government securities on the primary market.
  - Direct financing of off-budget programs by the NBU will be avoided altogether.

*Italic: Source — 1ukrea2024004-print-pdf - 38. We are implementing the 2023 Roadmap to reform our public investment*

### 51. We remain fully committed to upholding the independence and institutional

### 51. We remain fully committed to upholding the independence and institutional effectiveness of the NBU. A strong and independent NBU remains critical to achieving macroeconomic stability and will support the eventual transition back to a full-fledged inflation targeting framework with a floating exchange rate.

### NBU governance and financial autonomy
- Governance arrangements
  - Enhanced the MoU between the NBU and the MOF for servicing the government’s obligations to the Fund by the NBU through the introduction of additional agreements and necessary contracts, and rigorous monitoring of the status of settlements between the MOF and the NBU.
- Financial autonomy
  - Continue adhering to profit retention rules and ensure distribution of NBU profits to the state budget in line with procedures established under the NBU Law.
  - Commit to refrain from using NBU profit for earmarked spending and will direct this revenue category to the General Fund of the State Budget.
  - Recognize that costs incurred from monetary policy implementation via liquidity absorption (interest expenses on NBU CDs) are necessary and justified to support macroeconomic stability.

### Safeguards Assessment, NBU Council, and legal reform
- Actions taken and commitments
  - In July, pursuant to a key recommendation of the 2023 Safeguards Assessment, the NBU Council conducted a self-assessment assisted by external consultants with recommendations to improve oversight role and collective fitness.
  - Continue working with IMF staff to develop and adopt amendments to the NBU law to:
    - establish appropriate selection criteria for the Council and strengthen financial autonomy safeguards;
    - clarify counterparty eligibility for refinancing operations and emergency liquidity assistance;
    - further strengthen NBU’s status as a secured creditor.
  - Ensure that vacant positions in the NBU Council are filled by end-April 2025.

### Financial reporting and EU accession preparation
- Improve conceptual framework and content of NBU’s financial reporting to provide reliable and relevant presentation aligned with central bank operations.
- With IMF and partner technical assistance, study experiences of European national central banks and the legal framework for accounting and financial reporting in the ESCB and assess readiness to transition to ESCB standards.

### Unwinding wartime monetary measures
- Intend to carefully unwind unconventional measures used to support price and external stability in wartime:
  - Ensure such measures are well-targeted, clearly communicated, and time bound.
  - As structural liquidity surplus unwinds, adjust monetary policy operational framework and assess merits of reverting to a corridor system.
  - Commit to phasing out war-time measures when conditions permit to strengthen the monetary policy toolkit and support return to full-fledged inflation targeting with a floating exchange rate.

### Financial sector stability: emergency measures and operational resilience
- Emergency measures preserved financial stability; majority of bank branches operational; online banking available to clients with internet connectivity; non-cash payment system functioning normally; liquidity robust for most banks.
- Power Banking
  - Introduced in late 2022; network includes over 2,400 branches or about 55 percent of the total capable of providing services during prolonged power outages.
  - Despite heavy attacks on energy infrastructure in September, 98.5 percent of the branches in the Power Banking network remained open and operational during prolonged disruptions to electricity supply.
- Bank licensing and nationalization
  - Licenses of eight small banks (around 4 percent of system net assets) have been revoked under Martial Law and one bank (also around 4 percent of system net assets) was nationalized.

### Bank diagnostics, resilience assessments, and asset quality work
- NBU completed a resilience assessment of banks comprising 90 percent of system assets in December 2023:
  - Asset valuation and solvency assessment found minor capital needs in five banks, largely addressed.
  - Four banks submitted capital management plans to close the approximately UAH 10 billion (US$260 million) gap as of end-2023 in two stages by March 2026.
  - Findings have been fully reflected in banks’ regulatory ratios and financial statements.
- Annual resilience assessments will resume in 2025, including asset quality reviews and stress testing under baseline and adverse scenarios and involving external auditors.
- NBU assessed key financial and operational risks under downside conditions and updated monitoring and emergency response frameworks (Structural Benchmark, end October 2024).
- Terms of Reference adopted January 2023: will (i) complete an independent asset quality review (AQR) once conditions stabilize; and (ii) carry out a subsequent bank viability assessment.
  - Current prohibition on bank capital distributions remains until independent AQR findings are fully reflected in regulatory ratios and financial statements.
  - Banks will not be subject to further fiscal measures that erode capital buffers; interim regulatory activities will be informed by supervisory observations and resilience assessments.

### Contingency planning, DGF, and legal/litigation preparedness
- 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 for preparation against:
  - potential adverse rulings from constitutional challenges against the DGF Law; and
  - litigation risks concerning past bank resolution decisions.
- Will continue to monitor developments and update plans as needed.

### Bank rehabilitation framework and DGF operational readiness (Structural Benchmark)
- DGF, MOF, and NBU to prepare a bank rehabilitation framework in consultation with IMF staff (Structural Benchmark, end-December 2024). Framework will include:
  - measures to strengthen operational readiness, including regularly updated bank recovery and contingency plans;
  - drafting by end-December 2024 legislative changes to close gaps in early intervention, temporary administration, and resolution frameworks as set out in an updated roadmap prepared in September 2024 by the DGF and NBU in consultation with IFIs;
  - revive NBU-DGF coordination committee to improve information sharing and cooperation;
  - ensure DGF continues to have adequate financial backstops.
- NBU reinstated requirements for banks to update recovery plans; first submissions received in October.
- Based on Financial Stability Council recommendations, DGF Administrative Board approved quantum and timeframe for achieving deposit insurance target coverage ratio; maintain emergency financial backstops at least until target reached.
- NBU will align counterparty eligibility frameworks in monetary policy operations with international best practice and coordinate with lender-of-last-resort operations.

### Roles of financial safety net stakeholders during Martial Law
- Will refrain from changing allocation of roles and responsibilities of financial safety net stakeholders during Martial Law.
- DGF’s current role in safeguarding deposits and addressing insolvent banks remains essential.
- Recent actions:
  - Appointed a new Managing Director in November 2024 (in consultation with IFIs).
  - Financial Stability Council established a working group in August 2024 with NBU, MoF, and DGF representatives to review DGF governance arrangements.
    - Review covers composition of Administrative Board, DGF accountability, legal protection, decision-making structures, internal controls, and appointment procedures for Managing Director.
    - Working group to prepare legislative proposals to close gaps relative to good practice by end-March 2025.
    - New appointment procedures will engage an independent HR firm and introduce a nomination committee comprised of voting representatives and IFIs as observers.

### Strategy on state ownership in the banking sector and privatization
- Decisions will align with strategy to reduce state ownership in banking sector; any decision potentially increasing state ownership will be taken in consultation with IMF staff and limited to preserving financial stability and national security during Martial Law.
- All systemic banks with majority state ownership will fall under MOF responsibility; any non-systemic banks that come under state ownership will not be recapitalized using fiscal resources and will be transferred to the DGF for resolution upon breach of prudential requirements (Continuous Structural Benchmark).
- Key steps:
  - Prepare and implement a framework to inform decisions on additional banks coming under state control to preserve value, ensure effective operational management, and reach decisions on future of such banks.
  - Continue analysis of banking system state and wartime developments; informed by NBU resilience assessment, develop capital management plans and adjust SOBs’ business plans.
  - MoF, as SOB shareholder, instructed SOBs to maintain best practice risk appetite frameworks; NBU will assess these frameworks as a thematic review in the 2025 Supervisory Review and Evaluation Process.
  - Use independent AQR results to update general SOB strategy and strategies for individual majority public ownership banks, including privatization (in line with Financial Sector Strategy).
- Privatization preparations
  - Parliament approved a law on SOB privatization in October 2024.
  - Preparing two systemic state-owned banks for sale: Sense Bank and Ukrgasbank.
  - Plan to appoint an internationally recognized financial advisor by end-March 2025 using a transparent procedure and in consultation with IFIs.
  - Privatization of SOBs is excluded from the general privatization law.
  - Ensure SOB supervisory boards remain fully operational, including for Sense Bank; propose amendments to independent supervisory board selection process by establishing a shortlisted panel of pre-screened candidates to accommodate attrition by end-January 2025.
- Ukrainian Financial Housing Company
  - Ministry of Economy to develop a strategy in consultation with MoF, NBU and IFIs by end-June 2025 that: (i) fully considers fiscal and debt constraints, (ii) minimizes use of fiscal resources, and (iii) aligns with objectives of updated financial sector development strategy approved by the Financial Stability Council.
  - No further budget resources will be allocated to the Ukrainian Financial Housing Company in 2025 until the strategy is complete.

