## Ukraine: Seventh Review — IMF staff report (1ukrea2025001-print-pdf) ## Source details **Canonical URL:** [Ukraine: Seventh Review — IMF staff report (1ukrea2025001-print-pdf)](https://www.imf.org/-/media/files/publications/cr/2025/english/1ukrea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1ukrea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1ukrea2025001-print-pdf.pdf.json) --- ### Executive summary — context, outlook, and program performance - Context: - "Three years of war" with "more than 6.9 million refugees" outside Ukraine and "3.7 million internally displaced persons." - RDNA4 estimates reconstruction and recovery needs of "US$524 billion." - Individual agreements under the "US$50 billion Extraordinary Revenue Acceleration Loans Initiative for Ukraine (ERA)" nearing finalization. - Authorities adopted the law on tobacco excise taxes (prior action). - Document date: "March 21, 2025." - Recent developments and macro outlook: - Baseline assumes war "winds down in the final months of this year," but risks "exceptionally high." - Energy situation improved due to "a mild winter and faster repairs" but "continued attacks on civilian sites and critical infrastructure persist." - Growth and inflation: - "Growth is now expected at 3.5 percent y/y for 2024 (-0.5pp relative to the Sixth Review)." - "Surprise slowdown to 2 percent y/y in 2024Q3 (versus preliminary estimates of 3.8 percent)." - "Partial recovery to 2.6 percent y/y in 2024Q4 is expected." - "Headline inflation reached 13.4 percent y/y in February 2025." - "Core inflation accelerated to 12 percent y/y in February 2025." - "Sequential inflation decelerated to 0.8 percent m/m in February from a 1.9 percent m/m peak in November." - "Households’ inflation expectations deteriorated to around 11 percent y/y in December and January." - External and reserves: - "Current account deficit excluding grants widened to US$24.7 billion (13 percent of GDP) in 2024, up from US$21.3 billion (11.9 percent of GDP) in 2023." - "Gross international reserves totaled US$43 billion (5.2 months of prospective imports) as of end-January 2025." - Financial sector: - "Banking system liquidity coverage ratios are more than triple the required minimum." - "Average Tier 1 capital was 17 percent at end-October 2024." - "Net interest margin was 7.6 percent in 2024." - "Business and household lending annual growth was 22 percent and 38 percent respectively at end-2024." - "NPLs fell to 29 percent at end-2024, down from a peak of 39 percent in mid-2023." - Program performance: - "All end-December quantitative performance criteria (QPCs) were met." - Selected QPC outcomes (end-December 2024): - "Floor on tax revenues (excluding Social Security Contributions): 2,042,250 (Adjusted QPC) — Actual 2,101,877 — Met." - "Floor on net international reserves (in millions of U.S. dollars): 26,300 (Adjusted QPC 26,095) — Actual 28,228 — Met." - "Ceiling on publicly guaranteed debt: 47,900 (Adjusted QPC 61,618) — Actual 46,799 — Met." - Key near-term risks: - "Further attacks on energy and civilian infrastructure." - "Uncertainty about the duration of the war and donor support." - "Rising risk of reform fatigue." ### Baseline scenario and key projections - Baseline revisions: - ERA disbursements "substantially more frontloaded" with important fiscal and external implications. - Growth and inflation (staff estimates and projections): - Real GDP growth (%): "2024: 3.5; 2025: 2-3; 2026: 4.5; 2027: 4.8" - Inflation, eop (%): "2024: 12.0; 2025: 9.0; 2026: 7.0; 2027: 5.0" - External sector and reserves: - Current account (US$ billion): "2024: -13.4; 2025: -32.8; 2026: -23.3; 2027: -12.4" - Current account balance excluding grants (US$ billion): "2024: -24.7; 2025: -34.3; 2026: -23.8; 2027: -14.8" - FX reserves (US$ billion): "2024: 43.8; 2025: 56.8; 2026: 50.8; 2027: 54.1" - Fiscal and debt: - Overall fiscal balance (% GDP): "2024: -17.2; 2025: -18.8; 2026: -9.7; 2027: -4.1" - Overall fiscal balance, excl. grants (% GDP): "2024: -23.2; 2025: -19.6; 2026: -9.9; 2027: -5.2" - Public debt (% GDP): "2024: 89.8; 2025: 110.0; 2026: 108.5; 2027: 103.5" - Gross Reserves (% IMF composite metric (float)): "2024: 121.2; 2025: 127.3; 2026: 106.2; 2027: 109.1" - Program financing assumptions (selected): - "Official financing ex. IMF in the baseline scenario (Billions of U.S. dollars): 2025: 54.9; 2026: 10.8; 2027: 1.8" - "Used contemporaneously as budget support: 2025: 37.4; 2026: 9.8; 2027: 1.8" - "Pre-financing in 2025 to be used in 2026-27: 8.4" - "Downside buffer: 9.1 (2025)" ### Downside scenario — assumptions and outcomes - Assumptions: - Downside shock assumed to start in "2025Q2" with a "longer and more intense war winding down by 2026Q2." - Calibrated to a comparable cumulative GDP loss vis-à-vis Sixth Review baseline. - Key macro outcomes (staff estimates): - Real GDP growth (%): "2024: 3.5; 2025: -2.0; 2026: -0.5; 2027: 3.8" - Inflation, eop (%): "2024: 12.0; 2025: 13.0; 2026: 9.0; 2027: 7.5" - Current account (US$ billion): "2024: -13.4; 2025: -33.1; 2026: -23.4; 2027: -6.6" - FX reserves (US$ billion): "2024: 43.8; 2025: 45.3; 2026: 28.5; 2027: 32.6" - Overall fiscal balance (% GDP): "2024: -17.2; 2025: -23.6; 2026: -20.6; 2027: -10.6" - Public debt (% GDP): "2024: 89.8; 2025: 117.7; 2026: 128.2; 2027: 131.8" ### Risks and enterprise risk assessment - Principal risk vectors: - War intensity/duration, reductions in external military/economic support, reform fatigue, loss of export/transit corridors, commodity price volatility, tighter financial conditions. - RAM likelihoods (staff subjective): "low" = <10 percent; "medium" = 10–30 percent; "high" = 30–50 percent. - Enterprise risk: "main risk remains strategic risk" (high); partly offset by ERA progress. ### Policy priorities and recommended measures - Fiscal policy and public finances: - "Execute the 2025 Budget as planned." - "Align the frontloaded disbursement schedule of ERA financing with the program’s fiscal paths." - "Advance work on the budget declaration" (Budget Declaration for 2026–28, SB end-June 2025). - "Domestic revenue mobilization must support a durable return to fiscal and debt sustainability." - Advance fiscal structural reforms: "public financial management, medium-term budgeting, tax and customs systems, public investment management, and expenditure policies." - Monetary and exchange rate policy: - "Maintain a tight monetary stance to tackle rising inflation and ensure inflation expectations remain anchored." - "Enable the exchange rate to increasingly play a shock-absorbing role." - "Continue a careful, conditions-based approach to FX liberalization with close monitoring." - Financial stability and market infrastructure: - "Remain vigilant to financial stability risks." - "Make progress on strengthening the bank rehabilitation framework." - "Prepare a framework to address critical third-party risks." - "Update the NBU Resilience Assessment" with asset valuation and stress testing by "end-December 2025." - "Close substantial gaps in capital market infrastructure" and urgent actions at the NSSMC. - Governance, anti-corruption, and rule of law: - "Decisively address slippages in governance reforms." - Near-term tasks: "enact the delayed criminal procedural code; finalize the external NABU audit; further strengthen AML/CFT architecture." - Prior action: enactment of law "#11090" on tobacco excise taxes. - Energy sector resilience: - "Continue efforts to decentralize and make the energy sector more resilient, including needed gas imports in 2025 (up to 4bcm)." - "Strengthen governance of the state-owned electricity transmission operator and appointment procedures for SOE supervisory boards." - Plan to adopt a law on market coupling and NEURC external audit (end-October 2025 SB). ### ERA, financing gaps, and debt restructuring - ERA and program financing: - "G7 ERA initiative envisages about US$50 billion of loans" repayable from profits of extraordinary revenues from qualifying centralized securities depositories holding immobilized Russian assets. - Baseline ERA financing included: "US$44.1 billion." - Baseline cumulative financing gap: "US$148.8 billion." - Downside cumulative financing gap: "US$162.9 billion." - Selected financing table highlights (Billions of US dollars, program-period 2023Q2–2027Q1): - A. Financing gap (excl. downside buffers): "148.8" (sum across years shown in table). - B. Official financing (excl. IMF): "132.7" - C. IMF (prospective): "15.3" - D. Flow relief from debt operations: "10.8" - E. Budget prefinancing: "0.0" (memo items show pre-financing usage detail) - Debt restructuring progress and targets: - "August 2024 Eurobond restructuring included." - Debt restructuring 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 and publicly guaranteed debt (ex. ERA loans) in 2028: 82 percent of GDP" and "Annual flow relief over 2024-27: 1-1.8 percent of GDP" - Staff judgment: - "Debt assessed as sustainable on a forward-looking basis" conditional on fiscal adjustment, concessional financing, and credible restructuring process. - Staff supports completion of the Seventh Review and "a purchase of SDR 300.47 million (14.9 percent of quota)." ### Program conditionality, structural benchmarks, and requested resets - Authorities’ requests: - "Raise the QPC on net international reserves for all test dates in 2025." - Reset missed SBs: "criminal procedure code, selecting the new ESBU head, the external NABU audit, and the SB on critical third-party risk" to end-July or end-September 2025 as proposed. - Add four SBs with deadlines: "Complete independent fit and proper review of NSSMC (end-June 2025); Adopt changes to selection and appointment procedures for SOE supervisory boards (end-August 2025); Adopt operational plan for MoF IT Strategy (end-September 2025); Adopt sectoral PIM strategies (end-December 2025)." - Request rephasing to backload purchases under the program for "2025–26" totaling "SDR2.722 billion" within existing envelope. - Structural benchmark implementation (selected met/not met examples preserved verbatim): - "Adopt Budget Code amendments in line with Action 1 under the June 2024 PIM Action Plan." — "End-January 2025 — Met." - "CMU to approve a methodological framework underpinning the PIM process..." — "End-February 2025 — Met." - "Submit legislative amendments to Parliament to introduce tax reporting requirements for digital platform operators." — "End-April 2025." - "Appoint a permanent head of SCS." — "End-June 2025." - "Complete the independent fit and proper review of the NSSMC." — "End-June 2025." (proposed) - "Publish the completed external audit of NABU..." — "End-July 2025 — Not Met (Reset from end-February 2025)." ### Monetary policy, FX framework, and NBU safeguards - Monetary stance and guidance: - "NBU should tighten its monetary stance" to anchor expectations; "a further tightening in the first half of the year is warranted." - KPR adjustments: "The key policy rate was raised ... from 13 percent to 15.5 percent in March 2025." - Monetary policy objective: "return inflation to the 5 percent target by end-2027." - FX and reserve management: - FXI policy: "limit excessive exchange rate volatility without compromising the shock-absorbing role of the exchange rate." - NBU reported "FX interventions amounted to US$34.5 billion in 2024" and "through February 2025, the exchange rate appreciated by 1.4 percent and net FX sales amounted to US$6.8 billion." - Authorities requested tightening NIR QPCs in 2025 to "safeguard frontloaded ERA disbursements." - Governance and safeguards: - NBU to implement recommendations from the 2023 safeguards assessment; "vacancies on the NBU Council" to be filled and mechanisms to "strengthen the Council’s overall collective fitness." - "Complete another ‘Resilience Assessment’ by end-December 2025." ### Financial sector reform, market infrastructure, and SOE governance - Financial market infrastructure and capital mobilization: - RDNA4 reconstruction needs: "US$524 billion." - "Cumulative official sector financial support ... EUR €118 billion" (Feb 2022–Dec 2024, source noted). - Key gaps: underdeveloped "project and structured finance instruments"; JII framework shortfalls; need for EU regulatory equivalence (~"75 percent convergence"). - State-owned banks and SOE governance: - "MoF will update the SOB Nomination Committee (NomCom) rules by end-June 2025." - Supervisory board evaluations for "Ukrenergo, GTSO, and Naftogaz" due by "end-May 2025." - Proposed SB: "Revise the selection and appointment processes for SOE supervisory board members and adopt appropriate changes to the relevant CMU by-laws" — "End-August 2025." - Banking supervision and resolution: - "First bank resolution purchase and assumption transaction in eight years occurred." - NBU to adopt "supervisory risk assessment methodology" (met) and continue phased alignment with EU acquis, strengthen NPL workout capacity and resolution frameworks (draft law expected "end-December 2025"). ### Social protection, pensions, and SCS reforms - Pensions and social protection: - Authorities aim to reform the pension system amid "fiscal pressures from emigration and a rising number of eligible pensioners." - With World Bank support, reforms to proceed while containing fiscal pressures; commitments to avoid introducing new special pensions or privileges without fiscal backing. - Social assistance and consolidation initiatives: "draft legislation to consolidate different types of social entitlements" and expand means-testing; "Increased income threshold for eligibility under the Guaranteed Minimum Income program." - State Customs Service (SCS) reforms: - Legislation to criminalize large-scale customs fraud and smuggling adopted; administrative liability framework to be submitted "end-March 2025." - AEO program expanded "from one participant at end-2023 to 83 by February 2025." - Structural Benchmark: "appoint a new permanent head of customs by end-June 2025." ### Program monitoring, TMU, and reporting requirements - TMU key points: - Official exchange rate for program evaluation: "36.5686" UAH per USD (set March 13, 2023) and fixed reference rates for other currencies (listed exactly in TMU). - NIR definition, adjustors, and Tables B and C provide cumulative official support and domestic FX issuance figures (selected cumulative flows and net issuance values preserved in TMU). - Ceiling on general government direct borrowing from the NBU (indicative target) with explicit adjustors and quarterly reset rules. - Reporting obligations (selected): - NBU daily/weekly/monthly reporting on reserves, FX interventions, government securities holdings, and bank-by-bank FSIs per TMU paragraphs. - MoF monthly/quarterly treasury, debt, arrears, and budget execution reports with specified submission lags (e.g., monthly no later than "25 days" after end of month). - STS and SCS quarterly and monthly reporting on tax exemptions, VAT refunds, and related metrics (submission lags specified). - Naftogaz and GTSO monthly cash flow and operational reporting (no later than the "25th of the following month"). - Pension Fund monthly reporting and Ministry of Social Policy quarterly social assistance data reporting in agreed formats. ### Staff appraisal and next steps - Program focus: "navigating exceptionally high uncertainty, preserving economic and financial stability, closing financing gaps, restoring debt sustainability and medium-term external viability, and enhancing preparedness for adverse shocks." - Staff supports completion of the Seventh Review under the Extended Arrangement and the requested SDR "300.47 million" purchase, conditional on the authorities’ commitments and proposed SB resets. - Next reviews and monitoring: "Eighth, Ninth, and Tenth Reviews expected ... on or after June 15, August 31, and November 30 respectively" with corresponding QPCs and SBs. *Source: IMF staff report content (1ukrea2025001-print-pdf, March 21, 2025).