### Aligning market infrastructure, reporting, and regulation with international good practice
- Financial reporting
  - Restored legislative obligations to submit financial statements and audit reports for financial institutions for 2023 and for business entities located outside occupied territories for 2024.
  - NBU fully restored prudential reporting requirements for NBFIs.
  - In September 2024 restored requirements for mandatory quality control of services provided by audit companies, including verification of audit reports.
  - Expand functional capabilities of the Financial Reporting Collection Center to ensure stakeholder access to financial reports in XBRL format by end-December 2025; tasks include budgeting to integrate software systems for reporting entities, state users, and the Center platform.
- Bank capital rules
  - NBU aligned banks’ regulatory capital structure and leverage ratio calculations with EU rules.
  - With World Bank support, will close key gaps in regulatory capital requirements by end-June 2025 and other gaps thereafter; implementation to be phased.
  - NBU will prepare legislative amendments to increase banks’ minimum share capital to the equivalent of EUR 5 million by end-January 2025, with a six-month transition period for existing banks.
  - NBU will monitor conditions and relax controls and reinstate pre-war regulations when safe, based on adherence to new capital requirements aligned with EU standards, resilience assessment results, and banking system’s lending role.
- Property valuations law
  - State Property Fund (SPF), in coordination with NBU, NSSMC and IFIs, to submit to Parliament amendments by end-June 2025 to close gaps with international valuation standards.
  - By end-December 2025 propose an implementation roadmap including transitional arrangements, supportive regulation/guidance, training requirements for valuers for financial assets, and creation of a register of valuations for financial assets.
- Immovable property databases and indices
  - In March 2024 NBU and Ministry of Justice prepared a proposal to increase real estate market transparency, strengthen systemic risk analysis, and bank collateral valuations.
  - Proposal includes a publicly accessible database of real estate transaction prices with detailed metadata and residential and commercial property price indexes.
  - Ministry of Justice and NBU will implement reforms to launch databases and publish indices in September 2025.
- Virtual assets
  - NBU and NSSMC will prepare an update of legislation, with Fund technical assistance and IFI consultation, by end-February 2025 to align with international best practice while considering development goals and mitigating price and financial stability risks.
  - Regulation and supervision roles will be decided in consultation with the Financial Stability Council and the IMF.
  - Prepare a Memorandum of Understanding in consultation with IFIs defining coordination and information sharing between NSSMC and NBU by end-January 2025.
- Non-performing exposures (NPEs)
  - NBU, in consultation with IFIs, aligned definition of non-performing exposures with Article 47a and Article 178 of Regulation EU 575/2013; amendments to come into force from January 1st, 2025.
  - Will strengthen monitoring by supervisors and banks and take further steps to strengthen NPL workout capacity and revive the secondary market for NPLs, per NPL strategy approved by the Financial Stability Council.
- NBU’s status as a secured creditor
  - Will strengthen NBU's status as a secured creditor in line with the IMF's Safeguards Assessment.
  - Submit to Parliament by end-December 2024 law amendments reflecting coordinated NBU and DGF position to strengthen mechanisms for extraordinary satisfaction of NBU's claims through collateral, management, and sale of collateral.

*UKRAINE; INTERNATIONAL MONETARY FUND.*

### 62. We are fully committed to further strengthening banking supervision.

### We are fully committed to further strengthening banking supervision.

### Strengthening banking supervision and NBU reforms
- Supervisory panels
  - Implemented “supervisory panels” as a consulting body to the NBU Supervisory Committee providing additional independent review by relevant subject matter experts.
  - Conducted a survey of the effectiveness of the new supervisory panels in end-September 2024, in consultation with IMF staff, and adjusted processes accordingly.
- Transition to risk-based supervision
  - NBU will prepare and implement a supervisory risk assessment methodology to inform supervisory engagement priorities (Structural Benchmark, end-December 2024).
  - Apply the methodology to all banks and prepare a supervisory action plan by end-December 2024.
  - Adjust organizational structure for bank supervision as part of the transition to a risk-based approach.
  - Continue to develop expertise for effective supervision, including supervision of information and communications technology risks as part of operational risk.
  - Further improve professional capacity of bank supervision, including development of professional profiles and a multi-year training program for new hires.
- AML and Banking Supervision
  - Continue strengthening risk-based AML/CFT supervision of banks, payment service providers and non-bank financial institutions, particularly regarding corruption, tax crimes and illegal gambling.
  - By end-March 2025, 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 by entities regulated and supervised by the NBU are effective, dissuasive, and proportionate, in line with the FATF standards.
  - Financial sanctions applied to such entities will be established by the laws of Ukraine and the regulatory legal acts of the National Bank of Ukraine.
  - Commit to invest in building capacity of new and existing NBU staff to improve organizational performance and flexibility in the AML/CFT framework.
- Supervision of banking hybrid business models
  - Recognize growing importance of Banking-as-a-Service and other hybrid models; NBU prepared an analysis in October 2024 in consultation with IMF staff, considering risks including operational resilience, critical third parties, and AML/CFT, aligned with international standards and best practices.
  - To mitigate critical third-party risk:
    - (i) prepare a concept note on oversight of critical third-party risk and digital operational resilience by end-February 2025; and
    - (ii) develop and submit a draft law to parliament (proposed Structural Benchmark, end-May 2025). The draft will be prepared in consultation with IFIs and include measures for detection, containment, and mitigation of critical third-party risk under both going- and gone-concern conditions.
  - Entities identified as critical third parties will be subject to NBU’s fit and proper rules.
- Transfer of bank ownership
  - Ensure any future transfers of bank ownership, including following seizures during Martial Law, take place with due regard to the Law of Ukraine on Banks and Banking and following formal notification, review, and approval of the process by the NBU.

### Strengthening legal, regulatory, and supervisory framework for NBFIs and financial markets
- Legal framework and implementation timeline
  - Legislation passed: Financial Services and Financial Companies (#1953), Insurance (#1909) and Credit Unions (#3254) during December 2021–July 2023.
  - Most provisions came into force in January 2024; NBU prepared implementing regulations.
  - Rules for insurance intermediaries apply from January 2025, and Solvency II will apply from January 2027.
  - NBU and DGF plan to develop a deposit insurance framework for credit unions and a guarantee framework for life insurance companies after Martial Law is lifted and required regulations are implemented.
- Capital and reporting requirements for NBFIs
  - Increased capital requirements for financial companies came into effect in July 2024.
  - NBU developed a supervisory risk assessment methodology that distinguishes between types of NBFIs.
  - By end-December 2025, the NBU will test this methodology to refine it and transition to a risk-based approach for supervising NBFIs.
  - NSSMC will prepare draft regulation for financial intermediaries by end-June 2025 to align their capital requirements with the EU acquis; regulation to be enacted by end-December 2025 following consultation with IFIs.
- NBFI governance
  - NBU will continue to strengthen review of NBFIs and their ownership structures to ensure compliance with transparency standards and that owners meet requirements for business reputation and financial/property status.
- Payments market reforms and timelines
  - Law 3994-IX passed in October aligns Ukrainian law with PSD2 (2015/2366) and international good practice.
  - Prepared a concept note for a supervisory risk assessment methodology in August 2024 and will implement the methodology by end-December 2024.
  - Will develop reporting system; strengthen supervision capacity through hiring specialists and building analytical competence.
  - Prepared a concept note in June 2024 on regulatory requirements for person to person (p2p) and other electronic payments; will continue to introduce regulation to restrict abnormal behavior.
  - Developed a concept note in August 2024 on establishment of a public register to record card holder and merchant violations and its potential use by market participants and government agencies.
  - By end-December 2024, prepare a legislative proposal to:
    - (i) extend supervisor’s authority to limit operations of payment service providers non-compliant with regulatory requirements; and
    - (ii) establish two public registers to be used by banks: (a) persons with a high risk of payment transactions related to illegal activities, and (b) business entities to promote correct use of payments activity codes.
  - Prepare a concept note by end-December 2024 on measures to strengthen the risk-based approach by banks and non-bank payment service providers.
- Capital market regulation and IOSCO alignment
  - Following enactment of Law 3585-IX on state regulation of capital and commodity markets:
    - Conduct screening process to become a signatory of IOSCO’s multilateral MoU by end-June 2025.
    - Full implementation of other provisions of the law by end-December 2025.
  - NSSMC actions:
    - (i) propose reorganizational and operational strategy in consultation with IFIs;
    - (ii) update and implement Commission’s Employees Code of Ethics in line with international best practice in consultation with IFIs;
    - (iii) initiate an advance independent fit and proper review of NSSMC Chair and Commissioners in accordance with Article 12 of the law and disclosures made in line with the Code of Ethics and in consultation with IFIs;
    - (iv) by end-December 2024 in consultation with the NBU, take steps to ensure effectiveness of capital flow measures, including regulatory harmonization and aligning capital flow restrictions for securities operations with those applied to bank operations (proposed Structural Benchmark, end-January 2025).
  - Commission to complete the independent fit and proper review by end-March 2025.
- Related parties and legislation
  - Submitted a draft law to Parliament to strengthen supervisory powers to capture economic interdependencies and related party risks; will take necessary steps to facilitate adoption by end-March 2025.
- Insurance transparency and reporting
  - Adopted a regulation in February 2024 requiring auditors to confirm insurers have acceptable assets and to assess their value for the 2023 financial year.
  - Will assess feasibility of updating disclosure requirements for insurance and reinsurance brokers by end-December 2025.
- Strengthening NBU legal capacity and enforcement
  - NBU, in collaboration with the Ministry of Internal Affairs and the National Police of Ukraine, will propose coordination arrangements by end-June 2025 to promote more effective detection, documentation, and processing of administrative offenses related to unauthorized provision of financial and payment services.
  - In consultation with IMF staff, improve legislation regulating license revocation and liquidation procedures for non-bank financial institutions to respond effectively to critical threats to financial stability in the event of adverse court rulings regarding NBU decisions.

### Enhancing credit and financial market infrastructure
- Capital market infrastructure
  - NBU and NSSMC implemented mechanisms for foreign investors to directly access marketable debt instruments (municipal bonds and other Ukraine reconstruction-related debt instruments).
  - NSSMC, National Depositary (NDU), and NBU will target establishment of a direct link between the Central Securities Depository (CSD) and foreign CSDs by end-July 2025.
  - NBU, NSSMC, and MOF, in consultation with IFIs, will develop a targeted model for capital market infrastructure development to facilitate engagement of foreign investors by end-December 2024.
- Secondary market for government bonds
  - Largest stock exchange for domestic government bonds is undercapitalized; NSSMC agreed recapitalization terms with owners.
  - NBU and NSSMC coordinated to facilitate launching by Settlement Center, an NBU majority owned central counterparty, of contract making and clearing services for over-the-counter transactions in government bonds.
- War risk insurance system
  - Working group of the FSC finalized a draft law establishing a fully functional war insurance system.
  - NBU and the Ministry of Economy held public consultations in September and October 2024; plan to finalize and submit the draft law to Parliament by end-December 2024.
- Financial inclusion
  - War jeopardizes access to financial services for households and enterprises near conflict zones, in liberated territories, and for certain population groups.
  - Collated fresh data with World Bank using a best-efforts approach and will update financial inclusion strategy in consultation with IFIs by end-March 2025.
  - Encourage financial institutions to better meet needs of vulnerable clients and reintegrate de-occupied territories.
  - NBU prepared draft law (#12044) for a specialized and restricted banking license in July 2024 to tackle financial inclusion challenges; specialized banks will:
    - (i) be subject to the full extent of the Law of Ukraine on Banks and Banking;
    - (ii) participate in the Ukraine deposit insurance scheme;
    - (iii) have limits imposed on lending and funding operations.
  - Proposal prepared in consultation with key stakeholders and IFIs and with due regard to international good practice.
- Lending development strategy and implementation
  - Financial Stability Council approved a strategy in July 2024 to support bank lending and provide a unified policy approach to support fresh credit, including a prioritized interagency NPL resolution action plan informed by the 2023 NBU resilience assessment.
  - Strategy focuses on targeting subsidized lending instruments to key priority sectors during the war and further developing credit infrastructure to support banks’ risk management and lending decisions.
  - NBU regulation and supervision will continue to apply to institutions providing financial services to a large volume of clients.
  - NBU will prepare detailed action plans by end-February 2025 to implement the Strategy’s second (implementation) phase, including for exchange of information, protection of creditors’ rights, and tackling NPLs.
- Responsible consumer lending and credit bureaus
  - Submitted to Parliament in February a draft law on improving state regulation and the functioning of credit bureaus.
  - Will take necessary steps to facilitate adoption by Parliament by end-April 2025.
  - Will enhance supervision of credit bureaus 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
  - NBU, in consultation with IFIs and via technical assistance, will prepare a concept note by end-December 2024 setting out steps, conditions and timing needed to introduce and develop the foreign exchange derivative financial instruments (including forwards) market.

### Asset recovery, governance, and anti-corruption priorities
- Asset recovery
  - Reconfirm commitment to continue efforts to recover value from assets of failed banks and to abstain from any interference with current asset recovery strategies of the largest bank nationalized in 2016 and of the DGF.
- Governance of reconstruction
  - Post-war reconstruction strategy will meet high standards of transparency and accountability, leveraging digital technologies for the full cycle of public investment projects.
  - Develop a single digital ecosystem for PIM based on updated Ministry of Economy’s Prozorro procurement system, Ministry of Finance’s IT systems, the Digital Restoration EcoSystem for Accountable Management (DREAM), and other systems and registries.
  - Comprehensive audits and performance audits of selected projects, with timely publication of audit reports, will be key features; integrate mechanisms to prevent and identify corruption risks and refer cases to anti-corruption institutions.
  - NABU and the State Agency for Restoration and Development will continue cooperation and exchange of information per memorandum of understanding.
- Strengthening audit institutions
  - Enact a law enhancing independence, mandate and effectiveness of the Accounting Chamber of Ukraine (ACU) to fulfill constitutional oversight in line with INTOSAI standards (Structural Benchmark, end-December 2024).
  - Law will, in particular:
    - (i) enhance independence including strengthening selection process for new ACU members with decisive vote of independent experts with international experience and improve dismissal procedures;
    - (ii) establish that ACU has a minimum of 11 members;
    - (iii) enable ACU to select scope of audits free from direction or interference and to have full and timely access to all relevant information and databases;
    - (iv) empower ACU to exercise external audit function on all public funds (including local governments, SOEs and off-budget funds);
    - (v) establish formal legislative procedures for reviewing and monitoring external audit reports and following up on audit recommendations with commensurate financial and technical resources; and
    - (vi) establish a periodic peer review mechanism by independent experts with international audit experience for ten years from enactment of the law.
  - Enacted law expected to continue requiring ACU to independently determine priority tasks and funding requirements and submit proposed budget to the Ministry of Finance during preparation of the budget declaration and state budget; unresolved disagreements to be submitted to Parliament with justification and calculations, with final decision by the Verkhovna Rada Budget Committee.
  - Rada approved a draft law on October 30. Commit to start selection process for six vacant ACU members and have full membership in line with timelines provided in the law.
- Anti-corruption and rule of law
  - Reform agenda aims to effectively combat corruption, sustain public confidence in rule of law, and advance towards EU membership.
  - Remain committed to preserving independent, competent, and trustworthy institutions to combat high-level corruption and preventing any backtracking on progress made.

*Source: 1ukrea2024004-print-pdf - 62. We are fully committed to further strengthening banking supervision.*

### 69. We remain committed to strengthening the effectiveness of anti-corruption

### We remain committed to strengthening the effectiveness of anti-corruption institutions.

### Strengthening corruption-investigation procedures and legal certainty
- Amendments to the Criminal Procedural Code will be enacted to:
  - enable the Prosecutor General to delegate to the SAPO the management of extraditions and mutual legal assistance requests in relation to corruption investigations;
  - remove the mandatory dismissal of pre-trial investigations due to the lapse of time limits of pre-trial investigation after notice of suspicion;
  - upon expiration of the timelines and motion of the defendant or affected parties, enable the investigating judge to compel in a timely manner the prosecutors to decide on the pre-trial investigation (either close the proceeding or complete the pre-trial investigation), or reject the motion (Structural Benchmark, end-December 2024).
- Provide full legal certainty in terms of legal regulation and determination of the timelines of pre-trial investigation after notice of suspicion has been filed.

### NABU external audit and operational capabilities
- The 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-February 2025).
  - Terms of reference and criteria and methodology approved by the commission were published in November.
  - The audit report will include clear, reasoned, and evidence-based conclusions as well as prioritized recommendations on the effectiveness of NABU and its operational and institutional independence.
- Ensure that NABU by end-July 2025 has access to independent and competent forensic experts to enable effective investigation of complex corruption schemes.
- NABU and law enforcement agencies have finalized a memorandum of understanding on the implementation plan in the post-Martial Law period to provide resources, equipment and technological solutions for NABU to independently intercept communications of landlines and mobile devices (implementation of law empowering NABU to intercept communications).

### Corporate criminal liability and SAPO audit
- Enact by end-January 2025 a law to enhance corporate criminal liability to support accession to the OECD Anti-Bribery Convention.
  - The law will be applicable to private and public legal entities either resident or non-resident in Ukraine and covering, among others, domestic corruption offenses, and consistent with international standards.
- Commit to conduct an external independent audit of SAPO and publish the audit report consistent with the two-year period provided in the December 2023 amendments to the SAPO law.

### Asset declarations, PCIE, and HACC appointments
- Since restoration of public access to asset declarations in January 2024, the National Agency for Corruption Prevention (NACP) continues to monitor and verify them on a risk-based approach to prevent and mitigate corruption risks in procurement, particularly for recovery and reconstruction.
- Initiated nomination and appointment process for new members of the Public Council of International Experts (PCIE) to vet candidates for 24 new vacancies to the High Anti-Corruption Court (HACC): 15 vacancies at first instance and 9 vacancies at appellate levels.
  - A law enacted in November extends PCIE’s mandate to complete selection of all 24 vacancies for HACC judges.
  - Ensure open and competitive selection and adequate provision for staffing and office needs for new HACC judges.

### AML, UBO, and transparency in procurement
- NBU steps to ensure risk-based implementation of AML tools:
  - Following August 2024 NBU guidance, financial institutions and covered non-bank institutions are implementing a risk-based approach to politically exposed persons and are being monitored by the NBU for compliance within the risk-based supervisory approach.
- Improve effectiveness of the ultimate beneficial ownership (UBO) regime:
  - By end-December 2024, the Ministry of Justice will enhance the operational framework for obtaining adequate, accurate and up-to-date UBO information to enhance transparency in public procurement, detect conflicts of interest, and prevent misuse of companies.

### Rule of law and the High Public Disputes Court (HPDC)
- Enact a law to establish the High Public Disputes Court (HPDC) with first instance and appellate chambers to hear administrative cases against national state agencies (e.g., NBU, NABU, NACP) by judges vetted for professional competence and integrity using decisive and crucial vote of independent experts with international experience following the PCIE model (Structural Benchmark, end-December 2024).
  - HPDC will have authority over cases belonging to the competence of the liquidated Kyiv District Administrative Court related to appeals of acts of state agencies with nationwide authority, and administrative cases against procedures of selection commissions and external audit commissions that include independent experts (such as NACP, NABU, and SAPO).
  - The PCIE model will be leveraged to assess integrity of HPDC candidates.
  - Swift operationalization through appointment of a minimum number of judges within the law’s timelines will enable independent adjudication of administrative cases against national state agencies.