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - Three years of war have taken a staggering social, humanitarian, and economic toll. - More than 6.9 million refugees remain outside Ukraine, on top of the 3.7 million internally displaced persons. - The updated World Bank Rapid Damage and Needs Assessment (RDNA4) estimates reconstruction and recovery needs of US$524 billion. - Authorities continue to implement important reforms (including adopting the reform for new specialized administrative courts) and will enact a law on tobacco excise taxes (prior action). - Individual agreements under the US$50 billion Extraordinary Revenue Acceleration Loans Initiative for Ukraine (ERA) are nearing finalization, providing multi-year financing commitments to be utilized consistent with program parameters. - Date of the document: March 21, 2025. ### Outlook and risks - Baseline continues to assume that the war winds down in the final months of this year, but risks remain exceptionally high. - Recent developments: - A mild winter and faster repairs have helped the energy situation. - Continued attacks on civilian sites and critical infrastructure persist. - Growth and inflation: - Growth is expected to slow this year due to labor shortages and damages to gas and other infrastructure. - Growth is now expected at 3.5 percent y/y for 2024 (-0.5pp relative to the Sixth Review). - Surprise slowdown to 2 percent y/y in 2024Q3 (versus preliminary estimates of 3.8 percent) caused by energy shortages. - Partial recovery to 2.6 percent y/y in 2024Q4 is expected. - Headline inflation reached 13.4 percent y/y in February 2025. - Core inflation accelerated to 12 percent y/y in February 2025. - Sequential inflation decelerated to 0.8 percent m/m in February from a 1.9 percent m/m peak in November. - Households’ inflation expectations deteriorated to around 11 percent y/y in December and January. - External and reserve position: - Current account deficit excluding grants widened to US$24.7 billion (13 percent of GDP) in 2024, up from US$21.3 billion (11.9 percent of GDP) in 2023. - Gross international reserves totaled US$43 billion (5.2 months of prospective imports) as of end-January 2025. - Financial sector risks and indicators: - Banking system liquidity coverage ratios are more than triple the required minimum. - Average Tier 1 capital was 17 percent at end-October 2024. - Net interest margin was 7.6 percent in 2024. - Business and household lending annual growth was 22 percent and 38 percent respectively at end-2024. - NPLs fell to 29 percent at end-2024, down from a peak of 39 percent in mid-2023. - Key downside risks highlighted: - Further attacks on energy and civilian infrastructure. - Uncertainty about the duration of the war and donor support. - Rising risk of reform fatigue at a time when momentum is needed on a wide-ranging set of reforms. - Authorities’ policy responses and mitigants: - Decisive policymaking and contingency planning. - Continued vigilance on inflation and financial stability. ### Focus of the review and policy priorities - With macroeconomic stability sustained under challenging conditions and good program performance despite some governance slippages, discussions emphasized: - Fiscal policy and public finances: - Execute the 2025 Budget as planned. - Align the frontloaded disbursement schedule of ERA financing with the program’s fiscal paths. - Advance work on the budget declaration. - Domestic revenue mobilization must support a durable return to fiscal and debt sustainability. - Advance fiscal structural reforms in public financial management, medium-term budgeting, tax and customs systems, public investment management, and expenditure policies. - Monetary and exchange rate policy: - Maintain a tight monetary stance to tackle rising inflation and ensure inflation expectations remain anchored. - Enable the exchange rate to increasingly play a shock-absorbing role to prevent external imbalances and safeguard reserves given exceptionally high uncertainty. - Continue a careful, conditions-based approach to FX liberalization with close monitoring. - Financial stability and market infrastructure: - Remain vigilant to financial stability risks. - Make progress on strengthening the bank rehabilitation framework. - Prepare a framework to address critical third-party risks. - Update the NBU Resilience Assessment. - Close substantial gaps in capital market infrastructure. - Swift action needed to address operational and governance challenges at the National Securities and Stock Market Commission (NSSMC). - Governance and anti-corruption: - Decisively address slippages in governance reforms to tackle corruption, support EU accession, and underpin post-war growth. - Recent adoption of the law establishing new specialized administrative courts is an important milestone. - Key near-term tasks: enact the delayed criminal procedural code to assist anti-corruption institutions; finalize the external National Anti-corruption Bureau of Ukraine (NABU) audit; further strengthen AML/CFT architecture. - Energy sector resilience: - Continue efforts to decentralize and make the energy sector more resilient, including needed gas imports in 2025. - Strengthen governance of the state-owned electricity transmission operator and appointment procedures for SOE supervisory boards. ### Recent economic and program performance (selected findings and statistics) - Growth and output: - 2024 growth expected at 3.5 percent y/y (down -0.5pp relative to Sixth Review). - 2024Q3 growth was 2 percent y/y (vs preliminary estimate of 3.8 percent). - 2024Q4 growth expected 2.6 percent y/y. - Inflation: - Headline inflation 13.4 percent y/y in February 2025. - Core inflation 12 percent y/y in February 2025. - Sequential inflation 0.8 percent m/m in February. - External sector: - Current account deficit excluding grants US$24.7 billion (13 percent of GDP) in 2024. - Gross international reserves US$43 billion (5.2 months of prospective imports) as of end-January 2025. - FX interventions amounted to US$34.5 billion in 2024. - Through February 2025, the exchange rate appreciated by 1.4 percent and net FX sales amounted to US$6.8 billion. - Fiscal: - Tax collections solid in 2024. - Overall fiscal deficit for 2024 was UAH 1,318 billion (17.2 percent of GDP), narrower than Sixth Review projection. - Financial sector: - Banking system liquidity coverage ratios are more than triple the required minimum. - Average Tier 1 capital 17 percent at end-October 2024. - Net interest margin 7.6 percent in 2024. - Business lending growth 22 percent and household lending growth 38 percent at end-2024. - NPLs 29 percent at end-2024 (down from 39 percent in mid-2023). - First bank resolution purchase and assumption transaction in eight years occurred. - ERA financing: - G7 ERA initiative envisages about US$50 billion of loans to be repaid from profits of extraordinary revenues from qualifying centralized securities depositories holding immobilized Russian assets. - Arrangements with Canada, European Union, the United States, and the United Kingdom have been finalized and flows have begun; discussions with Japan are advanced. - Program performance: - All end-December quantitative performance criteria (QPCs) were met. - The authorities respected continuous PCs since the Sixth Review and met all end-December indicative targets. - Selected QPC outcomes (end-December 2024): - Floor on tax revenues (excluding Social Security Contributions): 2,042,250 (Adjusted QPC) — Actual 2,101,877 — Met. - Floor on net international reserves (in millions of U.S. dollars): 26,300 (Adjusted QPC 26,095) — Actual 28,228 — Met. - Ceiling on publicly guaranteed debt: 47,900 (Adjusted QPC 61,618) — Actual 46,799 — Met. - The authorities met the majority of structural benchmarks (SBs) due between end-December 2024 and end-February 2025, including preparation of the bank rehabilitation framework, implementation of a supervisory risk assessment methodology, adoption of budget code amendments in line with PIM, and CMU adoption of a methodological framework underpinning the PIM process. - Missed SBs and slippages include: amendments to the criminal procedural code, NSSMC comprehensive operational strategy (including initiating an independent fit-and-proper review), enactment of the law establishing specialized administrative courts (adopted with delay), appointment of the new head of the Economic Security Bureau of Ukraine (ESBU), and the external NABU audit. Technical interruptions in external technical assistance contributed to some misses. ### Program issues and authorities’ requests - Authorities’ requests: - Raise the QPC on net international reserves for all test dates in 2025 to safeguard frontloaded ERA disbursements. - Reset missed SBs for the criminal procedure code, selecting the new ESBU head, the external NABU audit, and the SB on critical third-party risk. - Add four SBs: - Complete the independent fit and proper review of the NSSMC (end-June 2025). - Adopt changes to selection and appointment procedures for SOE supervisory boards (end-August 2025). - Adopt the operational plan for the implementation of the updated IT Strategy of the MoF (end-September 2025). - Adopt sectoral PIM strategies (end-December 2025). - Request rephasing to backload purchases under the program for 2025–26 to better align with the updated profile of balance of payments needs. - Staff stance: - Staff supports completion of the Seventh Review under the Extended Arrangement, enabling a purchase of SDR 300.47 million (14.9 percent of quota). ### Staff appraisal and next steps - Program remains focused on navigating exceptionally high uncertainty, preserving economic and financial stability, closing financing gaps, restoring debt sustainability and medium-term external viability, and enhancing preparedness for adverse shocks. - Key institutional and policy priorities: execute the 2025 budget, mobilize domestic revenues, advance fiscal structural reforms, maintain a tight monetary stance, continue conditions-based FX liberalization, strengthen financial stability frameworks and capital market infrastructure, address governance and anti-corruption slippages, and bolster energy sector resilience. *Source: EXECUTIVE SUMMARY, 1ukrea2025001-print-pdf (March 21, 2025).* ### 9. Baseline ### 9. Baseline ### Baseline overview and near-term outlook - A key revision to the baseline scenario since the Sixth Review pertains to new information on the schedule of ERA disbursements. Recently concluded donor arrangements revealed a disbursement schedule that is substantially more frontloaded than expected at the Sixth Review, with important implications for the program’s fiscal and external sector projections. - 2025 growth is now expected towards the lower end of the 2–3 percent range, mainly resulting from lower steel exports and higher coal imports due to the war-related closure of the Pokrovsk mine and from increased gas imports due to large-scale attacks on the gas infrastructure. - Inflation is expected at 9 percent y/y by year-end (+1.5pp relative to the Sixth Review), on the back of the recent acceleration and the likely persistence ensuing from the deterioration in household expectations. The fundamental drivers of inflation dynamics remain unchanged and largely result from base effects. As food prices fell in 2024H1 and rose sharply in 2024H2, base effects would likely drive inflation in the opposite directions in 2025, if, as expected, the harvest is at least on par with 2024. Appropriate monetary policy, by anchoring expectations, would also help the deceleration. - The current account deficit excluding grants is forecast to widen relative to the Sixth Review (by 1.3 percent of GDP) reflecting higher gas imports as well as higher services imports due to increased uptake of services liberalization. The production suspension at the Pokrovsk coal mine further contributes to the trade balance deterioration while the outlook for agriculture exports remains positive. - International reserves are expected to end the year higher (US$56.8 billion), reflecting frontloaded ERA disbursements. - The baseline fiscal projections remain anchored by the 2025 budget, and the deficit excluding budget support grants remains unchanged at UAH 1,710 bn (19.6 percent of GDP). - The medium-term fiscal path shows modest revisions relative to previous reviews, and continues to incorporate an increase in revenues, reflecting both policy adjustment and post-war recovery, and a normalization of expenditures in key categories after the war. - Over the medium term, moderate revisions incorporate more persistent effects of short-term pressures. By end-2026, inflation is now expected at 7 percent y/y, reflecting inertia from the 2025 acceleration. 2026 GDP growth has been revised down to 4.5 percent (-0.8pp) to incorporate the enduring impact of reduced coal production on net exports and delayed migrant returns in line with recent surveys. Revised migration estimates also drive an upward revision of 2027 GDP growth to 4.8 percent y/y. ### Baseline: Key economic indicators (staff estimates) - Real GDP growth (%): 2024: 3.5; 2025: 2-3; 2026: 4.5; 2027: 4.8 - Inflation, eop (%): 2024: 12.0; 2025: 9.0; 2026: 7.0; 2027: 5.0 - Current account (% GDP): 2024: -7.0; 2025: -15.9; 2026: -10.6; 2027: -5.3 - Current account (US$ billion): 2024: -13.4; 2025: -32.8; 2026: -23.3; 2027: -12.4 - Current account balance excluding grants (US$ billion): 2024: -24.7; 2025: -34.3; 2026: -23.8; 2027: -14.8 - Goods trade balance (US$ billion): 2024: -30.1; 2025: -36.5; 2026: -34.6; 2027: -35.7 - FX reserves (US$ billion): 2024: 43.8; 2025: 56.8; 2026: 50.8; 2027: 54.1 - Overall fiscal balance (% GDP): 2024: -17.2; 2025: -18.8; 2026: -9.7; 2027: -4.1 - Overall fiscal balance, excl. grants (% GDP): 2024: -23.2; 2025: -19.6; 2026: -9.9; 2027: -5.2 - Public debt (% GDP): 2024: 89.8; 2025: 110.0; 2026: 108.5; 2027: 103.5 - Gross Reserves (% IMF composite metric (float)): 2024: 121.2; 2025: 127.3; 2026: 106.2; 2027: 109.1 ### Downside scenario: assumptions and outcomes - The downside scenario maintains the assumption of a longer and more intense war winding down by 2026Q2. Staff updated the downside scenario to incorporate changes to the baseline, with the downside shock now assumed to start in 2025Q2. - The revised scenario is calibrated to a comparable cumulative GDP loss over the projection period relative to the Sixth Review baseline, implying real GDP growth at -2 percent y/y in 2025 and -0.5 percent y/y in 2026. - As in the baseline, the post-war period sees even lower refugee returns, compressing growth in 2027 to 3.8 percent y/y. - Inflation outturns and inertia also drive upward revisions of inflation over the 2025–2027 horizon. - The primary fiscal deficits over 2026–27 widen in the downside scenario, reflecting both higher expenditure needs and the impact of weaker economic performance on revenues. - Deficit financing in the downside scenario includes utilization of downside buffers related to ERA financing and higher issuance on the domestic government bond market. ### Downside: Key economic indicators (staff estimates) - Real GDP growth (%): 2024: 3.5; 2025: -2.0; 2026: -0.5; 2027: 3.8 - Inflation, eop (%): 2024: 12.0; 2025: 13.0; 2026: 9.0; 2027: 7.5 - Current account (% GDP): 2024: -7.0; 2025: -16.9; 2026: -12.0; 2027: -3.2 - Current account (US$ billion): 2024: -13.4; 2025: -33.1; 2026: -23.4; 2027: -6.6 - Current account balance excluding grants (US$ billion): 2024: -24.7; 2025: -34.7; 2026: -23.9; 2027: -9.0 - Goods trade balance (US$ billion): 2024: -30.1; 2025: -36.9; 2026: -27.5; 2027: -27.8 - FX reserves (US$ billion): 2024: 43.8; 2025: 45.3; 2026: 28.5; 2027: 32.6 - Overall fiscal balance (% GDP): 2024: -17.2; 2025: -23.6; 2026: -20.6; 2027: -10.6 - Overall fiscal balance, excl. grants (% GDP): 2024: -23.4; 2025: -24.6; 2026: -20.8; 2027: -11.8 - Public debt (% GDP): 2024: 89.8; 2025: 117.7; 2026: 128.2; 2027: 131.8 - Gross Reserves (% IMF composite metric (float)): 2024: 121.2; 2025: 103.5; 2026: 61.0; 2027: 66.5 ### Risks to scenarios - Risks remain exceptionally high and pertain to the war, international support, and reform momentum. - Specific risk vectors: - The war could intensify, including through energy attacks, or be more prolonged, adversely impacting the program and economic outcomes. - Reduction in external economic and military support could over time undermine security, leading to weaker economic performance and open financing gaps, eroding policy buffers and the fragile social fabric. - An earlier end to the war could create an upside scenario conditional on adequate security guarantees, international support, and stronger reforms and growth; conversely, a peace settlement without credible security guarantees and/or financial resources for reconstruction could lead to adverse outcomes and lingering uncertainty. - Reform fatigue and challenges to political consensus are vulnerabilities regardless of the evolution of the war. - The existing baseline and downside scenarios continue to span an adequate range of outcomes, as required under the EHU policy. ### Enterprise risk assessment - Enterprise risk remains on par with the 6th Review. The main risk remains strategic risk, which remains high, driven by uncertainty about the duration, intensity and evolution of the war. - Strategic risks are partly offset by progress on the G7’s ERA initiative, including operationalization and commencement of financial support flowing to Ukraine under the initiative. - Business risks have recently increased somewhat given uncertainty related to ongoing discussions on prospects for peace. - No material changes to reputational risks to the Fund; other enterprise risks (financial and operational) persist broadly unchanged. ### Policy discussions — Macro-Fiscal policies and financing - Fiscal policy aims to finance priority spending while restoring fiscal sustainability. This requires staying within a fiscal framework that recognizes the limits of available financing and consistency of the frontloaded ERA disbursements with the baseline and downside fiscal paths. - Authorities’ commitments on ERA allocations: - One portion will be allocated to current-year budgetary financing. - Another portion will pre-finance future-year deficits. - A third portion will constitute contingent financing for the downside scenario. - To operationalize prudent management of ERA flows, the authorities will rely on provisions of the Ukrainian budget code to: (i) allocate adequate resources for prefinancing and downside buffers; and (ii) adhere to the expenditure ceilings set by the 2025 budget. The authorities have committed to revise any expenditure categories, if necessary, only after consultation with Fund staff. - Fiscal stability near term requires: - Contain expenditure pressures: The 2025 Budget allocations reflect the need for an adequate envelope for national defense, with other categories tightly prioritized. There are high risks of expenditure shocks, which combined with large upfront disbursements, may trigger calls for new lower-priority spending. Materialization would require quickly identifying and implementing offsetting spending and/or revenue measures given the current financing envelope is fully allocated under the two program scenarios. - Ensure revenues consistent with the budget’s assumptions: The revenue projection incorporated the revenue yield from law #11090, which aims to gradually align excise tax rates with EU directives. It was adopted by Parliament last year and the authorities will enact this law as a prior action. Should additional budgetary shocks arise this year, the authorities remain prepared to raise the main VAT rate as a countervailing measure. ### Program financing assumptions (selected) - Official financing ex. IMF in the baseline scenario (Billions of U.S. dollars): 2025: 54.9; 2026: 10.8; 2027: 1.8 - Used contemporaneously as budget support: 2025: 37.4; 2026: 9.8; 2027: 1.8 - Pre-financing in 2025 to be used in 2026-27: 8.4 - Downside buffer: 9.1 (2025) - In the downside scenario, Official financing ex. IMF: 2025: 54.9; 2026: 10.8; 2027: 5.8 - Used contemporaneously as budget support in downside: 46.5; 10.8; 5.8 - Use of downside buffer: 9.1; 1.0; 0.0 - Contingent downside financing: 0.0; 0.0; 4.0 - Memo: Utilization of pre-financing in 2026-27: 0.0; -8.1; -0.3 ### Policy discussions — Medium-term fiscal framework and structural reforms - Work is beginning on the Budget Declaration for 2026–28 to provide a strategic framework for fiscal policy for the remainder of the program and the immediate post-war period. The Budget Declaration will be prepared in consultation with Fund staff (end-June 2025 SB) and submitted to Parliament by end-June. - The Budget Declaration will focus debate on key expenditure priorities including recovery and reconstruction, defense, public services, and social protection. Given high expenditure needs, further progress on mobilizing revenues is needed, focusing on aligning tax policies with EU directives and reforming environmental taxation ahead of the definitive phase of the EU’s Carbon Border Adjustment Mechanism. - Authorities remain committed to achieve primary surpluses in the ½–1½ percent of GDP range. Both program scenarios assume achieving primary surpluses toward the upper end of this range through revenue-based fiscal adjustment and gradual expenditure normalization after the war. These fiscal paths, together with concessional financing and ongoing external debt restructuring, would deliver debt sustainability. Pending full implementation of the restructuring strategy, gaps between debt burden indicators and their targets remain, but completion of remaining steps maintains potential to deliver the targets. ### Fiscal structural reforms and revenue mobilization - Public financial management reforms aim to enhance efficient resource allocation, strategic prioritization, transparency, and accountability. Guided by the action plan to improve medium-term budgetary planning (MOF Order 542), improvements include expanding the Budget Declaration coverage to social funds and local government spending, enhancing costing of new policies and expenditure baseline estimates, and aligning the fiscal framework with EU standards. - National Revenue Strategy (NRS) implementation is essential for revenue-based fiscal adjustment: modernize tax and customs services, raise revenues, improve the investment climate, reduce tax evasion/avoidance, and harmonize legislation with EU standards (e.g., VAT and excise tax). The authorities are preparing the first annual report on reform progress to pinpoint implementation risks in key tax reforms. - To enhance revenue mobilization, the government is developing reporting requirements and international data exchange for digital platform operators (end-April 2025 SB). - Comprehensive IT reforms are required for successful NRS implementation: MoF, State Tax Service (STS) and State Customs Service (SCS) will develop an operational plan for the implementation of MoF’s updated IT strategy, to be adopted by MoF (proposed end-September 2025 SB). - Customs reforms: legislation to criminalize large-scale customs fraud and smuggling and preparing a framework for administrative liability (end-June 2025 SB includes appointment of a new permanent head of customs). The selection process for a new head for the ESBU has progressed more slowly (end-February 2025 SB, not met, proposed reset to end-July). - Public Investment Management (PIM) reforms: Amendments to the Budget Code on PIM (end-January 2025 SB, met) and the methodological framework for PIM (end-February 2025 SB, met) establish unified planning, appraisal, selection, financing, and implementation roles. Authorities will adopt sectoral strategies in line with new PIM approaches by end-December 2025 (proposed end-December 2025 SB). ### Public Investment Management (Box 1) — key points - PIM reform aims to align the PIM framework with good international practices: consolidate fragmented investment streams into a single project pipeline (SPP), embed investment decisions within strategic and medium-term fiscal planning, and apply merit-based project appraisal and selection criteria. - The government aims to complete its national strategic planning system by 2027. An intermediate straightforward national strategy could improve decision-making and prioritization for recovery efforts. - Successful PIM reforms require strengthening institutional capacity across government levels, robust governance, explicit anti-corruption safeguards, transparency, strong oversight and monitoring of project implementation, and sustained support from international partners. *Source: IMF staff estimates and program documents contained in the cited chapter.* ### 22. Reforming support schemes for vulnerable groups and the pension system is needed ### 22. Reforming support schemes for vulnerable groups and the pension system is needed ### Social protection and pension reforms - The government’s ambition (MEFP ¶29) is to reform the pension system—subject to fiscal pressures from emigration and a rising number of eligible pensioners—in a fiscally constrained environment. - With World Bank support, pension reform must proceed while containing fiscal pressures caused by demographic and migration trends. - With support from UNDP, authorities are reforming the social insurance system to: - provide targeted support for those with limited work capacity; and - reduce benefits for individuals able to seek employment. ### Monetary and exchange rate policies - The NBU should tighten its monetary stance to combat inflation and anchor inflation expectations, consistent with its Monetary Policy Guidelines (MPG) and program objectives. - Recent context and guidance: - The NBU has tightened its monetary stance (see ¶5). - Inflation expectations deteriorated recently for some agents due mainly to the November inflation surprise and the compression of ex-ante real returns on hryvnia deposits. - A further tightening in the first half of the year is warranted; depending on upcoming inflation prints, the NBU should be prepared to raise the KPR further should inflation continue to rise or should there be a significant deterioration in inflation expectations. - With such action, together with an improved energy situation and a more favorable comparison base, inflation should decelerate over 2025H2, allowing a possible return to an easing cycle in 2026 after a longer period of monetary policy tightening. - Monetary policy should remain consistent with inflation returning to the 5 percent target by end-2027. - Monetary transmission and operational measures: - Monetary transmission has been gradually improving, supported by recent adjustments to the operational design. - In its March MPC, the NBU increased the spread between 3-month and overnight CDs and adjusted the formula governing banks’ limits to the 3-month CDs to incentivize higher rates on local-currency term deposits. - Potential refinements could include further adjusting the 3-month CDs limits and reviewing the design of reserve requirements (including in view of the reduced domestic bond market financing required this year). - During the latest maintenance period, banks used UAH 290 billion in government bonds to meet reserve requirements, below the allowable maximum limit of UAH 326 billion. - FX intervention (FXI) guidance: - FXI should aim to limit excessive exchange rate volatility without compromising the shock-absorbing role of the exchange rate. - Over-reliance on FXI to achieve price stability would hinder restoring inflation as a nominal anchor and the transition to full-fledged inflation targeting as envisioned under the NBU’s Strategy. - FXI should be appropriately calibrated through FXI rules supporting consistency with the program objectives, including ensuring adequate reserves. - In light of risks from frontloaded external financing, the authorities have requested to tighten NIR targets (see ¶35, MEFP ¶44 and MEFP ¶45). - FX liberalization approach: - The NBU should continue its careful approach to FX liberalization measures while weighing trade-offs for external stability and supporting the recovery. - Focus should remain on ensuring compliance, limiting circumvention, and allowing additional easing of measures only on a case-by-case basis. - In December 2024 and January 2025, the NBU eased restrictions, allowing companies to make Eurobond payments from their own FX deposits, and implemented measures to support the gas, energy and defense sectors. - To curb unproductive outflows, the NBU will continue to closely monitor outflows and strengthen alignment with the NSSMC on FX securities trading (¶27). ### Central bank governance and safeguards - The NBU continues to implement the recommendations of the 2023 safeguards assessment. - With IMF TA, the NBU has taken steps to strengthen counterparty eligibility in refinancing operations and emergency liquidity assistance as part of the end-December SB on strengthening the bank rehabilitation framework. - Progress continues towards filling vacancies on the NBU Council (MEFP ¶47) and outlining mechanisms to strengthen the Council’s overall collective fitness. - Achieving these goals would uphold the credibility of the NBU and strengthen its capacity and governance. ### Financial sector resilience and supervision - The NBU continues to monitor bank resilience through diagnostics and contingency planning (MEFP ¶50). - The NBU will complete another ‘Resilience Assessment’ by end-December 2025. - The asset valuation component commenced in February and involves external auditors. - This will be followed by stress testing under baseline and adverse scenarios; banks falling below or at risk of breaching regulatory requirements will be subject to capital remediation plans. - Results will inform supervisory priorities for 2026 and help prepare the schedule for closing outstanding gaps in regulatory capital requirements and harmonization of regulations with EU acquis. - High-frequency monitoring and response triggers will activate supervisory, monetary policy, and capital flow management actions aimed at preserving financial stability. ### NSSMC, capital flow measures, and governance - The NSSMC is strengthening capital flow measures and urgently needs to improve its internal governance (MEFP ¶57). - To align with NBU capital flow restrictions, the NSSMC will require that OTC FX bond operations carried out by non-banks are settled through the Settlement Center by end-March 2025. - Law 3585-IX (March 2024) initiated a major NSSMC transformation. The NSSMC proposed a reorganizational and operational strategy and updated the Employees Code of Ethics in February 2025. - To underpin institutional effectiveness and address a delayed fit and proper review (end-January SB, missed), the NSSMC will complete an independent fit and proper review of the NSSMC Chair and Commissioners (proposed end-June 2025 SB). ### Financial market infrastructure to attract private capital (Box 2) - Scale of financing needs and official support: - Reconstruction and recovery needs estimated in the latest RDNA4 at US$524 billion (MEFP¶16) as of end 2024. - Cumulative official sector financial support to Ukraine between February 2022 and December 2024 amounted to EUR €118 billion (Kiel Institute, www.ifw-kiel.de). - The current public sector Single Project Pipeline plus priority projects amount to €68 billion, or 58 percent of all external financial support under Martial Law. - The majority of investment for reconstruction and recovery will need to come from the private sector. - Key gaps and development priorities for financial market infrastructure: - Project and structured finance instruments (securitizations, covered bonds, loan syndications, loan sub-participations) are underdeveloped but critical for large-ticket projects and risk-sharing. - Joint Investments Institutions (JII) framework has substantial shortfalls and fiscal implications; examples of concerns: - 96 percent of JII funds are not collective investments. - Over half of funds are owned by one individual and over 90 percent of funds have 5 or less owners. - Closed non-diversified funds are vulnerable to abuse: not overseen by authorities, not required to be licensed, minimal reporting requirements, can be incorporated to avoid asset-structure requirements, lack anti-abuse rules, and can attract investments without disclosure. - JIIs can be used to achieve preferential tax treatment; they don’t pay tax unless wound down, enabling tax deferral and reduced effective tax paid. - EU Banking Regulatory Equivalence: - Authorities have achieved about 75 percent convergence with EU norms. - Narrowing gaps will facilitate regulatory equivalence and encourage EU banks to remain or re-enter the market. - Bank secrecy equivalence is a pre-requisite and a priority. - Local valuation standards are outdated and need alignment with European valuation standards (EVS). - War risk insurance platform has made notable progress but substantial gaps and challenges remain. ### State-owned banks and SOE governance - State-Owned Banks (SOB): - The MoF will update the SOB Nomination Committee (NomCom) rules by end-June 2025 (MEFP ¶70). - MoF and CMU updated the independent supervisory board selection process in March 2025 to enable applicants for one SOB to be considered for vacancies in other SOBs. - MoF and CMU will update NomCom processes by end-June 2025 based on lessons learned from past NomComs in consultation with IFIs. - SOE corporate governance (MEFP ¶71–72): - Authorities are implementing the state ownership policy (SOP), prepared a triage SOE list (identifying strategic and non-strategic SOEs), progressed on a framework for privatization, and prepared a concept for consolidated SOE management. - A centralized management model for non-strategic SOEs should follow international best practices, ensure a strong MoF gatekeeper role for SOE financial oversight, limit quasi-fiscal risks, and avoid political interference or empire building. - Independent evaluations of the supervisory boards of Ukrenergo, GTSO, and Naftogaz are underway and due by end-May 2025; supervisory boards should promptly select new CEOs under OECD standards. - Authorities commit to revise selection and appointment processes for SOE supervisory board members and adopt changes to relevant CMU by-laws by end-July (proposed end-August 2025 SB). - It will be important to enhance NomCom efficiency, transparency, and processes and to develop a roadmap for medium-term reforms to streamline and centralize the NomCom selection procedure. ### Governance, anti-corruption, and AML/CFT - Governance progress and slippages (MEFP ¶62–65): - The reform law on the supreme audit institution (ACU) was enacted in December (end-December 2025 SB met), and the selection process for new members has been initiated. - February adoption of the law creating new specialized administrative courts is a key milestone reform (end-December 2025 SB, not met). A separate law proposed by the President formally creating the courts is being planned before the selection process for judges can be initiated. - Proposed amendments to the criminal procedural code to enhance pre-trial investigation procedures have not advanced in parliament (end-December SB, not met, proposed to be reset for end-July 2025). - Asset declarations of public officials (particularly in high-risk areas such as procurement and customs) should be subject to robust risk-based verification by the National Agency of Corruption (NACP). - NABU audit: - Activities of independent auditors of NABU were temporarily delayed due in part to interruptions in external donor support (end-February 2025 SB, not met, proposed to be reset for end-July 2025), but the audit has resumed and is benefiting from a robust audit methodology and good cooperation. - AML/CFT enhancements (MEFP ¶66): - Authorities committed to enhance the AML/CFT architecture, including UBO transparency in public procurement. - Legislative changes will require companies that have won direct contracts or a negotiated procedure for government procurement to publish their UBO information; UBO information will also be published for successful non-resident bidders. ### Energy sector resilience and reforms - Authorities continue implementing comprehensive plans to make the energy sector more resilient and decentralized (MEFP ¶73–76). - Work is ongoing to repair energy capacity in 2025 and add distributed gas-fired generation. - Authorities are looking to import up to 4bcm of gas in 2025 to replenish gas reserves and replace domestic production lost due to attacks on energy infrastructure. - To finance these gas purchases, Naftogaz is expected to rely on IFI and bilateral donor support and deploying its cash buffers. - The EU announced a broad energy support package to assist gas purchases, facilitate investments in renewable energy (up to 1.5GW), and EU market integration. - Authorities plan to adopt a law on market coupling in the coming months to advance integration with the EU energy market. - Reform to develop a legal accountability framework for the energy regulator NEURC is on track, including an external audit of NEURC’s independence and governance framework (end-October 2025 SB). - Authorities should commence work on a roadmap to gradually liberalize gas and electricity markets, including strategies on tariffs, PSOs, and protecting the most vulnerable households. ### Program issues and conditionality - Quantitative and structural conditionality adjustments requested by the authorities (¶35): - Request to modify quantitative performance criteria: Authorities request to tighten the NIR QPCs for all test dates in 2025 to reflect the more frontloaded disbursement schedule for ERA financing, aiming to safeguard external sustainability and maintain adequate buffers. - Structural conditionality: Authorities propose adding four new SBs (Table 4): - completing the independent fit and proper review of the NSSMC by end-June 2025; - revising selection and appointment processes for SOE supervisory board members and adopting appropriate changes to the relevant CMU by-laws by August 2025; - developing an operational plan for the implementation of the MOF’s updated IT strategy by end-September 2025; and - adopting sectoral strategies in line with new PIM approaches by end-December. *Source: 1ukrea2025001-print-pdf - 22. Reforming support schemes for vulnerable groups and the pension system is needed* ### 2025. Furthermore, the authorities are requesting to reset the SBs on appointing the new head ### 1ukrea2025001-print-pdf - 2025. Furthermore, the authorities are requesting to reset the SBs on appointing the new head ### Program adjustments, prior actions, and access rephasing - Authorities request reset of structural benchmarks (SBs) on: - appointing the new head of ESBU and publishing the external audit of the NABU to end-July 2025. - enacting the amendments to the criminal procedural code to end-July 2025. - critical third-party risk to end-September 2025. - Prior action: - The authorities will enact a law adopted by Parliament to align excise taxes on tobacco products with EU directives (law #11090). - Access rephasing: - Authorities request rephasing of purchases under the extended arrangement