### Corporate governance in SOBs and SOEs
- State-owned banks (SOBs):
  - Review framework for setting and paying remuneration to Senior Management of all SOBs by end-December 2024 in consultation with IFIs, guided by principles that remuneration should be internationally competitive, consistent, proportionate to functions, duties, responsibilities, consider part-time nature of roles and Martial Law restrictions.
  - Implement a procedure for conducting performance assessments for all SOBs in 2025.
    - The first performance assessment will be conducted by the MoF for each of the banks in end-July 2025.
    - In December 2025, the MoF will publish key findings of its first annual assessment, together with the CMU’s proposed actions to address the findings.
- State-owned enterprises (SOEs):
  - Implement law #3587-IX on SOE corporate governance, including developing secondary legislation to operationalize SOEs’ financial planning processes and required financial indicators designed with IMF TA, consistent with the gatekeeper role of the MOF to limit quasi-fiscal risks.
    - CMU approved regulation for the financial indicators in August 2024 (No. 984).
    - Review financial indicators at the latest in early 2027 before the next SOE financial planning season in 2028, and adjust via CMU resolution if necessary.
  - Revamp nomination process and independent evaluation procedure for SOE supervisory board activity consistent with OECD standards.
  - Commit to review Resolution 777 guiding appointment procedures for independent supervisory board members in SOEs by September 2025 in consultation with Fund staff and international partners.
  - Advance energy corporate governance reforms:
    - Complete formation of the full supervisory board of Ukrenergo (7 members) with independent members in the majority (Structural Benchmark, end-December 2024).
    - Launch an independent evaluation of supervisory boards of GTSO, Naftogaz and Ukrenergo in January 2025 and conclude and publish it by end-March 2025.
  - SOE reform sequencing and actions:
    - Implement related secondary legislation for #3587-IX, establish methodology and conduct regular independent evaluations of SOE supervisory board activity;
    - Assess financial conditions and fiscal risks of SOEs in the state ownership policy (SOP);
    - Produce comprehensive SOP, dividend policy and privatization strategy (Structural Benchmark met).
    - Implement SOP and State Dividend Policy by: classifying SOEs of strategic importance; implementing framework for privatizations; preparing a concept of consolidated SOE management; finalizing legislation for mandatory supervisory boards and evaluation of their activity; establishing financial statements in accordance with IFRS subject to appropriate phase-in; and implementing SOE information disclosure and SOE remuneration policy (not applicable to SOBs).
    - Commit to review the SOP by December 2025.
    - Assess financial viability of key SOEs as input to framework to deal with quasi-fiscal costs, including legacy Public Service Obligations (PSOs) with IMF TA support.

### Energy sector priorities and commitments
- Immediate priorities:
  - Mitigate adverse impact of the war on the energy sector, repair generating capacity, ensure sufficient electricity provision for the winter heating season, and enhance resilience (including decentralized energy generation and Green Transformation) with an independent energy regulator.
  - Affected companies rely on working capital for repairs; donor support continues; additional donor financial assistance needed for repairs and decentralized electricity generation support programs.
  - Expanded role of 5-7-9 and the BDF to support the energy sector and implementation of SOB energy support lending programs.
- 2024/25 heating season and gas imports:
  - Do not plan additional gas imports for domestic consumption under the baseline; additional gas could be stored by non-residents for EU country needs.
  - If gas imports are needed, Naftogaz has secured additional financing for gas imports from the EBRD and bilateral donors.
  - If Naftogaz faces a liquidity shortfall, amount of PSO compensation in 2025 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 2025.
  - Potential spending pressure from gas imports and PSO compensation will be accommodated through an adjustor on fiscal balance targets, subject to the above assessment, stock of arrears of District Heating Companies (DHCs) based on a desk audit, available financing, and capped at UAH 60 billion (about 0.8 percent of GDP).
- Post-war and market reforms:
  - Potential measures, once conditions allow, include additional gradual tariff increases (subject to a new tariff methodology and social considerations), external financing, and transparent and exceptional direct budget support to energy SOEs pending available budgetary resources.
  - CMU will adopt a roadmap for gradual liberalization of gas and electricity markets within 6 months after the end of Martial Law, 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, in coordination with the European Commission.
- GTSO and transmission industry adjustments:
  - Updated strategies seek to rightsize the system and identify alternative sources of gas supply to prepare for zero-transit situation when the transit contract expires at end-2024.
  - Draft law #11083 (adopted in late August) allows for a special regime of operations for GTSO to reduce operational expenditures and maintenance for non-critical gas transmission purposes.
  - Plans to install gas turbines for electricity generation continue.
  - Adjusted transmission tariffs for 2025 should factor in GTSO’s financial situation in the new zero-transit environment.
- NEURC independence and accountability:
  - Amendments in #3915-IX exempt regulatory decisions by NEURC from state registration procedure (Structural Benchmark, met) and implement Article 5 of the Law of Ukraine ‘On the NEURC’ prohibiting state bodies from interfering with NEURC’s activities.
  - Appointed two new NEURC Commissioners based on competition in line with the Law of Ukraine ‘On the NEURC.’
  - Commit to develop an accountability framework enshrining regular external assessments of NEURC’s governance and independence frameworks in law; such assessments will be requested by NEURC to the Energy Community Secretariat.
  - The first external assessment of NEURC will be finalized and published by October-2025 (proposed Structural Benchmark, October-2025).
  - Ensure NEURC has sufficient staff to take on expanded mandate such as REMIT implementation in line with EU regulations and support energy decentralization plans.

*Source: IMF staff summary of the content unit.*

### 80. We have completed the review of arrears and debts of District Heating Companies

### 1ukrea2024004-print-pdf - 80. We have completed the review of arrears and debts of District Heating Companies

### Review of arrears and debts of District Heating Companies (DHCs)
- Structural Benchmark (end-October): Met.
- A desk review was conducted by a reputable audit firm to:
  - Clarify the stock of arrears and the financial situation of DHCs.
  - Identify drivers of the arrears’ accumulation.
  - Separate arrears until and after February 2022 (as part of the desk review scope).
- Timing: Completed ahead of the 2024/25 heating season.
- Policy approach:
  - The authorities will tackle arrears and debt comprehensively once war-related pressures on the budget subside by developing a new tariff methodology with cost-reflective tariffs.

### Program monitoring and conditionality
- Program monitoring mechanisms:
  - Quarterly reviews via quantitative performance criteria (PCs), indicative targets, and structural benchmarks.
  - Continuous performance criterion (PC) on the non-accumulation of external payments arrears and standard continuous PCs.
- Commitments:
  - Provision to IMF staff of all data needed for adequate monitoring, including as detailed in the attached TMU.
- Review schedule (as stated):
  - The Seventh, Eighth and Ninth Reviews are expected to take place on or after March 1, 2025, June 15, and August 31, respectively, based on quantitative performance criteria for end-December 2024, end-March 2025, and end-June 2025, respectively, and corresponding structural benchmarks.

### Key quantitative performance criteria and indicative targets (selected figures)
- Units: end of period; millions of Ukrainian hryvnia, unless indicated otherwise.
- Selected QPCs and targets presented (as in Table 1):
  - Floor on the non-defense cash primary balance of the general government, excluding budget support grants:
    - Proposed QPC values listed include 368,3130, 368,313, 650,954 (status: Met), 415,410, 415,410, 254,800, 254,800, 546,800, 547,200, 751,000, 752,400, 822,000.
  - Floor on tax revenues (excluding Social Security Contributions):
    - 1,398,6000, 1,398,600, 1,527,903 (Met), 2,042,250, 2,042,250, 485,000, 485,000, 1,019,600, 1,019,600, 1,622,200, 1,622,200, 2,491,045.
  - Ceiling on publicly guaranteed debt:
    - 47,900, 13,718, 61,618, 22,667 (Met), 47,900, 47,900, 62,860, 62,860, 62,860, 64,357, 62,860, 64,357, 64,357.
  - Floor on net international reserves (in millions of U.S. dollars):
    - 28,800-4,435, 24,365, 24,988 (Met), 26,300, 26,300, 23,800, 24,300, 24,800, 24,800, 23,000, 23,000, 23,000.
- Selected Indicative Targets and Memorandum items (as in Table 1):
  - Ceiling on general government arrears: 1,8000, 1,800, 1,687 (Met), and repeated 1,800 across periods.
  - Floor on social spending: 390,0000, 390,000, 427,680 (Met), 537,800, 537,800, 135,000, 132,000, 270,000, 271,200, 410,000, 414,000, 560,900.
  - Ceiling on general government borrowing from the NBU: 000-33 (Met), 00-984-984-4,100-4,100-1,500-1,500-6,500.
  - External project financing (in millions of U.S. dollars): 271......271...1,4961,4961911915725721,1441,1441,906.
  - External budget financing (in millions of U.S. dollars): 21,310......21,310...35,36735,3679,1059,10519,28219,28227,28027,28035,813.
  - Budget support grants (in millions of U.S. dollars): 6,556......6,556...10,01210,0124294299659651,2861,2861,608.
  - Budget support loans (in millions of U.S. dollars): 14,754......14,754...25,35525,3558,6778,67718,31818,31825,99425,99434,206.
  - Interest payments: 284,320......284,320...429,820429,82086,70086,200244,800244,600366,600366,100488,800.
  - NBU profit transfers to the government: 38,000......38,643...38,00038,0000063,86163,90063,86163,90063,900.
  - Cash balance of the general government, excluding budget support grants, treasury report at current exchange rates (- implies a deficit; in billions of Ukrainian hryvnia):
    - -1,046.6......-969.4...-1,741.1-1,850.4-342.4-342.1-719.0-718.4-1,146.9-1,146.0-1,710.4.