over 2025–26 totaling SDR2.722 billion within the existing program envelope to allow modest backloading to align IMF financing with Ukraine’s balance of payment needs. ### Debt restructuring progress and claims - Eurobonds: - Following the successful conclusion of the Eurobonds, bond spreads have exited distressed levels and shown two-directional fluctuations as investors digest war developments and peace discussion prospects. - GDP warrants: - Prices on GDP warrants continue to rally given growth outturns and investor expectations. - Authorities and advisors are developing proposals consistent with the program’s debt sustainability objectives and have sought investor feedback. - Other commercial claims: - Ukrenergo bond restructuring restarted after reconstitution of the supervisory board; a 2½-week restricted discussion period ended in February without agreement; discussions will continue. - Government loans to a commercial creditor in the restructuring perimeter remain under communication pending a counterproposal. - Official bilateral claims: - GCU’s standstill remains in effect; consultations with the GCU on overall strategy are ongoing. - A CMU order authorized MOF and MOE to renegotiate a loan owed by a Ukrainian SOE to an official export credit agency; authorities sent a consolidated proposal. ### Debt trajectory, statistical treatment, and restructuring targets - Near-term debt trajectory: - Modestly revised since the Sixth Review; risen in the near term largely due to frontloading of ERA financing, but remains downward over the medium term. - Statistical treatment of ERA financing: - Staff and authorities treat EU MFA financing as a loan and incorporate these obligations in debt statistics. - Currently available information leads staff to continue including all other donors’ ERA financing in the debt stock; this judgment will be monitored and updated if warranted. - Debt sustainability assessment: - Expectation that distributions from the Ukraine Loan Cooperation Mechanism (ULCM) would extinguish claims related to ERA initiative that fall on Ukraine. - Staff judges risks of Ukraine assuming residual liability for servicing ERA financing are sufficiently mitigated, so ERA financing can be carved out from assessment of debt restructuring targets, which remain unchanged. - Principal debt targets (as presented): - 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 and publicly guaranteed debt (ex. ERA loans) in 2028: 82 percent of GDP - Annual flow relief over 2024-27: 1-1.8 percent of GDP ### Lending-into-arrears (LIA) and financing assurances - Staff assessment for Seventh Review: - 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 ERA burden; and (iii) a credible ongoing debt restructuring process. - Second-stage restructuring remains credible due to retention of advisors, information sharing, and authorities’ commitment to undertake any such debt operation by the end of EHU or the penultimate review. - LIA policy requirements: - Met: staff judges that (i) prompt Fund support is essential and (ii) Ukraine is pursuing appropriate policies and making a good faith effort to reach collaborative agreements with private creditors. - Ongoing discussions indicate adequate information sharing and opportunity for private creditor input. - Developments supporting financing assurances: - Authorities’ steps include updating strategy to restructure GDP warrants; continuing engagement with Ukrenergo bondholders; communication with a commercial creditor; working toward consolidated proposal on SOE loan to an official export credit agency; and outreach to the GCU. ### Financing needs, ERA allocation, and scenario gaps - Baseline cumulative financing gap: - US$148.8 billion. - Key updates to financing sources: - Bilateral support from Japan disbursed through the World Bank: US$0.5 billion. - Additional loan financing from the World Bank: US$0.9 billion. - Fresh loan financing from the Council of Europe Development Bank (CEB): €0.2 billion. - Revised cross exchange rate assumptions applied. - Allocation and phasing of ERA financing: - Baseline ERA financing included: US$44.1 billion. - ERA financing incorporated in macro framework in G7 members’ local currencies and converted to U.S. dollars based on WEO exchange rates. - Downside scenario: - Cumulative financing gap projected at US$162.9 billion (somewhat lower than in the Sixth Review). ### Selected financing table highlights (as presented) - Total cumulative program-period (2023Q2–2027Q1) totals (in millions of SDR): - Current Schedule total: 11,608.25 - Proposed Schedule total: 11,608.25 - Table 1: Baseline Scenario Financing Gap and Sources, 2023Q2–2027Q1 (Billions of US dollars) - A. Financing gap (excl. downside buffers): 42.5 46.1 42.8 23.2 3.3 148.8 - B. Official financing (excl. IMF): 38.0 36.4 54.9 10.8 1.8 132.7 - ERA (within B): 0.0 1.0 39.4 2.4 1.3 44.1 - C. IMF (prospective): 4.5 5.3 2.3 2.2 1.0 15.3 - D. Flow relief from debt operations: 0.0 4.4 3.0 3.2 0.2 10.8 - E. Budget prefinancing: 0.0 0.0 -8.4 8.4 0.3 0.0 - F. Downside buffers: 0.0 0.0 -9.1 -1.0 0.0 -10.1 - Memorandum: Underlying BoP gap: 31.2 43.5 47.3 22.1 2.2 140.2 - Table 2: Baseline Scenario 12-month (25Q2 thru 26Q1) (Billions of US dollars) - A. Financing gap (excl. downside buffers): 41.0 - B. Official financing (excl. IMF): 45.7 - EU: 12.1 - Japan: 0.5 - UK: 1.0 - World Bank: 0.9 - Other: 0.2 - ERA: 31.0 - C. IMF (prospective): 3.2 - D. Flow relief from debt operations: 3.5 - E. Budget prefinancing: -4.3 - F. Downside buffers: -7.1 ### Capacity to repay the Fund and staff appraisal indicators - Joint and several capacity-to-repay (CtR) assurance: - Provided by a significant group of creditors/donors at program approval and remains valid; includes G7 plus Belgium, Lithuania, the Netherlands, Poland, Slovakia, and Spain. - Assurance recognizes Fund’s preferred creditor status for amounts outstanding to Ukraine and any purchases under the proposed extended arrangement, and undertakes to provide adequate financial support to secure Ukraine’s ability to service all Fund obligations. - Indicators of capacity to repay (baseline and downside peaks noted): - Under baseline: - Stock of total Fund credit expected to peak at 7.2 percent of GDP in 2025 and 29.6 percent of gross reserves in 2026. - Debt service to the Fund would peak at 1.5 percent of GDP in 2025 and 5.6 percent of gross reserves in 2026. - Under downside risks: - Outstanding credit to the Fund would peak at 7.7 percent of GDP and 52.7 percent of gross reserves in 2026. - Debt service to the Fund would peak at 1.6 percent of GDP in 2025 and 9.9 percent of gross reserves in 2026. _Italic: Source — IMF staff report content (excerpts) from 1ukrea2025001-print-pdf (2025)._ ### 43. The Seventh Review is taking place as Ukraine faces an inflection point three years ### The Seventh Review is taking place as Ukraine faces an inflection point three years after the start of Russia’s war ### Context and immediate outlook - The Seventh Review occurs "three years after the start of Russia’s war." - "Initial discussions to end the war have begun," with potential implications for international financial and security support for Ukraine. - The economy "has remained broadly resilient," but "strains from the ongoing war are weighing on the recovery." - The "G7’s ERA financing continues to be integral to closing Ukraine’s financing gaps." - Immediate tasks identified: - "implement strong policies" - "preserve buffers" - "advance structural reforms to preserve economic stability and deliver a return to medium-term external viability by the end of the program" ### Program performance and reform implementation - Authorities' performance under the program described as "remained strong" despite challenging conditions and delays in governance reforms. - Compliance and deliverables: - Authorities "met all continuous PCs" - Authorities "met all end-December QPCs" - "The majority of structural benchmarks during December 2024-February 2025 were delivered on time" - A law to "establish the new administrative court was adopted with a delay" - A prior action, "the enactment of the law on tobacco excise taxes, will be completed for this review" - Implementation delays: - "Some of the delays in implementing SBs were triggered by lapses in donor support" *1ukrea2025001-print-pdf - 43.* ### 45. Near-term risks remain exceptionally high. The main risks continue to pertain to the ### 1ukrea2025001-print-pdf - 45. Near-term risks remain exceptionally high. The main risks continue to pertain to the ### Near-term risks and scenarios - Main risks: duration and intensity of the war; durability of international financial and military support; implications for macroframeworks and financing assurances. - Additional risks: continuing attacks on civilian and energy infrastructure; reform fatigue. - Upside scenario: an earlier end to the war with adequate security guarantees could drive investment and return migration. - Downside scenario: a peace settlement without credible security guarantees and/or financial resources for reconstruction could lead to adverse economic and social outcomes. - Policy implication: contingency planning remains essential. ### Fiscal policy and domestic revenue mobilization - Implementing the 2025 budget according to plan is critical to restore fiscal sustainability over the medium term. - Domestic revenue mobilization remains central; aligning taxation with EU requirements should continue. - Enactment of the law on tobacco excise taxes is highlighted as a welcome development. - Any deviations from the 2025 budget will need offsetting measures. - Anchoring medium-term fiscal policy on the forthcoming budget declaration is important. - Additional sustained efforts on domestic revenue mobilization will help decisively restore fiscal and debt sustainability. ### Management of donor disbursements and buffers - Authorities should prudently manage donor disbursements in line with the program’s fiscal paths. - Recommendation to save frontloaded financing in excess of financing needs, including through proposed tightening of NIR targets and rephasing of Fund purchases. - Purpose: safeguard buffers needed for future years and downside shocks, thereby supporting financing assurances across program scenarios. ### Debt restructuring - Prompt completion of the debt restructuring strategy is essential. - With the Eurobond exchange complete, authorities should progress on treatment of remaining commercial claims in the restructuring perimeter, especially on the GDP warrants. - Objective: provide critical flow relief during the program period and help restore sustainability. - Ongoing discussions between authorities and creditors should continue to deliver the program’s debt sustainability objectives. ### Fiscal structural reforms and public investment management - Continue efforts on fiscal structural reforms, building on a strong track record. - Priorities: - Implement public investment management (PIM) and medium-term budgeting reforms. - Effectively implement customs reforms, including timely appointment of the new head, to modernize the SCS and tackle corruption and fraud. - Effectively implement the National Revenue Strategy (NRS) to advance tax measures and improve tax collection. - Payoff: stronger frameworks to support recovery, reconstruction, and social protection needs after the war. ### Monetary policy and FX management - A tight monetary stance is appropriate to tackle inflation pressures and maintain adequate reserves. - The NBU should remain vigilant against further inflation risks and be prepared to further tighten in the near term to anchor expectations. - The exchange rate should play a greater shock-absorbing role to prevent external imbalances and safeguard reserves, given exceptionally high uncertainty and in line with the NBU Strategy and program objectives. - The cautious, conditions-based approach to FX liberalization remains appropriate, supported by continued monitoring of effectiveness. ### Financial stability - Authorities need to remain vigilant to financial stability risks. - Further efforts needed on: - Strengthening the bank rehabilitation framework. - Preparing a framework to address critical third-party risks. - Updating the NBU Resilience Assessment. - Closing substantial gaps in capital market infrastructure. - Priority: swift action to address critical institutional and effectiveness challenges of the NSSMC. ### Governance and anti-corruption - Decisive implementation of governance and anti-corruption reforms is essential to mitigate corruption risks, support swift EU accession, and attract post-war private capital flows. - Recent milestone: adoption of the law establishing new specialized administrative courts. - Continued actions recommended: - Enact the delayed criminal procedural code to assist anti-corruption institutions. - Finalize the external NABU audit. - Further strengthen the AML/CFT architecture, including publishing beneficial ownership information. - Reform payoff: stronger rule of law, transparency, accountability, and effective law enforcement to support private-sector-led reconstruction and EU accession. ### Energy sector resilience and governance - Efforts must continue to make the energy sector more resilient and decentralized while strengthening corporate governance. - Authorities have helped close the winter energy deficit; they should continue to build gas buffers ahead of the next heating season. - Selection and appointment procedures for SOE supervisory boards should be modernized. - Recommendation: start soon on a roadmap for gradual liberalization of gas and electricity markets with a time-bound implementation plan for the post Martial Law period. ### Program status, financing, and conditionality - The program remains on track to meet its objectives; requisite policies and safeguards are in place for the Fund to proceed with financing. - The program provides an anchor for restoring medium-term external viability, guiding debt restructuring, and catalyzing large-scale donor financing. - Going forward: - Authorities must continue delivering on policy commitments. - External partners must provide committed support in a timely manner and on appropriate terms. - Staff supports authorities’ request for: - Resetting four structural benchmarks. - Modification of a quantitative performance criterion. - Rephasing. - Completion of the Seventh Review Under the Extended Arrangement. - Completion of the financing assurances review. - Rationale: authorities’ strong performance and commitments, and continuing donor commitments indicate the program remains on track to meet objectives. ### Structural benchmarks and implementation status (selected highlights) - Numerous structural benchmarks listed with sector, timing, and status through 2025, including met and not met items. Examples preserved verbatim: - "Enact the law #11090 on tobacco excise taxes." — Fiscal — Prior Action. - "Adopt Budget Code amendments in line with Action 1 under the June 2024 PIM Action Plan." — Fiscal — End-January 2025 — Met. - "CMU to approve a methodological framework underpinning the PIM process, as specified in ¶36 of the MEFP." — Fiscal — End-February 2025 — Met. - "Submit legislative amendments to Parliament to introduce tax reporting requirements for digital platform operators." — Fiscal — End-April 2025. - "Appoint a permanent head of SCS." — Fiscal — End-June 2025. - "Submit a 2026–28 Budget Declaration on time and in line with program parameters." — Fiscal — End-June 2025. - "Adopt law to establish a new court that will hear administrative cases against national state agencies (e.g., NBU, NABU, NACP)..." — Governance/Anti-Corruption — End-December 2024 — Not Met. - "Prepare a comprehensive operational strategy for the NSSMC, including initiating an independent fit and proper review." — Financial Sector — End-January 2025 — Not Met. - "Complete the independent fit and proper review of the NSSMC." — Financial Sector — End-June 2025. - "Publish the completed external audit of the National Anti-Corruption Bureau of Ukraine’s effectiveness with participation of three independent experts with international experience." — Governance/Anti-Corruption — End-July 2025 — Not Met (Reset from end-February 2025). - Many other benchmarks with exact timing and status are listed in the source. ### Selected economic and fiscal baseline indicators (exact values preserved) - Real GDP (percent change): 2024: 3.4; 2025: -28.8; 2026: 5.3; 2027 (EFF 6th Review proj.): 3.5; 2028 proj.: 2.5; 2029 proj.: -3.5; 2030 proj.: 2-35.3 (as presented in the source). - Consumer prices (period average): 2024: 9.4; 2025: 20.2; 2026: 12.9; 2027: 6.5; 2028: 10.3; 2029: 12.6; subsequent years shown in source. - Fiscal balance (percent of GDP): 2024: -4.0; 2025: -15.6; 2026: -19.6; 2027 (EFF 6th Review): -17.2; 2028 proj.: -18.9; 2029 proj.: -18.8; 2030 proj.: -9.9; subsequent years shown in source. - Public and publicly-guaranteed debt (percent of GDP): 2024: 48.9; 2025: 77.7; 2026: 82.3; 2027 (EFF 6th Review): 89.8; 2028 proj.: 104.3; 2029 proj.: 110.0; 2030 proj.: 105.8; subsequent years shown in source. - Gross reserves (end of period, billions of U.S. dollars): 2024: 30.9; 2025: 28.5; 2026: 40.5; 2027 (EFF 6th Review): 43.8; 2028 proj.: 43.3; 2029 proj.: 56.8; 2030 proj.: 47.9; subsequent years shown in source. - Memorandum: Per capita GDP / Population (2017): US$2,640 / 44.8 million. Literacy / Poverty rate (2022 est): 100 percent / 25 percent. *Source: Excerpts from the IMF staff report (1ukrea2025001-print-pdf) provided in the content unit.