### Structural benchmarks (selected entries and status)
- Total list of structural benchmarks summarized in Table 2; selection below focuses on items directly relevant to fiscal, energy, and governance reforms:
  - 1 Enact the second supplementary Budget 2023 — Fiscal — End-April 2023 — Met.
  - 6 Prepare a conditions-based strategy to move to a more flexible exchange rate, ease FX controls and transition to inflation targeting — Monetary and Exchange Rate — End-June 2023 — Met.
  - 21 Based on findings of the revenue working group, prepare short-term revenue measures (tax and non-tax) with yields of at least 0.5 percent of GDP ready to be included in budget 2024 — Fiscal — End-February 2024 — Met.
  - 24 Adopt a new law on the ESBU that has a clear mandate and scope for investigative powers … — Fiscal — End-June 2024 — Met.
  - 31 Analyze the debts and assess financial conditions of District Heating Companies (DHCs) through a desk review by a reputable audit firm, including by separating arrears until and after February 2022 — Energy — End-October 2024 — Met.
  - 32 To ensure NEURC’s functional independence, adopt amendments to the law #3354-IX to exempt regulatory decisions by NEURC from the state registration procedure — Energy — End-December 2024 — Met.
  - 33 Produce a SOE state ownership policy, dividend policy and privatization strategy — SOE Corporate Governance — End-October 2024 — Met.
  - 40 All systemic banks with majority state ownership will fall under the responsibility of the MOF, and any non-systemic banks that come under state ownership will not be recapitalized using fiscal resources and will be transferred to the DGF for resolution upon breach of prudential requirements — Financial Sector — Continuous.
  - 51 Enact the tax package (Law #11416-d) — Fiscal — Prior Action — Met.

### Technical Memorandum of Understanding (TMU) — selected definitions and protocols
- Purpose:
  - Sets out understandings between Ukrainian authorities and IMF staff regarding definitions of variables subject to targets for the Extended Arrangement under the EFF.
  - Describes methods to be used in assessing program performance and information requirements for monitoring targets.
- Exchange rates for program accounting (kept fixed over the program period):
  - 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):
    - 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.
  - Note: These accounting exchange rates are kept fixed; the program exchange rate may differ from the actual exchange rate set in Ukraine’s foreign exchange market.
- General government definition for program purposes:
  - Comprises the central (state) government, including the road fund, all local governments, all extra budgetary funds including the Pension and Unemployment Funds of Ukraine, and special accounts which provide resources to key spending units.
  - Budget of the general government comprises: (i) the state budget; (ii) all local government budgets; and (iii) if not already included in (i), 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.

*Source: Excerpt from 1ukrea2024004-print-pdf (pages provided).*

### 5. For program purposes, the definition of debt is consistent with paragraph 8(a) of the

### 5. For program purposes, the definition of debt is consistent with paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements

### Definition of debt (paragraph 8(a))
- Debt: a current, i.e., not contingent, liability created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, which requires the obligor to make one or more payments in the form of assets (including currency) or services at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract.
- Primary forms of debt:
  - i. Loans: advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements).
  - ii. Suppliers’ credits: contracts where the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided.
  - iii. Leases: arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For these guidelines, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair, or maintenance of the property.
- Arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt.
- Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

### Other program definitions and inclusions
- Gross Domestic Product: 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 (paragraph 7, Table B):
  - a. Budget support loans and grants: unearmarked financial support provided to the government of Ukraine for general government financing. Budget support grants are recorded in the general fund of the government’s fiscal accounts. These include financing from official multilateral creditors (e.g., World Bank, European Commission) and official bilateral creditors.
  - b. Project support loans and grants: earmarked financial support provided to the government of Ukraine for financing specific projects and appear as part of government financing. These include financing from official multilateral creditors (e.g., European Investment Bank, World Bank Group and European Bank for Reconstruction and Development) and official bilateral creditors.
- Defense expenditures: include expenditures of the defense and security sector pursuant to the articles of the Law of Ukraine “On National Security of Ukraine”, covering total amounts of all current (including goods and services, wage bill, social payments, etc.) and capital expenditures; 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; revenues received by budgetary institutions as payment for services, works, targeted activities, grants, gifts, charitable contributions, proceeds from sale of products or property and other activities in the prescribed manner.
- Proceeds of sales of confiscated Russian assets or bank account balances (including those directed toward the Fund for the Liquidation of the Consequences of the Armed Aggression): 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 as the amount of payments due on the 30th day after the deadline for mandatory payment per Order of the Ministry of Finance No. 372 dated April 2, 2014. If payment deadline not specified, arrears count from the 30th day after confirmation of goods received, works done, and/or services rendered.
  - a. 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 based on the 30-day rule. Information on arrears in the security and defense sector can be presented in aggregated form, considering Martial Law specifics.
  - b. Wages: all forms of remuneration for work performed for standard and overtime work in all subcategories, including defense and security service.
  - c. Arrears of social funds (Pension and Unemployment Fund of Ukraine): arrears with regard to all insurance benefits of these funds measured as 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) — definition and components
- NIR of the NBU: 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: all readily available claims on nonresidents denominated in convertible foreign currencies, consistent with the Balance of Payments Manual (Sixth Edition) and the Special Data Dissemination Standard (SDDS) (Table 6.1, item A).
  - Exclusions from usable reserves include, inter alia:
    - a. any assets denominated in foreign currencies held at, or which are 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.
    - b. any precious metals or metal deposits, other than monetary gold and gold deposits, held by the NBU.
    - c. 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 (in so far as not already included in foreign liabilities, or excluded from reserve assets); or (iii) frozen.
    - d. 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 (this refers to the notional value of the commitments, not the market value);
  - 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.

- Table A (components on NBU balance sheet and memorandum accounts): international reserves items and short-term liabilities listings as specified (account codes in source).

### NIR adjustors (summary)
- NIR targets will be 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 will be adjusted downward by the full amount of the cumulative shortfall in net issuance (gross issuance minus redemption and interest payments) of central government’s domestic foreign exchange securities relative to the amounts expected under the baseline (Table C).
- Symmetric adjustor for swaps:
  - If the NBU converts any non-reserve currency provided under a central bank swap agreement into a reserve currency through an outright sale, NIR targets will be adjusted upward by the amount converted into a reserve currency at the time of conversion; NIR targets will be adjusted downward by the amount of a reserve currency (both principal and interest due) when the NBU repays the non-reserve currency provided under a central bank swap agreement.
  - If the NBU requests use (draws) any reserve currency provided under a central bank swap agreement with maturity over 1 year, NIR targets will be adjusted upward by the amount used with maturity over 1 year and adjusted downward when the NBU repays these amounts.

### Table B: Gross Disbursements from IFIs and Official Sources (Cumulative in USD millions, at program exchange rates)
- 2024 (Flows in USD million, cumulative from January 1, 2024 for 2024):
  - Total official support: 36,864 9,296 19,854 28,424 37,720
  - Budget support: 35,367 9,105 19,282 27,280 35,813
  - Loans: 25,355 8,677 18,318 25,994 34,206
  - Grants: 10,012 429 965 1,286 1,608
  - Project support: 2/ 1,496 191 572 1,144 1,906
- Notes:
  - Prospective IMF disbursements under the EFF are excluded.
  - Totals differ from Ukrainian authorities' projections under the budget due to different exchange rate assumptions.
  - 2/ Project support is in the form of loans.

### 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 (2024): 179 -48 -73 -103 -119
- Gross issuance (2024): 3,692 1,014 1,463 2,787 3,499
- Repayment (2024): 3,513 1,062 1,536 2,890 3,618
- Redemption (2024): 3,342 1,014 1,463 2,787 3,499
- Interest (2024): 171 48 73 103 119
- Note: Flows in USD million, 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.
  - Changes exclude securities acquired as collateral under loans provided by the NBU during the measurement period, and loans exclude those to the Deposit Guarantee Fund.
  - Change measured relative to the stock as of end of the preceding quarter and adjusted for exchange rate valuation effects using program exchange rates. For the Sixth Review, the preceding quarter is June 2024 and the latest as of assessment is September 2024.
  - Detailed breakdown of the accounts will be provided in a format agreed with IMF staff.
- Preconditions:
  - Additional precondition for activating monetary financing is the drawing down of government deposits (consistent with paragraph 50 of the MEFP), underpinned by a framework mutually agreed between the MOF and NBU in consultation with the IMF, and for which an NBU resolution has been adopted in September 2024.

### Adjustors for the ceiling on borrowing (paragraphs 17–18 and Table D)
- Adjustors apply if both conditions are met:
  - (i) shortfall in external financing defined as any shortfall of the financing listed in Table B; and
  - (ii) primary issuances on government bonds during the 3-month period prior to the request for monetary financing exceed percentage thresholds of actual redemptions over the same period listed in the first line of Table D (132 percent for the target date in 2024 and 123 for the target dates in 2025).
- If both verified, 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 (September 30, 2024, and December 31, 2024 for the 2024 targets; and March 31, 2025, June 30, 2025, September 30, 2025 and December 31, 2025 for the 2025 targets) and is not carried over between quarters.
- The amount of the shortfall in external financing is assessed as the total cumulative shortfall from end-December 2023 for 2024 targets, and end-December 2024 for 2025 targets, and is measured on the last day of the previous month.
- In cases where the 15-business-day interval for reaching agreement and making payments falls past the relevant test date, the ceiling will be subject to an automatic upward adjustor by the amount of the payment.