* ### 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. - Risk likelihood definitions (staff subjective): “low” = probability below 10 percent; “medium” = probability between 10 and 30 percent; “high” = probability between 30 and 50 percent. - Non-mutually exclusive risks may interact and materialize jointly. - RAM reflects staff views as of discussions with the authorities. ### External Risks - Regional conflicts - Likelihood: Medium - Expected impact: High - Key impacts: - Disruption to trade in energy and food, tourism, supply chains, remittances, FDI and financial flows, payment systems, and increased refugee flows. - Further destruction of capital stock (including energy system), outward migration, internal displacement, stalled recovery, sharp growth decline, wider fiscal and external financing needs, possible resort to monetary financing, high inflation, erosion of purchasing power, increased poverty, stress on bank and SOE balance sheets. - Policy responses: - Maintain appropriate macroeconomic policies; implement contingency plans. - 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. - Sovereign debt distress - Likelihood: High - Expected impact: High - Key impacts: - Capital outflows, rising risk premia, loss of market access, abrupt expenditure cuts, lower growth, reduced/delayed disbursements of committed external financing, shift to less concessional financing. - Policy responses: - Prioritize spending; seek additional revenue measures. - Mobilize domestic financing; diversify external financing sources; obtain grant-based or highly concessional terms. - Commodity price volatility - Likelihood: Medium - Expected impact: Medium - Key impacts: - High energy prices strain consumption and business activity; widen fiscal and external financing needs. - Low/volatile agriculture prices could alter sowing decisions. - Policy responses: - Continue rationing energy to priority areas; further expand gas production. - Secure alternative gas sources and storage through the heating season. - Target transfers to most vulnerable groups within existing budget envelope. - Build on and deepen alternative export routes. - Tighter financial conditions and systemic instability - Likelihood: Medium - Expected impact: High - Key impacts: - Shortfall or delay in financing could necessitate financial repression, monetary financing, sharp spending compression, intensifying macro-financial risks and damping recovery. - Policy responses: - Prioritize spending; seek additional revenue measures. - Mobilize domestic financing; diversify external financing; obtain grant-based or highly concessional terms. - Implement contingency plans. ### Domestic Risks - Social discontent - Likelihood: Medium - Expected impact: High - Key impacts: - Declining real incomes and rising inequality amplify social unrest, undermine national unity, risk populist policies that widen fiscal and external imbalances and stall reforms. - Policy responses: - Maintain appropriate macroeconomic policies and consistently explain rationale for measures. - Targeted transfers to most vulnerable groups within existing budget envelope. - Loss of reform momentum - Likelihood: Medium - Expected impact: High - Key impacts: - Poor governance, corruption, retrenchment of oligarchic interests, and weak oversight of external funding reduce incentives for reform, exacerbate financing gaps, and risk donor fatigue. - Policy responses: - Adhere to governance reforms; strengthen anti-corruption and judicial institutions. - Implement critical reforms to support competitiveness and productivity. - Mobilize domestic financing and prioritize spending. - Loss of export and transit corridors and EU restrictions for agricultural produce - Likelihood: High - Expected impact: Medium - Key impacts: - Loss of the Black Sea corridor would severely affect the balance of payments, exacerbate financing gaps, undermine recovery; prolonged closure of other transit routes would curtail exports and affect farming decisions. - Policy responses: - 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 expand the Black Sea corridor. ### Structural Risks - Deepening geoeconomic fragmentation - Likelihood: High - Expected impact: High - Key impacts: - Persistent conflicts, protectionism, fractured technologies and payment systems increase input costs, hinder green transition, lower trade and potential growth; Ukraine exposed as a trade-dependent economy. - Policy responses: - Maintain appropriate macroeconomic policies to safeguard stability and ensure 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 ### Context and Overall Assessment - The SRDSA is based on a baseline scenario and a downside scenario. Only agreed debt restructurings are incorporated (the August 2024 Eurobond restructuring is included; other claims in the authorities’ restructuring perimeter retain pre-restructuring terms). - Continued finding: debt sustainability relies on (i) completing restructuring with sufficiently deep treatments; (ii) fiscal adjustment; and (iii) concessional financing during and after the program. - Staff assesses debt as sustainable on a forward-looking basis conditional on policy commitments, donor assurances, and a credible process for remaining external commercial debt restructuring. ### Macroeconomic Projections (baseline) - Real GDP growth: - 3.5 percent in 2024 - 2 percent in 2025 - 4.5 percent in 2026 - Subsequent years: little changed; real GDP exceeds pre-war level starting in 2031. - Inflation: recent rise led to some upward revisions. - Downside scenario: war continues to extend until mid-2026. ### Financing Assumptions - Total official external financing (excluding the IMF) over the program period: US$132.7 billion. - ERA disbursements comprise US$44.1 billion of the total. - ERA phasing: more frontloaded; portion of 2025 disbursements US$8.4 billion allocated as budget prefinancing. - Contingent financing saved: US$10.1 billion over 2025–26. - After the program, expected budget support disbursements from partners: around US$5–12 billion per year. - Return to market access assumed in 2029. ### Debt Perimeter and Contingent Liabilities - The DSA uses authorities’ end-2024 debt statistics with adjustments: - Three debts with Russia (disputed) are excluded from DSA debt stock but remain contingent liability risk. - DSA includes US$1 billion of ERA financing through the FORTIS FIF in December 2024. - ERA financing treated conservatively as loans on terms similar to the EU’s MFA (assumed 10-year grace period, 25-year final maturity, and no interest); under these assumptions, no impact on GFNs in the forecast horizon. - No change in assessment of the second half of the canceled 2024 US budget support as a contingent liability. - Projected payments on warrants are incorporated as contingent liabilities under passive policy assumptions. ### Debt Stock (derivation from authorities’ statistics) - Public debt at end-2024, authorities' debt statisitcs: 6,981 UAH billion | 166 USDbillion | 91.3 Pct of GDP - Less: disputed claims: 152 UAHbillion | 42 USDbillion | 2.0 Pct of GDP - Add: ERA disbursed at end-2024: 42 UAHbillion | 10.5 USDbillion - Public debt in the DSA: 6,871 UAH billion | 163 USDbillion | 89.8 Pct of GDP - Memo: Public debt in the DSA, ex. ERA: 6,829 UAH billion | 162 USDbillion | 89.3 Pct of GDP ### Debt and GFN Trajectories and Risks - End-December public debt in DSA: 89 percent of projected 2024 GDP (below 92 percent in Sixth Review DSA). - Debt-to-GDP ratios rise initially then resume a downward trend over the medium run; GFN changes modestly relative to the Sixth Review. - Mechanical tools indicate debt unsustainable in a pre-restructuring scenario; overall risk signals are high for medium- and long-term horizons. - Long-term risks remain high given uncertainty and possible need to refinance concessional debt on less favorable terms. ### Debt Restructuring Targets (remain appropriate) - ERA financing treated as neutral for DSA targets given its extraordinary, multi-level risk mitigation structure. - Debt restructuring targets: - Public debt excluding ERA liabilities: reach 65 percent of GDP by 2033. - Gross financing needs excluding ERA debt service: average 8 percent of GDP in the post-program period (2028–33). - Complementary targets: public debt (excluding ERA liabilities) of 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 provided substantial progress toward these savings. ### Policy and Financing Preconditions for Sustainability - Restoration of debt sustainability depends on: - (i) fiscal adjustment (authorities plan revenue-based fiscal adjustment under the program); - (ii) substantial concessional financing (official bilateral donors committed substantial concessional financing, agreed debt standstill during the program, and assurances to restructure claims before final review); and - (iii) debt restructuring (including GDP warrants). - Staff view: with program implementation and commitments, the three conditions can be met and debt can be assessed as sustainable on a forward-looking basis, though high uncertainty and risks remain. *Source: IMF staff annexes (Annex I. Risk Assessment Matrix; Annex II. Sovereign Risk and Debt Sustainability Analysis).* ### Annex II. Figure 2. Ukraine: Debt Coverage and Disclosures ### Annex II. Figure 2. Ukraine: Debt Coverage and Disclosures ### 1. Debt coverage in the DSA - 1. Debt coverage in the DSA: 1/CGGGNFPSCPSOther - 1a. If central government, are non-central government entities insignificant?n.a. ### 2. Subsectors included in the chosen coverage - Subsectors captured in the baselineInclusion - 1 Budgetary central governmentYe s - 2E xtra budgetary funds (EBFs)No - 3Social security funds (SSFs)Ye s - 4State governmentsYe s - 5Local governmentsYe s - 6Public nonfinancial corporationsYe s - 7Central bankYe s - 8Other public financial corporationsYe s ### 3. Instrument coverage - (No detailed instrument list provided in the figure text extract.) ### 4. Accounting principles - (No detailed accounting principles provided in the figure text extract.) - Footnote excerpts preserved: - 2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. - 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. - 3/ Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities. ### 5. Debt consolidation across sectors - Debt consolidation across sectors:Data unavailable - Reporting on Intra-Government Debt Holdings table headings present but data not available in extract (holders/issuers listed as Budget. central govt, Extra-budget. funds, Social security funds, State govt., Local govt., Nonfin pub. corp., Central bank, Oth. pub. fin. corp with numeric placeholders "0" and "Total000000000"). ### Coverage summary (text excerpt) - 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. ### Color code and labels (as presented) - Color code: █ chosen coverage █ Missing from recommended coverage █ Not applicable ### Basis of recording / Valuation (labels present) - Labels appearing in the figure: - Non-consolidated - Consolidated - CPS - NFPS - GG: expected - CG - Non - cash b asis 4/ - Cash basis - Nominal valu e 5/ - Face valu e 6/ - Basis of recordingValuation of debt stock - Not applicable - Inc. projected IMF BOP support - Debt securities - Loan s - IPSGSs 3/ - Market valu e 7/ - Currency & d eposits - Comments *Source: Annex II. Figure 2 text (Ukraine: Debt Coverage and Disclosures).* ### Annex III. Table 2a. Ukraine: General Government Finances (Downside Scenario), 2021–33 ### Annex III. Table 2a. Ukraine: General Government Finances (Downside Scenario), 2021–33 ### Revenue (Billions of Ukrainian Hryvnia) - Revenue (2024–2033): 1,990; 2,609; 3,583; 4,140; 3,569; 3,932; 4,579; 5,070; 5,473; 5,966; 6,502; 7,066; 7,689 - Tax revenue (2024–2033): 1,825; 1,782; 2,139; 2,658; 3,175; 3,592; 4,102; 4,585; 4,972; 5,432; 5,934; 6,462; 7,044 - Tax on income, profits, and capital gains (2024–2033): 514; 551; 656; 883; 1,038; 1,190; 1,367; 1,527; 1,664; 1,823; 1,987; 2,165; 2,359 - Personal income tax (2024–2033): 350; 421; 496; 584; 795; 937; 1,063; 1,192; 1,299; 1,421; 1,549; 1,687; 1,839 - Corporate profit tax (2024–2033): 164; 131; 159; 299; 243; 253; 304; 334; 364; 402; 438; 478; 520 - Social security contributions (2024–2033): 358; 430; 489; 556; 572; 619; 696; 762; 832; 908; 997; 1,083; 1,175 - Property tax (2024–2033): 43; 37; 44; 50; 52; 51; 51; 52; 53; 53; 54; 54; 54 - Tax on goods and services (2024–2033): 731; 592; 784; 989; 1,288; 1,486; 1,711; 1,940; 2,094; 2,308; 2,541; 2,766; 3,022 - VAT (2024–2033): 536; 467; 581; 734; 909; 1,028; 1,184; 1,353; 1,457; 1,602; 1,760; 1,905; 2,078 - Excise (2024–2033): 180; 115; 190; 238; 337; 411; 475; 530; 576; 641; 710; 785; 861 - Other tax (2024–2033): 140; 145; 126; 132; 158; 169; 182; 192; 203; 206; 211; 235; 256 - Tax on international trade (2024–2033): 382; 641; 486; 778; 951; 1,121; 1,221; 1,351; 1,461; 1,591; 78 - Nontax revenue (2024–2033): 166; 827; 1,444; 1,483; 394; 339; 477; 485; 501; 533; 568; 604; 644 - Budget support grants (comprises grants to the general fund) (2024–2033): 148; 142; 647; 584; 261; 331; 141; 031; 071; 101; 131; 116 ### Expenditure (Billions of Ukrainian Hryvnia) - Expenditure (2024–2033): 2,207; 3,426; 4,865; 5,458; 5,642; 5,961; 5,754; 5,695; 6,115; 6,532; 7,069; 7,600; 8,221 - Current expenditure (2024–2033): 1,995; 3,298; 4,562; 5,053; 5,253; 5,459; 5,161; 5,023; 5,382; 5,726; 6,191; 6,642; 7,177 - Compensation of employees (2024–2033): 516; 1,240; 1,479; 1,584; 1,863; 1,892; 1,322; 1,141; 1,198; 1,273; 1,385; 1,513; 1,652 - Goods and services (2024–2033): 483; 848; 1,674; 1,505; 805; 809; 876; 731; 793; 832; 939; 994; 1,098 - Interest (2024–2033): 155; 162; 254; 305; 502; 440; 641; 708; 739; 779; 799; 791; 807 - Subsidies to corporations and enterprises (2024–2033): 116; 131; 158; 530; 714; 657; 410; 336; 353; 370; 389; 408; 429 - Social benefits (2024–2033): 724; 917; 996; 1,129; 1,367; 1,658; 1,909; 2,105; 2,297; 2,468; 2,676; 2,934; 3,188 - Social programs (on budget) (2024–2033): 154; 285; 241; 286; 458; 625; 776; 854; 917; 992; 1,077; 1,180; 1,288 - Pensions (2024–2033): 519; 583; 746; 822; 890; 1,011; 1,090; 1,165; 1,270; 1,310; 1,395; 1,540; 1,675 - Capital expenditure (2024–2033): 207; 130; 312; 411; 323; 428; 510; 581; 633; 698; 761; 829; 903 - Net lending (2024–2033): 5; -2; -9; -6; 24; 27; 30; 33; 36; 39; 43; 46; 51 - Contingency reserve (includes the unallocated portion of expenditures from the COVID fund) (2024–2033): 0; 0; 0; 0; 42; 47; 53; 58; 63; 69; 75; 82; 89 ### General government balance and financing (Billions of Ukrainian Hryvnia) - General government overall balance (2024–2033): -216; -817; -1,282; -1,318; -2,074; -2,029; -1,175; -626; -641; -566; -567; -534; -532 - General government overall balance, excluding grants (2024–2033): -218; -1,299; -1,707; -1,793; -2,158; -2,055; -1,308; -739; -744; -673; -677; -647; -648 - General government financing (2024–2033): 216; 817; 1,280; 1,318; 2,074; 2,029; 1,175; 626; 641; 566; 567; 534; 532 - External (2024–2033): 136; 562; 1,076; 1,106; 2,425; 545; 449; 882; 454; 304; 374; 235; 21 - Disbursements (2024–2033): 239; 615; 1,149; 1,317; 2,573; 734; 630; 277; 622; 705; 726; 746; 766 - Amortizations and other external payments (2024–2033): -103; -5; 3; -73; -210; -149; -189; -181; -189; -377; -274; -289; -323; -245 - Domestic (net) (2024–2033): 8; 126; 320; 420; 6; -351; 1,484; 726; 538; 396; 136; 130; 111; 11 - Bond financing (2024–2033): 4/ 622; 951; 833; 371; 510; 697; 045; 323; 901; 301; 241; 055 - o/w NBU (2024–2033): -143; 83; -1; 5; -12; -13; -12; -12; -12; -11; -12; -12; -12; -12; -47 - o/w Commercial banks (2024–2033): 76; -80; 1; 672; 222; 281; 1,075; 716; 543; 392; 130; 122; 103; 37 - Direct bank borrowing (2024–2033): 30; -2; -7; -500; 0; 0; 0; 0; 0; 0; 0; 0; 0 - Deposit finance (2024–2033): -19; -37; -59; -136; -375; 409; 160; 0; 0; 0; 0; 0; 0 - Privatization and other items (2024–2033): 72; 07; 11; 96; 66; 66; 66; 66; 66; 66; 66; 66; 66 - Financing Gap/unidentified measures (-gap/+surplus) (2024–2033): 0; 0; -200; 0; 0; 0; 0; 0; 0; 0; 0; 0; 0 ### Key fiscal indicators (Memorandum items) - Primary balance (2024–2033): -62; -655; -1,028; -1,013; -1,571; -1,589; -535; 829; 821; 323; 225; 727; 275 - Public and publicly-guaranteed debt (2024–2033): 2,666; 4,072; 5,383; 6,871; 10,323; 12,641; 14,575; 15,625; 16,680; 17,664; 18,604; 19,521; 20,472 - Nominal GDP (billions of Ukrainian hryvnia) (2024–2033): 5,451; 5,239; 6,538; 7,648; 8,771; 9,861; 11,055; 12,163; 13,256; 14,448; 15,747; 17,162; 18,705 *Sources: Ministry of Finance; National Bank of Ukraine; and IMF staff estimates and projections.