- Table D (Adjustors for the Ceiling on General Government Direct Borrowing from the NBU, in UAH billion):
  - For test dates in 2024 (Dec 31, Mar 31, Jun 30, Sep 30, Dec 30):
    - Actual rollover rate on three month period prior to requesting monetary financing: 132 123 123 123 123
    - 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): 50.0 49.0 45.9 48.5 43.5
    - Memo: Projected redemptions (in UAH billions), as of November 16 2024: -139.5 -130.3 -137.7 -170.9 -123.2

### 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 20 below, adjusted by the amount of budget support grants (Table B) recorded above the line in non-tax revenues.
  - The balance is 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 20): overall cash balance measured by net financing flows excluding valuation changes:
  - Total net treasury bill sales (in hryvnias and foreign currency) as per NBU registry of treasury bill sales (net treasury bill sales defined as cumulative total funds realized from sales of treasury bills at the primary auction and government securities issued for recapitalization of banks and state-owned enterprises (SOE), less cumulative total redemption of principal on treasury bills). Treasury bill issuances and redemptions 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 NBU monetary statistics (all non-treasury bill financing in either domestic or foreign currency extended to the general government by banks less the change in all government deposits in the banking system) and any other financing extended by entities not reflected by NBU monetary statistics.
  - Total receipts from privatization (including change in the 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.
  - The change in sub-accounts 3551 and 3559 for pre-payments ahead of the delivery of goods and services.
  - The 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.
  - The 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 97 of this TMU).
  - The net sales of SDR holdings in the IMF’s SDR department.
  - The 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: Excerpts from the technical memorandum (content unit provided).*

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

### 1ukrea2024004-print-pdf - 21. For the purposes of measuring the balance of the general government, all flows to/from the

### Measurement of General Government Balance and Cash Flows
- 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.
- Exceptions: external disbursements and amortizations of municipal governments and commercial bank direct credit are accounted for at current exchange rates.
- 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.
- Project support disbursements will not be adjusted for the return of funds from under-executed projects.

### D. Floor on Non-Defense Cash Primary Balance of the General Government Excluding Budget Support Grants (Quantitative Performance Criterion)
- Definition:
  - Non-Defense Cash Primary Balance (excluding budget support grants) = Overall Balance of the General Government excluding budget grants (defined in section C) less interest payments (total interest paid on domestic and external debt, consistent with budget treasury codes 2410 and 2420, respectively) 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 for Balances in Parts C and D
- Upward adjustor: full amount of any increase above the projected stock of budgetary arrears (overdue account payables) in state budget and social funds (definition excludes domestic arrears in territories that are or were in direct combat zones and temporarily occupied by Russia).
- External budget support loans shortfall: if cumulative proceeds from external budget support loans (in hryvnia evaluated at program exchange rates) fall short of projections, the floor on the consolidated general government balance will be adjusted downward by the full amount of the shortfall.
- Downward adjustor: full amount of government bonds issued for 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.
- Upward adjustor: full amount of profits transferred by the NBU in excess of UAH 38 billion for all remaining test dates in 2024, UAH 0 billion for end-March 2025, and UAH 63.9 billion for the remaining test dates in 2025.
- Downward adjustor (energy-related): to accommodate gas purchases, PSO compensation and transfer to GTSO up to a cumulative maximum amount of UAH 60 billion in 2024 and UAH 0 billion in 2025, conditional upon availability of financing.
- Downward adjustor (confiscated assets and bank accounts receipts): for test dates in 2024, automatic downward adjustor up to a cumulative maximum amount of UAH 23.7 billion corresponding to receipts from sales of confiscated Russian assets and transfers of bank accounts; for test dates in 2025 the cumulative maximum downward adjustment is UAH 0 billion.
  - This amount reflects the balance of the Fund for the Liquidation of the Consequences of the Armed Aggression, which stood at UAH 7 billion as of October 1, 2024.
  - For the period of Martial law, data from territories that are or were in direct combat zones and temporarily occupied by Russia are excluded from the adjustor.

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

### F. Floor on the General Government Social Spending (Indicative Target)
- Definition: social spending of general government = spending on social programs through the General Fund and Special Funds; covers categories 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.
- Indicative Target: set in hryvnias on a cumulative basis starting January 1st of each calendar year.

### G. Ceiling on the General Government Domestic Arrears (Indicative Target)
- Definition and reporting: derived from paragraph 11 of this TMU and reporting format in paragraph 81 of this TMU (excluding arrears of local governments).
- Coverage: arrears of the state budget (general and special funds) and social funds (as defined in paragraph 11).
- Target: cumulative starting January 1st of each calendar year; the stock of arrears measured in that way will not exceed the stock of arrears at end December 2022.
- Exclusion: arrears accrued in territories that are or were in direct combat zones and temporarily occupied by Russia as of the applicable test date are not covered.

### H. 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 not paid when due in accordance with contractual terms (taking into account contractual grace periods).
- Exclusions: arrears on external financial obligations of the government subject to rescheduling are excluded.
- For this PC, “external” = debt payments to non-residents.

### I. Ceiling on Publicly Guaranteed Debt (Quantitative Performance Criterion)
- Applicability: ceiling applies to guarantees issued by the central (state) government once underlying debt is disbursed.
- Ceilings:
  - For test dates in 2024: ceiling set at UAH 47.9 billion.
  - For test dates in 2025: ceiling set at UAH 62.86 billion.
- Basis: ceiling consistent with 3 percent of current year revenues of the state budget general fund (as defined in the Budget Code); applies to cumulative amount of guarantees issued by the central (state) government from January 1st of 2024 calendar year including guarantees to priority sectors.
- Exchange rates: program exchange rates apply to all non-UAH denominated debt.
- Exclusion: guarantees for NBU borrowings from IMF are excluded.

Adjustor for publicly guaranteed debt:
- Automatic upward adjustor for guarantees signed for selected projects financed by multilateral and bilateral donors (e.g., WB, EIB, EBRD, KfW).
- For test dates in 2024, listed eligible projects include (i) loan to UGV to purchase equipment for gas extraction; (ii) loan to Naftogaz for additional procurement of natural gas; (iii) loan to Ukrhydroenergo for emergency restoration of hydropower plants; (iv) working capital loan to Ukrenergo; (v) loan for Boryspil International Airport for reconstruction of flight zone 2; (vi) loan to Urkhydroenergo for recovery equipment; (vii) loan to Urkhydroenergo for installation of energy storage.
- Caps:
  - 2024 adjustor capped at UAH 38.7 billion and discussed in program reviews.
  - 2025 adjustor capped at UAH 115 billion; projects subject to the 2025 adjustor will be discussed in subsequent program reviews.

### J. 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;
  - (iv) impose or intensify import restrictions for balance of payments reasons.

### II. Official Exchange Rate
A. Determination of the Official Exchange Rate
- UAH/USD 36.5686 as set by the NBU, effective 9am on July 21, 2022, until October 3, 2023.
- Since October 3, 2023, NBU transitioned to managed flexibility: official exchange rate against USD determined based on series of transactions in the interbank FX market.
- De jure exchange rate arrangement: floating.
- De facto arrangement: reclassified from stabilized to floating, effective October 3, 2023.
- Methodology since October 3, 2023:
  - NBU sets official hryvnia/US dollar exchange rate daily at the weighted average rate determined based on interbank market transactions using a two-stage cut-off system for transactions with extreme parameters.
  - To calculate the official exchange rate, NBU uses information on all tod, tom, and spot (T+2) USD purchase/sale transactions with a volume of USD 100,000 to USD 5 million inclusive between banks and between banks and the NBU, reported to the NBU via trade information systems before 3 p.m. on the same day.
  - Official exchange rates for other currencies determined by NBU on the basis of the official exchange rate against USD and cross rates of the relevant foreign currencies.
  - Official exchange rates 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.
  - Some foreign currencies have official exchange rates set by NBU on a monthly basis.

### III. Reporting Requirements
A. National Bank of Ukraine (NBU) reporting obligations to the IMF
- Timing and formats:
  - Monthly sectoral balance sheets for NBU and other depository corporations (banks) per SRFs: no later than the 25th day of the following month (SRFs for end of reporting year: no later than the 41st day after the reporting year).
  - Weekly: daily operational data on stock of net and gross international reserves at actual and program exchange rates, and full breakdown of NBU accounts included in net international reserves; any additional information needed for IMF monitoring.
  - Monthly (no later than the 21st of the following month): balance data on 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: information on 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.
  - Daily: information on official foreign exchange interventions and intervention quotations in the breakdown agreed with IMF staff, including results of any foreign exchange auctions.
  - Weekly: information as agreed with IMF staff on indicators of FX interventions approved by the NBU Board and related computations.
  - Immediate notification to IMF of any updates to FX interventions methodology documentation and any decisions defining indicators of FX interventions.
  - Daily: information on 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.”
- Government securities and auctions:
  - NBU will continue to provide on its website daily holdings of domestic government securities and information on primary auctions and secondary market sales.
  - Provide IMF daily holdings of government securities broken down by type of holders at primary market prices at the rate fixed on the day of auction; information on 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; and 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 secondary market treasury bills (including over-the-counter transactions and breakout for any NBU transactions).
- Financial statements and profit distribution:
  - Provide financial statements (income and expenses, balances on the general reserves and calculations of 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.
- NBU operations and collateral:
  - Daily and monthly data on NBU financing operations (including swaps or refinancing) of Ukrainian banks, and operations of mopping up (absorption) of liquidity (including through 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 settlement and maturity dates), and collateral pools, broken down by asset types and securities (with values before and after haircuts).
  - Monthly reporting to separately identify which banks are under temporary administration or liquidation.
- Financial Soundness Indicators (FSIs) and depository corporations surveys:
  - Monthly, not later than 30 days after reporting month (end-of-reporting-year data: no later than the 41st day): core FSIs for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group, as defined in the IMF Compilation Guide.
  - Daily and monthly, not later than the 25th day after termination of the report month (end-of-reporting-year data: no later than the 41st day): depository corporations surveys, including domestic claims (including NBU loans and liabilities with banks) and detailed information on banking sector loans to general government, broken down by central (state) government, local budgets and DGF, in national and foreign currency, by loan and by security; balances of government funds held at the NBU (Single Treasury Account account 3240 L and Treasury foreign currency account 3513 L) and DGF; computation of Target on General Government Borrowing from the NBU in format agreed with IMF staff based on monthly reporting data.
- External liabilities and arrears:
  - Monthly: projections for external payments falling due in the next 12 months.
  - Quarterly (within 80 days following the end of the quarter): data on actual settlement of external obligations, reflecting separately principal and interest payments and actual outturns for both public and private sectors.
  - Quarterly: stock of short- and long-term external debt for both public and private sectors.
  - Continuous reporting: information on the stock of external arrears.
- Foreign exchange transactions and e-limits:
  - 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 benefit 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 orders of physical persons; data on sales and purchases of foreign exchange cash by individuals (including 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.
  - Monthly: 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.