* ### 4. Given the exceptionally high uncertainty, our objectives under the program remain to first ### 4. Given the exceptionally high uncertainty, our objectives under the program remain to first ### Objectives and program focus - Preserve macroeconomic and financial stability within the context of the ongoing war while preparing the ground for a strong post-war recovery. - Restore stability and undertake repairs to essential infrastructure, such as in the energy sector that has suffered from repeated attacks. - Continue implementing wide-ranging structural reforms covering public finances, the financial sector, monetary and exchange rate policies, governance, anti-corruption, and the energy sector to lay foundations for stronger prospects after the war ends. - Further deepen structural reforms and implement additional macroeconomic policy reforms post-war to: - Restore medium-term external viability. - Support reconstruction. - Promote strong long-term growth. - Accelerate progress toward EU accession. ### Seventh Review under the EFF: performance and requests - Met all the end-December 2024 and continuous quantitative performance criteria (QPCs). - Achieved all the indicative targets (ITs). - Request: modifications of the net international reserves floors QPCs for all test dates in 2025 to reflect a more frontloaded disbursement schedule for ERA financing. - Rationale: commitment to utilizing these flows prudently and consistently with the program’s parameters; objective of preserving external sustainability and maintaining adequate buffers amid elevated near-term risks. - Request: completion of the Seventh Review and a disbursement in the amount of SDR 300.47 million (14.9 percent of quota), to be channeled for budget support. - Request: rephasing to backload purchases under the program for 2025–26 to better align with the profile of balance-of-payments needs. - Administrative: 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 of the government’s obligations to the Fund by the NBU on behalf of the MOF. ### Structural benchmarks, implementation, and proposed resets - Structural benchmarks met between end-December 2024 and end-February 2025: - (i) preparation of the bank rehabilitation framework; - (ii) implementation of a supervisory risk assessment methodology; - (iii) adoption of budget code amendments in line with the Public Investment Management (PIM) action plan; - (iv) CMU adoption of a methodological framework underpinning the PIM process. - Respected the continuous structural benchmark on the banking system. - Benchmarks not met and proposed resets: - Enactment of a law establishing a specialized administrative court — adopted by Parliament with a delay (missed end-December benchmark). - NSSMC comprehensive operational strategy including initiating an independent fit-and-proper review — implementation dates not met; propose completing independent fit-and-proper review of the NSSMC by end-June 2025 (proposed new structural benchmark). - Amendments to the criminal procedural code — missed end-December 2024 and end-February 2025 structural benchmarks; propose reset to end-July 2025. - Appointment of the new head of the Economic Security Bureau of Ukraine (ESBU) — missed; propose reset to end-July 2025. - External audit of the National Anticorruption Bureau of Ukraine (NABU) — missed; propose reset to end-July 2025. - Draft law on critical third-party risk — request to reset implementation date from end-May to end-September 2025 because more time is needed to develop and submit the draft law. - Prior action for this review: - Enacted law #11090, adopted by Parliament to align excise taxes on tobacco products with EU directives. ### Additional proposed structural benchmarks (demonstrating commitment) - (i) Complete the independent fit-and-proper review of the NSSMC by end-June 2025. - (ii) Revise selection and appointment processes for SOE supervisory board members and adopt appropriate changes to relevant CMU by-laws by August 2025. - (iii) Develop an operational plan for the implementation of the MOF’s updated IT strategy by end-September 2025. - (iv) Adopt sectoral strategies in line with new PIM approaches by end-December 2025. ### Debt restructuring, financing assurances, and partners’ support - International partners have assured continued support to help ensure that debt sustainability is restored and the program is fully financed. - March 2023: announced intention to undertake a treatment of external public debt in line with program parameters. - August 2024: completed an exchange of outstanding government and Ukravtodor bonds. - Commitment: if the macroeconomic and debt outlook worsen, Ukraine commits to undertake a further external commercial debt treatment as needed to restore debt sustainability in line with program parameters. - Timing expectation: such a treatment would take place once conditions of exceptionally high uncertainty abate, or at the latest by the penultimate review of the program. - Request: completion of the financing assurances review. ### Macroeconomic outlook and key statistics (2024–2025) - Program and financing package: - External financing package from international partners totals US$148.8 billion over the program period (2023Q2–27Q1). - EU and bilateral G7 arrangements make around US$50 billion available through the Extraordinary Revenue Acceleration (ERA) Loans for Ukraine Initiative. - Growth: - 2024 growth is estimated at around 3.5 percent. - 2025 growth is expected between 2 and 3 percent. - Inflation: - Inflation reached 12.9 percent y/y in January 2025. - Inflation is expected to moderate to around 9 percent by end-2025. - Current account and reserves: - Current account deficit excluding grants reached US$24.7 billion in 2024 (up from US$21.3 billion in 2023). - Projected current account deficit excluding grants in 2025: US$34.3 billion. - Gross international reserves projected to end 2025 at US$56.8 billion (127.3 percent of the ARA metric). - Exchange rate and FX: - Hryvnia depreciated through end-December 2024 by a cumulative 15 percent since the transition to managed exchange rate flexibility, and has remained broadly stable in recent months. - FX interventions remain sizeable; spread between official and cash rates has remained low. - Banking and credit: - State support in lending to businesses (5-7-9 program) role has declined. - Mortgage lending dominated by subsidy program (eOselya). - Gross non-performing loans continue to fall; loan default rates are declining and approaching pre-war levels. - Banking system remains profitable and highly liquid amid still strong deposit growth. ### Risks, scenarios, and contingency commitments - Upside potential: - A just peace agreement could deliver a swift and enduring improvement in the security situation and faster rebound driven by return migration, recovering sentiment, resolution of supply disruptions, durable access to seaports and supply routes, recovery and repair projects, and stronger progress in energy reforms. - Medium-term acceleration possible via forceful implementation of structural reforms, significant investments (private and official), and faster return of migrants. - Downside risks: - Prolonged or more intense war could pressure fiscal position, increase financing needs, weaken sentiment, discourage migrant return, worsen labor market mismatches, delay private investment, interrupt export transit routes, cause further energy infrastructure damage, and resurface supply chain disruptions. - Shortfalls or delays in external financing could recur, exacerbating financing constraints and requiring difficult policy trade-offs; mobilizing higher domestic financing could become difficult. - Prepared policy responses under updated downside scenario: - Stand ready to take additional feasible fiscal measures, including identifying additional tax policy measures implementable swiftly and effectively or spending measures building on efficiency gains. - Guided by the National Revenue Strategy (NRS) to strengthen revenue mobilization. - Identify additional domestic financing as needed to close financing gaps without compromising stability or debt sustainability. - Deploy foreign reserves, adjust monetary policy stance, and recalibrate FX controls as needed. - Partners stand ready to provide additional financial resources sufficient to close financing gaps and preserve debt sustainability under the downside scenario. ### Policy framework for 2025–27: overview - Ultimate goals of the program: - Restore fiscal and debt sustainability. - Maintain external and financial stability. - Restore medium-term external viability to support post-war reconstruction and EU accession. - Two-phased approach: - Phase 1: Preserve stability and advance priority structural reforms while planning for deepening reforms once the war tapers off. - Phase 2 (as conditions allow): Broaden and deepen structural reforms to entrench macroeconomic stability, bolster reconstruction, promote economic growth, and restore medium-term external viability; revert to pre-war policy frameworks where appropriate. - Key policy elements: - Ensure robust budget implementation in 2025 consistent with a strong medium-term budget framework. - Maintain managed flexibility of the exchange rate to strengthen resilience and reduce FX imbalance risks. - Tight monetary policy response to stabilize inflation expectations where needed. - Implement well-targeted structural measures in public finances, financial sector, monetary and exchange rate policies, SOE governance, anti-corruption, and the energy sector. - Safeguard social spending to the extent possible. - Swift progress toward EU accession as a major anchor; commitments under the Ukraine Facility and EU enlargement report. ### Transparency and consultations - Committed to consult with the IMF on adoption of measures and in advance of any revisions to the policies contained in the MEFP, in line with the IMF’s policies on consultation. - Will provide IMF staff with data and information needed to monitor program implementation, including by adhering to the data provision requirements described in the attached Technical Memorandum of Understanding (TMU). - Consent to the IMF’s publication of this letter, the MEFP, the TMU, and the accompanying Executive Board documents. *Source: Letter and Attachment I. Memorandum of Economic and Financial Policies, Ukraine.* ### 10. Despite immense challenges from Russia’s continuing war, we registered a strong ### 10. Despite immense challenges from Russia’s continuing war, we registered a strong performance under the program once again, delivering all end-December fiscal targets ### Program performance and end-December fiscal targets - Tax collections were UAH 2,101.9 billion, overperforming the target of UAH 2,042.3 billion (Quantitative Performance Criterion). - Non-defense cash primary balance of the general government was UAH 756.0 billion (at program exchange rates), exceeding the floor of UAH 415.4 billion (Quantitative Performance Criterion). - Overall balance excluding grants was UAH -1,611.5 billion (at program exchange rates), above its floor of UAH -1,801.7 billion (Indicative Target). - Issuance of government guarantees was UAH 46.8 billion (at program exchange rates), below the adjusted ceiling of UAH 61.6 billion (Quantitative Performance Criterion). - Accumulation of overdue accounts payable (domestic arrears) dipped to UAH 1.4 billion, below the ceiling of UAH 1.8 billion (Indicative Target). - Social spending amounted to UAH 601.4 billion, exceeding the floor of UAH 537.8 billion. ### 2025 Budget framework and projections - Expenditures: UAH 5,065 billion (58.0 percent of GDP). - Revenues excluding grants: UAH 3,355 billion (38.4 percent of GDP). - Tax revenues: UAH 3,087 billion (35.3 percent of GDP). - Overall deficit excluding grants expected to reach UAH 1,710 billion in 2025 (19.6 percent of GDP). - The 2025 Budget remains the anchor for fiscal policies; expenditures remain high reflecting defense needs despite tight prioritization. ### External support, ERA, and management of resources - ERA disbursements expected to reach US$39.4 billion in 2025. - Steps to ensure ERA disbursements are used according to the program’s fiscal paths over 2025–2027Q1, including allocating a portion as prefinancing for budget deficits and maintaining an adequate buffer. - Rules referenced: relevant rules on revenue overperformance; article of the budget code on pref inancing limits; articles of the budget code on expenditure limits. - Commitment: revise spending categories only in consultation with IMF staff and after identifying new financing sources or compensating fiscal measures. - Administration of ERA flows as budget support, ensuring financing is: (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. ### Revenue stance and contingent measures - Recent tax package raised military tax rates and broadened applicability, introduced presumptive tax on fuel stations, reformed corporate tax on non-bank financial institutions, and extended windfall bank taxation for another year. - Harmonizing tobacco excise taxes with EU directives and enact law #11090 as a prior action for this review. - Preparedness to respond to budgetary shocks with an increase in taxes if needed; continuing to view increases in the main VAT rate as the most efficient potential source of additional revenue. - Policy objective: pursue revenue-based fiscal adjustment to preserve stability and restore fiscal and debt sustainability. ### Medium-term planning and budget declaration - Preparing the 2026–28 Budget Declaration as a critical anchor for fiscal policies in the post-war reconstruction and recovery phase (Structural Benchmark, end-June 2025). - The 2026–28 declaration will plan for recovery and reconstruction, defense, and adequate social protection, and clarify the role of domestic revenue mobilization to return to fiscal and debt sustainability. ### Medium-term fiscal target - Aim to complete return to fiscal and debt sustainability by targeting a primary surplus of around ½-1½ percent of GDP in the medium term, after the end of the war with Russia. - Commitment to sustained revenue effort to meet post-war spending needs while reducing reliance on external financing, in line with NRS strategic objectives. ### Damage, needs, and investment prioritization - RDNA-4 (covering February 2022-December 2024) estimates: direct documented damages US$176 billion and total reconstruction and modernization needs US$524 billion. - RDNA-4 estimates do not account for undocumented damages, mineral resources extracted from occupied territories, and other factors. - Largest needs concentrated in housing, energy, transport, and commerce and industry. - Investment projects will be prioritized and selected through the PIM framework, fit into the medium-term budgetary framework (MTBF), and be consistent with a return to fiscal and debt sustainability. - Financing mix: will be carefully evaluated and financing sought on highly concessional terms. ### Financing strategy and commitments - Financing gap: US$148.8 billion over the baseline program period. - Budget support received: close to US$120 billion over first three years of the full-scale war; since start of the program, US$78.1 billion received, of which US$3.1 billion disbursed during January-February 2025. For remainder of the year, expect an additional US$52.3 billion. - Firm financing commitments for April 2025-March 2026: assurances for US$45.7 billion (excluding IMF financing), including US$31 billion from the ERA mechanism. - Prospects beyond March 2026: key partners have assured continued support to keep the program fully financed. ### Domestic financing and government bond market - Domestic financing need in 2025 expected to be smaller than last year's sizable effort due to large-scale external disbursements. - Year-to-date, UAH 20 billion of benchmark bonds have been issued. - Continued engagement with domestic bond market to execute the budget, avoid arrears, avoid monetary financing, and safeguard macroeconomic and financial stability and restore debt sustainability. - Benchmark bonds support absorption of government debt securities as banks can utilize them to meet reserve requirements. ### Public debt management actions - Update the Medium-Term Debt Strategy (MTDS) upon completing treatment of external commercial claims (including GDP-linked securities) and before the end of the year. - Strengthen debt management capacity by increasing staffing and training. - Support development of the domestic debt market, maintain attractiveness of locally-issued instruments, diversify investors including encouraging non-resident participation. - Facilitate international capital market access in the medium term consistent with debt sustainability objectives to enable bond market role in reconstruction. ### Fiscal structural reform priorities - Focus areas: (i) raising revenues guided by NRS; (ii) improving public investment and public financial management frameworks; (iii) reforming and strengthening the pension system and social safety net; (iv) enhancing fiscal transparency and management of fiscal risks; (v) strengthening the MTBF to ensure fiscal sustainability and predictability. ### Revenue mobilization under the NRS - NRS adopted in December 2023 aims to establish a fair and competitive tax framework to generate sufficient revenues while maintaining fiscal and debt sustainability. - NRS implementation: detailed implementation plans with timetables for tax administration, customs, and tax policy reforms. - Commitment to publish a comprehensive annual status report each March; finalizing this year’s report for publication by the end of March 2025. - NRS Steering Committees at SCS and STS to supervise implementation. - Commitment to abstain from tax measures that adversely affect the tax base and refrain from introducing new categories of taxpayers in existing preferential regimes. ### Near-term tax policy and tax expenditure reforms - Near-term measures: increase excise rates toward EU minimum levels; target and rationalize tax exemptions to minimize revenue losses while protecting equity and efficiency. - Adopted a formal assessment methodology for tax privileges including (i) number of topics per annual cycle, (ii) a standardized evaluation template, (iii) publication process for assessments. - By end-September 2025: determine the benchmark tax system for each major tax (CIT, VAT, PIT, and excise tax). - Inventory of all tax expenditures to be published alongside 2027 annual budget documentation; regular calculations of tax expenditure costs. ### Medium-term tax policy reforms planned - Measures to strengthen revenue mobilization: - (i) develop a comprehensive package for post-war taxation of carbon emissions; - (ii) analyze and assess taxation of extractive industries; - (iii) define principles of taxation of virtual assets aligned with EU rules and OECD Global Forum initiatives. - Consider reforms to make the tax system more equitable (e.g., more progressive PIT). - Comprehensive reform of the Simplified Tax (ST) system to limit application and scope for abuse; reforms to begin at the latest by early 2027 with measures to: limit return to ST after transition to general taxation, revise thresholds and indexing, and narrow eligibility by excluding certain activities. - Such PIT and ST reforms require administrative reforms, confidentiality safeguards in STS systems, and review by MoF in cooperation with the NBU with TA from the IMF and other partners. ### Digital reporting, anti-evasion, and legislative actions - 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 allow STS to obtain data on incomes of private individuals avoiding registration or ST system usage. - Will submit relevant legislative amendments to Parliament by end-April 2025 (Structural Benchmark, end-April 2025). - In 2025, submit legislative amendments to the CMU to implement rules to combat tax evasion practices that take into account EU Anti-Tax Avoidance Directive requirements. ### State Tax Service (STS) modernization and compliance measures - Publish taxpayer survey on a biannual basis (published a survey in 2024; commit to biannual publication). - Improve excise tax administration, including for tobacco; develop a track and trace system in cooperation with Ministry of Digital Transformation to be operational by January 1, 2026. - MOF, STS, and SCS to develop an operational plan for the updated IT Strategy of the MoF, to be adopted by end-September 2025 (proposed Structural Benchmark, end-September 2025), focusing on IT infrastructure modernization and consolidation. - Measures to ensure confidentiality and protection of data in STS systems; concept to use de-personified data planned to be operationalized by end-2026, conditional on funding. - Developed methodological documents to operationalize tax risk management and adopted an Overall Compliance Improvement Plan. - Finalizing 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 for large taxpayers by end-March 2025. - Working