*Source: Excerpt from TMU provisions in 1ukrea2024004-print-pdf.*

### 44. T

### 44. T

### NBU — Daily, Weekly, and Monthly Reporting Requirements
- Daily reporting to the IMF:
  - Foreign assets and liabilities of the overall banking system (excl. the NBU).
  - Banks’ open foreign exchange positions by main groups of banks.
  - Deposits on an 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 an aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities and by national and foreign currency.
  - Deposits and credits on an aggregated basis 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.
  - Aggregated data on main currency flows, including government foreign receipts and payments by currencies and interbank market operations by currencies; daily information on exchange market transactions including the exchange rate.
  - Bank-by-bank data for the largest 35 banks on the 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), and deposits from customers.
  - Bank-by-bank data for State Participation Group, Foreign Banking Group, and Private Capital Group banks: total assets and liabilities; loans and claims (by households, legal entities, and banks); foreign exchange net open position. Data reported by domestic and foreign currency; deposits by households and legal entities and by maturity (current accounts, saving accounts, and time deposits).
- Weekly reporting to the IMF:
  - 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.
  - Weekly reporting (with Ministry of Finance/NBU cooperation): face value of government bonds redeemed and face value of government bonds placed during the week.
  - Average interest rate on interbank borrowings on a weekly basis after Martial Law is cancelled (by domestic and foreign currency, and by maturity—overnight, 1–7 days, and over one week).
- Monthly reporting to the IMF:
  - 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).
  - 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.
  - Reserve requirements at the individual bank level, including breakdown between reserve requirements fulfilled by reserves and that by government securities.
  - 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, and non-financial corporations and households, and by maturity—demand and time accounts).
  - Risk-weighted assets and other risk exposures (for calculation of capital adequacy ratios); regulatory capital, Tier 1 capital, Common Equity Tier 1 (CET1) capital, Tier 2 capital; regulatory capital adequacy ratios (НРК); Tier 1 capital adequacy ratio (НК1); CET1 capital adequacy ratio (НОК1).
  - 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.
  - Amounts 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 and borrower categories); provisions on loans and claims; 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).
  - Bank-by-bank for State Participation Group, Foreign Banking Group and Private Capital Group banks: deposits of related parties (by domestic and foreign currencies, and households and legal entities); deposits of related parties pledged as (cash cover) collateral; other liabilities to related parties; 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; provisions on loans and claims on related parties.
  - Aggregate and bank-by-bank and by region data on loans and provisions (by households and legal entities, domestic and foreign currencies, and by debtor classification categories), and by asset class (e.g. corporate, and retail); deposits (by households and legal entities, and domestic and foreign currencies); due from banks (by domestic and foreign currencies).
  - Nonperforming loans (NPLs) for the entire banking sector and bank-by-bank for State Participation Group, Foreign Banking Group and Private Capital Group, 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).
  - Cumulative income statements for bank groups and the entire banking sector, 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 reporting of the amount by which State Participation Group, Foreign Banking Group and identified Private Capital Group banks' regulatory capital has been increased, disclosing the instrument or transactions (e.g., capital injection, conversion of subordinated debt to equity).
  - Data on liquid assets in local currency and all currencies, including holdings of cash, correspondent accounts with banks, domestic government debt securities (including benchmark domestic government debt securities), funds held at the NBU in correspondent accounts, NBU’s certificates of deposit (including NBU’s limited three-month certificates of deposit), amount of reserve requirements (required reserve ratio), the average value of the liquidity coverage ratio LCRall currencies, LCRfc.
  - Monthly reporting 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.
  - Monthly, detailed information on the government’s deposits at the NBU and at commercial banks in the breakdown of currency consistent with paragraph 20 and in an agreed format.
  - Monthly, detailed information 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 will be further broken down by bank group (State Participation, Foreign Banking, and Private Capital) and include ISIN-level.
  - Annually, information on hryvnia-denominated securities that are indexed (i.e., to inflation; USD), broken down by the type of the owner.
- Quarterly reporting:
  - Detailed quarterly balance of payments data in electronic format within 80 days after the end of the quarter.

### NBU — Governance, Audit, and Communications
- NBU will communicate electronically to IMF staff any changes in accounting and valuation principles applicable to balance sheet data and notify staff before introducing changes to Charts of Accounts and reporting forms of the NBU and commercial banks.
- NBU Internal Audit Department will 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) there have been no changes to the chart of accounts or valuation methods that would impact the data reporting.
- NBU will provide the IMF with a copy of the annual management letter from the external auditor within six weeks of completion of each audit. This remains in effect for the duration of the arrangement and for as long as credit remains outstanding.
- NBU will 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, and will provide information on outstanding interest and principal payments.
- NBU will inform IMF staff of any changes to reserve requirements for other depository corporations.

### Deposit Guarantee Fund (DGF) Reporting
- Monthly reporting to the IMF:
  - 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.
  - Bank-by-bank for all banks in the banking system the amount of insured deposits and total household deposits, by domestic and foreign currency in an agreed format.
  - Total insured deposits and remaining insured deposits to be paid by the DGF for banks under liquidation and under provisional administration, by domestic and foreign currency in an agreed format.
  - Financial position of the DGF, including information about the cash balance, bond holdings, credit lines, and loans, in an agreed format.
  - Financing arrangements of the DGF, including contracted financing from MoF, in an agreed format.
  - 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, in an agreed format.

### Ministry of Finance (MoF) Reporting and Treasury Operations
- Monthly and periodic 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.
  - 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; data on revenues from social security contributions, including by oblast breakdown; monthly data on funds deposited with the Single Treasury Account; registration accounts of entities not included in the state sector; balance of funds as of the 1st day of the month on 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, including expenditure data by programs and key spending units and standard functional and economic classifications. Quarterly reports will contain standard information on budget expenses to cover called government guarantees.
  - Data on the public wage bill (excluding SOEs) in line with an agreed template, including all payment categories, including defense wages. 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. Weekly information on face value of government bonds redeemed and 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, in electronic form 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), and aggregated cash expenditures for such projects through the most recent month.
  - Monthly data on the stock of all budgetary arrears no later than 25 days after the end of the 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. The Treasury will report monthly data on accounts payable for state and local budgets (economic classification of expenditures). The Pension Fund will provide monthly reports on net unpaid pensions to individuals who resided or continue to reside in territories that are or were in direct combat zones and temporarily occupied by Russia. The provided information will include defense and law-enforcement.
  - Quarterly decomposition of own revenues of budgetary institutions (budget treasury code 25000000) into proceeds from fees for services provided by budget institutions (budget treasury code 25010000) and other sources of own revenues (budget treasury code 25020000) no later than 25 days after the end of the quarter.

_Italic: Source — excerpt from the provided IMF document content._

### 83. The Ministry of Finance will provide monthly information, no later than 25 days after the end

### 1ukrea2024004-print-pdf - 83. The Ministry of Finance will provide monthly information, no later than 25 days after the end

### Debt, guarantees, and related monthly/quarterly reporting
- Ministry of Finance to provide monthly information, no later than 25 days after the end of each month, on:
  - 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.
- Ministry of Finance to provide monthly information, no later than 25 days after the end of each month, on balances of sub-accounts 3551 and 3559.
- Ministry of Finance to provide to the IMF in electronic form on a quarterly basis, no later than 25 days after the end of the quarter:
  - data on the outstanding stock of domestic and external debt of the state and local budgets (including general and special funds);
  - 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;
  - report the accumulation of any budgetary arrears on external and domestic debt service.
- Ministry of Finance to provide to the IMF in electronic form on a semi-annual basis, no later than 25 days after the end of Q2 and Q4, disaggregated bond-by-bond (loan-by-loan) data regarding the debt stock, associated payments, and disbursements.
- Data on external and domestic credit to key budgetary spending units and nongovernment units guaranteed by the government to be provided monthly no later than 25 days after the end of the month (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients).