on: (i) organizational restructuring of STS to a functionally organized tax administration and modern Compliance Risk Management, and (ii) improving efficiency of information exchange with foreign competent authorities. *Source: 1ukrea2025001-print-pdf - 10. Despite immense challenges from Russia’s continuing war, we registered a strong* ### 25. Near-term reform efforts at the State Customs Service (SCS) focus on areas critical for ### Near-term reform efforts at the State Customs Service (SCS) and related fiscal and governance reforms ### State Customs Service (SCS) — anti-corruption, capacity, and operational reforms - Criminalization and administrative liability - Legislation adopted to criminalize large-scale customs fraud and smuggling. - Legislation to modernize the framework to address administrative liability for violations of customs regulations submitted for adoption by end-March 2025. - Compliance risk management and AEO program - Automatic risk management system being implemented. - Authorized Economic Operator (AEO) program expanded from one participant at end-2023 to 83 by February 2025. - Commitment to ensure a steady increase in participants while maintaining program integrity. - Introduction of a random check methodology to establish a baseline measure of compliance risk and assess validity of existing risk criteria. - Customs Code implementation and integrity framework - Key Customs Code reforms include: simplifying procedures; integrity-based dismissal and periodic re-attestation; attestation of central office employees and all employees; creation of a disciplinary committee; enabling contractual hiring; barring re-hiring of personnel dismissed for ethics violations; aligning national customs legislation with EU regulations by 2027. - Additional reforms: granting customs authorities law enforcement status; centralization of customs IT and infrastructure by mid-2026. - MOF to provide leadership and oversight of customs-related reforms and to approve proposals before submission to the CMU to maintain a coherent reform agenda. - Structural Benchmark: appoint a new permanent head of customs by end-June 2025 (Structural Benchmark, end-June 2025). MOF to oversee selection, KPI-based performance evaluation, and policy guidance for the SCS head while ensuring SCS operational independence. - Vacancies for regional customs heads to be filled as soon as possible. - Gradual and selective centralization and standardization of functions such as HR, accounting, and litigation across the customs service to enhance efficiency, productivity, and compliance. - Integrity monitoring and operational improvements - SCS completed a Customs Integrity Perception Survey in December 2024; commitment to repeat on a biannual basis and use results to inform anti-corruption policy. - Ongoing reforms: (i) HR and compensation policy reforms; (ii) improving operational management from headquarters, including development of centers of excellence; (iii) moving verification/checking of customs documents from border crossings to inland offices. ### Economic Security Bureau of Ukraine (ESBU) - Mandate and institutional design - ESBU to focus on major economic and financial crimes and strengthen analytical capacity to prevent such crimes using a risk-based approach, complemented by capacity of the STS and SCS in tax and customs spheres. - ESBU law approved in June 2024 establishes mechanisms for the selection commission for the ESBU head with a decisive vote for independent experts with international experience. - Independent experts to play important roles in attestation of existing staff and HR commissions to select new staff. - Selection and attestation milestones - Selection commission for the new ESBU head approved in October. - Commitment to finalize selection process for the new ESBU head as soon as possible despite delays (Structural Benchmark, end-February 2025; not met and proposed reset for end-July 2025). - New ESBU head will approve attestation procedures and form the attestation commission within three months of appointment. - Priority attestation of heads of division and territorial offices and their deputies. - Analytical tools and coordination - Leverage AML/CFT framework and financial intelligence tools, in coordination with relevant agencies, to detect tax evasion and smuggling of goods in significant amounts. ### Restoring and strengthening the Medium-Term Budget Framework (MTBF) - Diagnostic and action plan - Diagnostic review comparing pre-war MTBF policies and practices to best practices completed; action plan adopted to enhance the MTBF. - 2025 focus: practical application of diagnostic results, improving expenditure baseline estimates, and costing of new policies. - With FAD TA, by end-October 2025 identify next steps to further improve expenditure baseline estimates and costing of new policies to ensure usage by all key spending units. - Ensure PFM-related reforms, including PIM reforms, are well aligned with the MTBF. ### Pensions and social spending — legal clarity, consolidation, and protection of fiscal sustainability - Addressing legal ambiguity and fiscal risks - Pre-Covid pension reform addressed aging-related sustainability but not system complexity; legal ambiguity produced numerous court cases with adverse budget outcomes. - Commitments to submit to Parliament by end-July 2025: - Amendments to ensure Article 61, Part 5 of Law 3354-20 becomes effective immediately. - New legislation prohibiting any changes to the pension system through unrelated legislation (i.e., outside the pension law). - Focus on consolidation of pension legislation provisions to replace various sectoral legislative acts regulating pension rights. - Steps to organize expenditures for payments under retrospective court decisions and pensions recalculated by court decisions. - Modifications and safeguards - With World Bank support, work on a comprehensive conceptual framework to improve and simplify the pension system; introduce unified conditions for assignment of insurance pensions; review possibility of a second pillar when conditions permit. - Any legal amendments increasing pension expenditures must be accompanied by a medium-term fiscal and debt sustainability analysis and clear identification of necessary resources in amendments to the Pension Fund of Ukraine budget. - Prohibitions and near-term measures: - Refrain from (i) introducing new special pensions or privileges; (ii) passing legislation creating pension-related contingent liabilities without financial resources; (iii) modifications lowering legally defined retirement age. - Near-term measures to limit additional benefits paid to certain categories of pensioners beyond contributive pensions. - Offer a unified approach to the annual increase of all pensions exclusively through the indexation mechanism. - Improve targeting and prevent abuse of pension supplements by clarifying eligibility criteria. - Support for vulnerable groups - Enhance targeting and means testing of benefits to vulnerable groups. - With World Bank support, including a programmatic loan, draft legislation to consolidate different types of social entitlements and explore integrating social assistance programs under a single unified package based on individual needs regardless of recipient status (e.g., IDP or non-IDP). - Increased income threshold for eligibility under the Guaranteed Minimum Income program. ### Fiscal transparency, fiscal risks, and public sector obligations - Strengthening fiscal risk assessment and integration into budgeting - Update methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including PPPs, guarantees, local governments and SOEs, with input from MOE and other line ministries. - Integrate fiscal risk assessments into early stages of the budget cycle to inform budgetary decisions. - Improvements in fiscal risk reporting and analysis - With FAD TA, improve fiscal risk reporting by including projections of fiscal variables (deficit, debt) under certain shock scenarios starting with the Budget Declaration for 2027–2029 and the FRS; improve reporting of PPP fiscal risks in the FRS. - Established a unit within MoF’s Fiscal Risk Management Department to strengthen public investment fiscal risk management; unit to complement PIM sectoral unit, MOE, and MOI project risk assessments. - Implement MOF’s SOE financial oversight and fiscal risk management function into the SOE governance framework and align with secondary legislation; gradually enhance identification, analysis, and reporting of Public Sector Obligations and Quasi-Fiscal Activities. - Risk-based fees for guarantees - MOF to continue development of risk-based fees for guarantees and prepare amendments to the existing decree. - Collaboration with an independent research team at State Tax University and Kyiv National Economic University to develop underlying risk assessment model. - Expectation that the framework for risk-based fees will be finalized by end-2025. - Earmarking and special funds - Avoid amendments to the Budget Code that would result in additional earmarking of revenues, including creation of new special funds or transfer of existing general fund revenues to newly created special funds. - Local government debt vulnerabilities - Strengthen framework to limit long-term debt vulnerabilities of local governments by improving regulatory and legal frameworks, increasing fiscal prudence, ensuring safe debt levels and balance of local budgets, and strengthening institutional capacity to attract credit for territorial development and manage local and guaranteed debt. ### Banking and SME support frameworks (BDF and 5-7-9 program) - MOF oversight and coordination - MOF remains responsible for overseeing the BDF; developed a coordination mechanism with clearly defined roles for MOE and MOF. - MOE to identify priority sectors and model changes for the 5-7-9 program; MOF to control and monitor spending under the program to balance SME support objectives against fiscal risks. - Appropriations for the 5-7-9 program in the Annual Budget to be consistent with program parameters and fiscal constraints. - Commitment that the 5-7-9 program remains solely within the BDF unless a government decision after prior consultations with IMF staff allows otherwise. - BDF reforms for effectiveness and sustainability - Independent assessment of the BDF and its support programs commissioned, to be completed by end-June 2025, to refine operational design and inform future role. - Legislation enacted to align asset declaration obligations of BDF’s foreign independent supervisory board members with those of SOBs. - Increased BDF's fees from 0.15 percent to 0.5 percent and shifted responsibility for paying such fees from the government to banks participating in the 5-7-9 program. - Established a BDF supervisory board with a majority of independent candidates. - Commitments: - BDF to review and update its guarantees framework, as needed, by end-April 2025 in consultation with stakeholders to ensure adequate guarantees backstops and consider financial position. - NBU to formally assess eligibility of BDF-issued guarantees as collateral for prudential reserves calculations and liquidity coefficients (Annex 6 to NBU Resolution No. 351) in consultation with IFIs by end-May 2025. ### Governance of new lending facilities and National Development Institution (NDI) / Business Development Fund - Best-practice requirements for government lending facilities or development finance institutions - Any government lending facilities or development finance institutions to adhere to international best practice, including: (i) appropriate oversight; (ii) a business model ensuring long-term financial sustainability and sound risk management; (iii) corporate governance standards insulating from political interference. - New programs must not affect existing government lending/granting programs and must respect coordination mechanisms between MOE and MOF. - IMF staff and international partners to be consulted before launching such programs. - External assessment and renaming - By end-June 2025 conduct an external assessment of the draft law on the NDI and related legislation against international best practice in consultation with IFIs, laying out fiscal implications and risks and providing recommendations to implement before creating an SME development finance institute. - NDI draft law to be renamed as draft law on the Business Development Fund and redrafted to emphasize focus on enhancing the SME mandate and governance of the BDF. ### Transparency in budgetary funds and special accounts - Fund for the Liquidation of the Consequences of the Armed Aggression - Supported restoration of destroyed and damaged property in the amount of UAH 38.1 billion in 2023 and UAH 17 billion in 2024. - In 2025 the Fund will continue to serve its purpose as stated in Article 43 of the State Budget Law; commitments to keep control over commitments and appropriations with the MoF as prescribed by budgetary legislation. - Special accounts - April 2023 amendment to the Budget Code to ensure transparency of sources, usage and reporting of funds on special accounts. - Since mid-2023, MOF published information about sources and usage of funds in special accounts donated by private individuals and legal entities. - Commitment to continue transparency and accountability of these accounts. ### Strengthening Public Investment Management (PIM) - Roadmap, Action Plan, and principles - Implementing the 2023 Roadmap and 2024 Action Plan to reform the PIM framework focused on: (i) strategic planning; (ii) integration of public investment into the MTBF; (iii) procedures for preparing, appraising, selecting, and implementing projects; (iv) institutional capacity; and (v) monitoring and evaluation. - PIM reforms to follow principles of budget unity, coherence, and predictability and strengthen coordination among MOF, MOE, Ministry of Infrastructure, and other line ministries. - MOF designated as gatekeeper in all stages of public investment management. - Achievements and forward milestones (first stage covering 2024–2025) - Amendments to the Budget Code adopted to: (i) integrate PIM into the budget process by including only appraised and selected projects in the budget; (ii) define roles in the PIM process; (iii) introduce medium-term planning for public investment, including prioritization of ongoing projects; (iv) mandate the use of a unified IT platform (Structural Benchmark, end-January 2025, met). - CMU approved the methodological framework for the PIM process, including procedures and criteria for preparing projects; forming the single project pipeline; appraising projects; selecting projects; determining financing sources and mechanisms; and implementing, monitoring, and evaluating projects (Structural Benchmark, end-February 2025, met). - By end-May 2025 the Strategic Investment Council to approve the Medium-Term Plan of Priority Public Investments, ensuring total capital spending on existing and new projects aligns with envelopes published in the Budget Declaration 2026–2028. - Sectoral strategies to be adopted by end-December 2025 to guide prioritization of public investment areas (proposed structural benchmark, end-December 2025). - By end-2025 enact legal amendments to improve integration of PIM into medium-term budget planning and fiscal risk management covering: (i) multiannual budget commitments and contingent liabilities recording; (ii) determination of contingent liabilities from PPPs; (iii) management and disclosure of fiscal risks related to public investments; (iv) public investment budgeting at the local level. Preparation of legal amendments and implementation plans by end-September 2025; FAD TA to be requested if necessary. - Finalize required IT infrastructure by end-2025 and increase institutional capacity of participating agencies. *Source: 1ukrea2025001-print-pdf* ### 37. Our efforts to restore debt sustainability on a forward-looking basis remain guided by ### Our efforts to restore debt sustainability on a forward-looking basis remain guided by the strategy announced in March 2023. ### Debt restructuring strategy and progress - The August 2024 Eurobond exchange was a major step forward in the restructuring process. - A treatment of the remaining external commercial claims in the restructuring perimeter remains necessary to: - help close financing gaps during the program period; - reduce gross financing needs to manageable levels, including after the program; - place public debt on a sustainable path. - Objective: restore public debt sustainability and ensure the program is fully financed, including in a downside scenario, while creating conditions for private sector participation in post-war reconstruction and preserving financial stability. - Ongoing components: - Commercial claims other than Eurobonds: - Continued engagement with holders of GDP warrants; government-guaranteed bonds of Ukrenergo (restricted discussions in February); and a commercial creditor on external commercial loans included in the March 2023 restructuring perimeter. - A moratorium on government payments on these instruments was introduced in August 2024. - External financial advisors retained to support a credible, transparent restructuring process in line with program objectives. - Official bilateral debt: - Group of Creditors of Ukraine (GCU) committed to a two-step process: extension of a debt standstill coupled with a separate assurance to deliver a final debt treatment sufficient to restore debt sustainability before the program’s final review. - First stage—extension of the standstill until 2027—was formally concluded in December 2023. - Ongoing coordination with the GCU to ensure comfort with the overall strategy; pursuit of comparable terms with other official creditors, including guaranteed loans, and definitive restructuring of these claims. - Contingencies and further actions: - Full implementation of the strategy is expected to deliver debt sustainability targets under the program’s baseline scenario. - If the prevailing scenario at the penultimate review (or earlier if exceptionally high uncertainty abates) is worse than the present restructuring basis, a further treatment of external commercial claims would be required alongside restructuring of official bilateral claims. - Any further treatment would occur once conditions of exceptionally high uncertainty abate, or at the latest by the penultimate review of the program. - Legal and financial advisors retained; regular information sharing with creditors on potential ranges of outcomes and timelines. - Fiscal safeguard: - Continue to strictly limit the issuance of guarantees (Quantitative Performance Criterion), while providing space for guarantees on loans from IFIs and foreign governments for recovery and reconstruction projects. *Italic: Source: Excerpt from IMF content unit 1ukrea2025001-print-pdf - 37–52.