### Budgetary funds, pension, recapitalization, and fiscal risks reporting
- Ministry of Finance to provide data on approved budgets and quarterly operational data (daily for the Pension Fund only) on:
  - revenue, expenditures, and arrears, and balance sheets of:
    - the Pension Fund (detailed data on the breakdown of revenues and expenditure by main categories are expected for this Fund),
    - Employment Fund (detailed data on the breakdown of revenues and expenditure by main categories are expected for this Fund),
    - any other extra budgetary funds managed at the state level;
  - timing: no later than 50 days after the end of each quarter (each month in case of the Pension Fund).
  - Any within-year amendments to the budgets of these funds will be reported within a week after their approval.
  - Annual financial statement including the final fiscal accounts of those funds at the end of each fiscal year to be reported no later than April of the following year.
- Ministry of Finance to provide, no later than 15 days after the end of each month, monthly data on the budgetary costs associated with the recapitalization of banks and SOEs, including:
  - upfront impact on the cash balance of the general government of the recapitalization of banks and SOEs;
  - costs associated with the payment of interests, including respective changes as a result of supplementary budgets.
- Quarterly performance reports for the Fund for Entrepreneurship Development to be provided.
- The registry of fiscal risks to become available to IMF staff on semi-annually or, if available, on a sooner basis.

### Tax administration, VAT, and tax arrears reporting (STS responsibilities)
- STS and State Customs Service (SCS) to provide on a quarterly basis, no later than two months after the end of the quarter, a listing of all tax exemptions granted, specifying:
  - the beneficiary to whom the exemption was provided;
  - the duration;
  - the estimated subsequent revenue loss for the current fiscal year.
  - Revenues foregone include losses from the simplified tax regime by groups of beneficiaries.
- STS to provide monthly information, no later than 25 days after the end of the month, on VAT refunds in the following format:
  - (i) beginning stock of refund requests;
  - (ii) refund requests paid in cash;
  - (iii) refunds netted out against obligations of the taxpayer;
  - (iv) denied requests;
  - (v) new refund requests;
  - (vi) end-of-period stock of requests;
  - (vii) stock of VAT refund arrears (unsettled VAT refund claims submitted to the STS more than 74 days before the end of period).
- STS to provide 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 the end of each month.
- STS to provide on a quarterly basis but no later than 25 days after the end of each quarter information on:
  - the number of tax appeals and the associated disputed amounts received by the STS in each reporting period;
  - the number of internally resolved appeals indicating the number of appeals resolved in favor of the controlling body, in favor of taxpayer and partial satisfaction.
- Tax Arrears reporting format items include:
  - Total stock, o/w Principal Interest Penalties Tax Arrears of Taxpayers Undergoing Bankruptcy;
  - Total Tax Arrears net of Taxpayers in Bankruptcy Procedures;
  - Taxes from Code 11010000 to 31020000.

### Loan program reporting and SOE/energy sector cash flows
- Ministry of Finance to provide on a monthly basis information about the number and amount of loans under the 5-7-9 program as well as a breakdown by sectors of loans.
- Naftogaz Group and the GTSO to each provide IMF staff with information in electronic form for each month, no later than the 25th of the following month, on their cash flows (in an agreed format).
  - Naftogaz Group report to also include volumes and prices of gas purchases and sales (purchase of domestic and imported gas, sales to households, heating utilities, budget institutions, and industries), and the main revenue, expenditure, and financing items.
  - Naftogaz to provide on a monthly basis updated information on the company’s financial liabilities, with a schedule of loan-by-loan interest and principal payments.
- Ministry of Economy to provide on a quarterly basis, but no later than 80 days after the end of each quarter, consolidated information from the 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 line with format agreed with IMF staff.

### National accounts revisions
- State Statistics Service to provide to the IMF revised quarterly data on gross domestic product (nominal, real, deflator) and their components (economic activities, expenditure, income), no later than 10 days after any revisions have been made.

*Source: Excerpt from PDF chapter/section provided in content unit 1ukrea2024004-print-pdf - 83.*

### 99. The Ministry of Social Policy will collect and submit to IMF staff on a quarterly basis data on

### 1ukrea2024004-print-pdf - 99. The Ministry of Social Policy will collect and submit to IMF staff on a quarterly basis data on

### Social assistance data reporting requirement
- The Ministry of Social Policy will collect and submit to IMF staff on a quarterly basis data on social assistance programs, including those existing before the war and newly emerging categories.
- The data, to be presented in an agreed excel format, will show for each program, including IDPs:
  - (a) the number of households receiving help under HUS and other support categories; and privileges in the 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.

### Macro outlook in wartime
- Russia’s attacks damaged or destroyed over ~10 GW of generating capacity in January-October 2024, or around half of last winter’s peak demand.
- The authorities commissioned 0.9 GW of reserve distributed generation and expanded import capacity to 2.1 GW to partially mitigate the energy deficit.
- Over a quarter of the Ukrainian population has been displaced—either as refugees or internally.
- Economic growth: the economy grew by 4.2 percent year-on-year in the first 10 months of 2024, and is expected to stay at around 4 percent by the year’s end.
- Labor market: demand for workers (job openings) continues to grow while the number of job applicants remains almost unchanged, with a significant labor shortage persisting.
- Risks: military escalation in November-December 2024 increased damage, losses, budget spending pressures, and financing needs.

### Monetary and exchange rate policies
- Inflation dynamics:
  - Decelerated from 26.6 percent year-on-year in end-2022 to 3.3 percent in May 2024.
  - Accelerated to 11.2 percent year-on-year in November 2024.
  - Core inflation rose to 9.3 percent year-on-year in November 2024.
- Policy response:
  - National Bank of Ukraine (NBU) suspended interest rate easing in July 2024.
  - NBU raised the key policy rate by 0.5 pp to 13.5 percent (December action).
  - NBU strengthened forward guidance toward potential further tightening if inflationary pressures persist.
- Exchange rate and reserves:
  - Hryvnia depreciated by a cumulative 12.2 percent through end-July 2024 since the transition to managed exchange rate flexibility, and has remained broadly stable thereafter.
  - NBU increased exchange rate flexibility and will continue gradual FX liberalization in line with its roadmap and security considerations.
- Commitment:
  - NBU committed to maintaining sufficiently positive real interest rates and to a gradual transition toward a full-fledged inflation-targeting regime with a floating exchange rate once prerequisites are met.

### Budget and fiscal policies
- Tax measures: a new tax measures package signed on November 28 will yield around UAH 141 billion or around 1.6 percent of GDP in 2025.
- 2025 Budget:
  - Authorizes expenditures of UAH 5,065 billion or about 58 percent of GDP.
  - Total revenues excluding budget support grants will be UAH 3,355 billion.
- Fiscal targets: authorities met all end-September 2024 fiscal targets.
- Medium-term improvements:
  - Diagnostic review completed in October to improve expenditure baseline estimates and costing of new policies.
  - Introduction of a Public Investment Management (PIM) system to improve efficiency, transparency, and allocation of budget funds for priority projects.

### Debt management and financing strategy
- 2025 deficit: expected to be ~19.7 percent of GDP (overall deficit excluding grants).
- Financing sources:
  - Largest external disbursements to finance the budget in 2025 will come from the $50 billion G7 Extraordinary Revenue Acceleration (ERA) Loans initiative.
  - EU macro-financial assistance (MFA) under the ERA Loans initiative could amount to 18.1 billion EUR (final amount to be determined).
  - United States Department of the Treasury announced disbursement of $20 billion for the benefit of Ukraine as part of the G7 ERA Loans initiative, to be transferred to the World Bank’s F.O.R.T.I.S. Ukraine FIF.
- Commitments:
  - Authorities remain committed to avoiding further direct monetary financing, subject to timely disbursements of committed international support.
  - Authorities committed to restructuring Ukraine’s external public debt to restore debt sustainability.
    - State Eurobonds restructuring completed, including the state-guaranteed Eurobond issued by Ukravtodor.
    - Ongoing restructuring discussions for GDP-linked warrants, some private commercial loans, and state-guaranteed claims including Ukrenergo’s outstanding Eurobond and China Eximbank’s loan to DPZKU.
  - Ministry of Finance remains in close contact with the Group of Creditors of Ukraine to deliver a final debt treatment sufficient to restore debt sustainability before the final review and complying with the Comparability of Treatment (CoT) principle.

### Structural reform policies and governance reforms
- Reforms Matrix:
  - As of November 1, 2024, the Ministry of Finance updated the Reforms Matrix comprising 325 conditions and recommendations linked to 531 indicators across support programs.
  - Implementation progress: 199 indicators met overall, including 91 in the third quarter of 2024.
- Specific governance actions:
  - Completed formation of the full supervisory board of Ukrenergo (7 members), with independent members in the majority (structural benchmark for end-December 2024).
  - Progress on end-December governance structural benchmarks: amendments to the Criminal Procedural Code and a law to establish the High Public Disputes Court (HPDC).
  - Changes to the Accounting Chamber of Ukraine (ACU) law approved by Parliament with enactment expected imminently.

### Technical assistance and capacity development
- Ukraine Capacity Development Fund (UCDF) has been providing demand-driven capacity development since endorsement of the workplan in February 2024.
- UCDF support areas:
  - Fiscal: domestic revenue mobilization, public financial management, and expenditure policy.
  - Monetary and financial: financial regulation and supervision, central bank operations, and TA on virtual assets; work beginning on AML/CFT frameworks.
- Authorities welcome UCDF responsiveness and flexibility and plan to refine the workplan ahead of the next Steering Committee meeting in the first quarter of 2025.

*Source: UKRAINE — SIXTH REVIEW OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR MODIFICATION OF A PERFORMANCE CRITERION, AND FINANCING ASSURANCES REVIEW—SUPPLEMENTARY INFORMATION (December 17, 2024).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1ukrea2024004-print-pdf.pdf_