* ### Monetary and exchange rate policy objectives - Core aims: safeguard price and external stability and ensure an adequate level of international reserves. - Policy guided by the Strategy and Monetary Policy Guidelines (MPG), including cautious continuation of FX liberalization while ensuring restored external viability. - Commitment to return inflation to target within a policy horizon of up to three years. ### Monetary policy stance and tools - Stance: - Maintain a sufficiently tight monetary policy to combat inflation, anchor expectations, and support macroeconomic stability. - Inflation was slightly below the target in 2024H1 but accelerated rapidly since mid-2024, driven primarily by supply-side shocks expected to unwind. - Paused easing cycle and implemented two rate hikes totaling 250 bps since December 2024, with strong one-sided forward guidance. - Expectation: inflation pressures to persist in the next few months (food and energy constraints, wage growth), abate later in the year with a stabilized energy situation and larger harvest than in 2024. - Operational design: - Align operational design with the tightened stance; may introduce additional instruments over time to increase average maturity of sterilization operations, considering implications for the primary government bond market. - Reserve requirements and CDs: - Recent adjustments (including share met with eligible domestic bonds) to enhance banks’ liquidity management and support government financing. - March MPC measures: refinements to 3-month CD investment limits and adjustment of the spread; prepared to adapt if liquidity absorption is hindered. - Flexible inflation targeting: - Interim flexible inflation targeting regime with managed exchange rate flexibility. - Strengthen effectiveness of the KPR as main policy instrument; FXI’s main role: cover the structural FX deficit of the private sector and avoid excessive FX volatility. - Aim to preserve confidence in the hryvnia and support eventual return to full-fledged inflation targeting. ### Exchange rate policies and FX market management - Managed flexibility regime: - Enhances FX market self-balancing and exchange rate role as shock absorber while safeguarding reserves. - December 2024 and January 2025: surge in FX demand due to year-end budget expenditures caused moderate depreciation; NBU increased FXI to address war-related structural FX deficit of the private sector and mitigate excessive volatility. - Policy: allow sufficient exchange rate flexibility, prevent accumulation of external imbalances, and safeguard reserve buffers. - FX market functioning: - Facilitate FX cash market functioning to ensure low and stable spread. - Spread between cash and official exchange rates: - Marginally increased while remaining moderate at below 2 percent since December. - Spread in March compressed below 0.5 percent. - Continuous monitoring and calibration of FX intervention policy to achieve external stability and consistency with program NIR targets. - Reserves and NIR targets: - Met the end-December 2024 Quantitative Performance Criterion on net international reserves thanks to careful FX intervention and large official financing inflows. - Requested tightening of all 2025 NIR targets; committed to achieving established NIR floors for 2025 (quantitative performance criteria) to safeguard frontloaded ERA disbursements needed across the program period. ### FX liberalization and controls - Liberalization guided by macroeconomic assessments and the overall policy mix to enhance investment environment, debt management, and capital inflows. - Measures to limit unproductive capital outflows and ensure compliance: - (i) bank-level data analysis to identify circumvention of controls; - (ii) careful Government and NBU assessment, on a needs-basis, of exceptions and extensions to import and export settlement deadlines; - (iii) alignment by the NSSMC of OTC operations for FX government bonds with those applied to bank operations, and close monitoring of securities account operations to prevent capital outflows. - Alignment with FX liberalization roadmap under the Strategy to safeguard macroeconomic stability. ### NBU independence, governance, and safeguards - Avoid monetary financing: - In event of unexpected critical needs or delayed external disbursements, first explore excess government deposits or debt market access. - Monetary financing is a last resort, strictly limited, governed by MOF–NBU framework agreed with the IMF; an NBU resolution was adopted in September 2024. - Avoid indirect forms of monetary financing (including directed liquidity provision to banks to buy government securities); direct financing of off-budget programs by the NBU will be avoided. - Principles to support NBU independence and transition to full-fledged inflation targeting: - Ensure financial autonomy: adhere to profit retention rules; direct distribution of NBU profits to the General Fund of the State Budget; refrain from earmarked spending from NBU profits; recognize interest expenses on NBU CDs as necessary costs. - Implement Safeguards Assessment recommendations: strengthened counterparty eligibility for refinancing operations; steps to enhance NBU’s secured creditor status under bank resolution; develop and adopt amendments to the NBU law to strengthen collective fitness of the NBU Council. - Ensure vacant positions in the NBU Council are filled by end-April 2025. - Phase out unwinding of unconventional wartime measures as conditions permit; assess return to a corridor system and phase out wartime measures to strengthen monetary policy toolkit and NBU credibility. - Financial reporting: - Improve NBU financial reporting in support of EU accession goals. - With IMF and partner technical assistance, study ESCB legal frameworks and assess readiness to transition to ESCB-aligned financial reporting. ### Financial sector resilience and supervisory actions - Emergency measures preserved financial stability; majority of bank branches remain operational, online banking available to clients with internet, non-cash payments functioning, and robust liquidity for most banks. - Power Banking: - Introduced in late 2022 to ensure continuity during power outages. - Network currently includes over 2,400 branches or about 55 percent of the total; most branches in the Power Banking network have remained open during prolonged electricity disruptions. - Bank sector structural changes: - Licenses of eight small banks (around 4 percent of system net assets) revoked under Martial Law. - One bank nationalized (also around 4 percent of system net assets). - NBU diagnostics and assessments: - Complete a resilience assessment by end-December 2025, including asset quality reviews with external auditors and stress testing under baseline and adverse scenarios; results to inform Pillar 2 implementation, schedule for closing regulatory capital gaps, and harmonization with EU acquis. - NBU assessed key financial and operational risks under various downside conditions and updated monitoring and emergency response frameworks (Structural Benchmark, end October 2024). - Terms of Reference adopted by the NBU in January 2023: - Complete an independent asset quality review (AQR) once conditions stabilize. - Carry out a subsequent bank viability assessment. - Current prohibition on bank capital distributions to remain until independent AQR findings are reflected in regulatory ratios and financial statements; banks will not face further fiscal measures that erode capital buffers. - Interim regulatory activities informed by supervisory observations and resilience assessments. - Contingency planning and resolution frameworks: - NBU and Deposit Guarantee Fund (DGF) prepared contingency plans for potential high-impact events, approved by the Financial Stability Council, including preparation for adverse rulings from constitutional challenges against the DGF Law and litigation risks from past bank resolution decisions. - DGF, MOF, and NBU updated bank rehabilitation framework (Structural Benchmark, end-December 2024), including: - (i) measures to strengthen operational readiness; - (ii) draft legislative changes to close gaps in early intervention, temporary administration, and resolution frameworks as set out in the NBU-DGF roadmap; draft law expected to be adopted by end-December 2025; - (iii) reviving the NBU-DGF coordination committee to improve information sharing and cooperation, and implementing the committee-approved action plan; - (iv) review of adequacy of DGF financial backstops and maintaining emergency financial backstops at least until the target ratio has been reached. - NBU aligned counterparty eligibility frameworks in monetary policy operations with international best practice and coordination with lender-of-last-resort operations. *Italic: Source: Excerpt from IMF content unit 1ukrea2025001-print-pdf - 37–52.* ### 53. We will refrain from making any changes to the allocation of roles and responsibilities ### 1ukrea2025001-print-pdf - 53. We will refrain from making any changes to the allocation of roles and responsibilities ### Financial safety net and Deposit Guarantee Fund (DGF) - Refrain from making any changes to the allocation of roles and responsibilities of financial safety net stakeholders during Martial Law. - The DGF plays an important role by safeguarding deposits and addressing insolvent banks; maintaining its current role is essential. - Actions taken in consultation with IFIs: - (i) appointed a new Managing Director in November 2024; - (ii) Financial Stability Council established a working group in August 2024 with representatives from the NBU, MoF, and DGF to review DGF governance arrangements. - Review scope: composition of the Administrative Board; DGF accountability; functioning of decision-making structures; internal controls; procedures for appointment of the Managing Director. - Deliverable: working group will prepare legislative proposals to close gaps relative to good practice by end-June 2025. - New appointment procedures will include engagement of an independent HR firm and introduce a nomination committee comprised of voting representatives and IFIs as observers. ### State ownership in the banking sector and State-Owned Banks (SOBs) - Decisions that could increase state ownership will be taken in consultation with IMF staff and strictly limited to preserving financial stability and national security during Martial Law. - All systemic banks with majority state ownership will 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 and actions: - Prepare and implement a framework to inform decisions on any additional banks that come under state control, aiming to preserve value, ensure effective operational management, and reach decisions on the future of such banks. - Continue analysis of the banking system and wartime developments; informed by the NBU resilience assessment, develop capital management plans and adjust business plans of SOBs needing capital increases. - MoF as SOB shareholder has instructed SOBs to maintain best practice risk appetite frameworks; NBU will assess these frameworks as a thematic review as part of the 2025 annual Supervisory Review and Evaluation Process. - Use results of the independent AQR, once concluded, to update the general SOB strategy and strategies for individual banks with majority public ownership, including with respect to privatization (in line with Financial Sector Strategy). - 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-July 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, given uncertainties in timing of sale processes. - Ministry of Economy to develop a strategy for the Ukrainian Financial Housing Company in consultation with the MOF, NBU, and IFIs by end-June/ 2025 that fully considers fiscal and debt constraints and minimizes use of fiscal resources. - No further budget resources will be allocated to the Ukrainian Financial Housing Company in 2025 until the strategy is complete. ### Aligning financial and credit market infrastructure with international good practice - Financial reporting: - In September 2024 restored requirements for mandatory quality control of services provided by audit companies, including verification of audit reports prepared to comply with the law. - Expand functional capabilities of the Financial Reporting Collection Center to ensure stakeholder access to financial reports submitted by financial institutions in XBRL format by end-December 2025. - Key tasks: identify and allocate budgets to integrate software systems for reporting entities, state users, and the Collection Center platform. - Bank capital rules: - NBU aligned banks’ regulatory capital structure and leverage ratio calculations with EU rules and will implement Pillar 2 capital requirements in 2025. - With World Bank support, close key gaps in regulatory capital requirements by end-June 2025 and other gaps thereafter. - Implementation will be phased to facilitate banks integrating requirements into business plans. - To align with the EU Directive, in February 2025 the NBU prepared amendments to increase banks’ minimum share capital to the equivalent of EUR 5 million, which includes a six-month transition period for existing banks. - NBU will continue monitoring economic conditions and relax controls and reinstate pre-war regulations when safe to do so based on banks' adherence to new capital requirements aligned with EU standards, results of resilience assessments, and consideration of banks’ role in lending and domestic debt market involvement. - Immovable property databases and indices: - Per a March 2024 proposal, Ministry of Justice and NBU will by September 2025: - (i) launch a publicly accessible database of real estate transaction prices with detailed metadata including structural parameters of primary and secondary market; - (ii) publish residential and commercial property price indexes. - Virtual assets: - Prepare an update of legislation with Fund technical assistance and in consultation with IFIs by end-October 2025 to align with international best practice, considering economic 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 arrangements between respective regulators by end-September 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 came into force on January 1st, 2025 and had no significant impact on reported NPE volumes. - Further steps to strengthen banks’ NPL workout capacity and revive the secondary market for NPLs in line with the NPL strategy approved by the Financial Stability Council. - Strengthening NBU’s status as a secured creditor: - Parliament expected to adopt legislative amendments by end-August 2025 reflecting the NBU and DGF coordinated position to strengthen NBU's status as a secured creditor by improving mechanisms for extraordinary satisfaction of the NBU's claims through collateral, management, and sale of collateral. ### Strengthening banking supervision - Supervisory panels: - Implemented “supervisory panels” as a consulting body to the NBU Supervisory Committees to provide independent review by subject matter experts. - Survey of effectiveness conducted end-September 2024 in consultation with IMF staff, with processes adjusted accordingly. - Transition to risk-based supervision: - NBU implemented a supervisory risk assessment methodology to inform supervisory engagement priorities (Structural Benchmark, end-December 2024, met). - Refine supervisory methodology and expand supervisory plan to include all material bank risks and develop methodologies for increased capital adequacy and liquidity requirements based on supervisory risk assessments by end-December 2025. - Adjust organizational structure for bank supervision to leverage efficiencies; continue to develop expertise for effective supervision, including information and communications technology risks as part of operational risk. - Improve professional capacity of bank supervision, including developing professional profiles and a multi-year training program for new hires. - AML and Banking Supervision: - Strengthen risk-based AML/CFT supervision of banks, payment service providers and NBFIs, particularly regarding corruption, financial crimes and other illegal activities. - By end-June 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 FATF standards. - Financial sanctions applied to such entities will be established by laws of Ukraine and regulatory legal acts of the NBU. - Commit to invest in building capacity of new and existing NBU staff to improve organizational performance and responsiveness in the AML/CFT framework. - Supervision of banking hybrid business models: - NBU prepared an analysis in October 2024 in consultation with IMF staff on risks from hybrid models (including Banking-as-a-Service). - To mitigate critical third-party risk: - (i) prepare a concept note on oversight of critical third-party risk and digital operational resilience by end-March 2025; - (ii) develop and submit a draft law to parliament (Structural Benchmark, end-May 2025, proposed to be reset to end-September 2025). Draft law to be prepared in consultation with IFIs and include measures for detection, containment, and mitigation of critical third-party risk under 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: - Any future transfers of bank ownership, including following seizures during Martial Law, will only take place with due regard to the Law of Ukraine on Banks and Banking and following formal notification, review, and approval by the NBU. ### Non-bank financial institutions (NBFIs) and financial markets - Legal framework: - December 2021–July 2023 legislation passed on Financial Services and Financial Companies (#1953), Insurance (#1909) and Credit Unions (#3254). - Most provisions came into force in January 2024; NBU prepared implementing regulations. - Rules for insurance intermediaries apply from January 2025; 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 once regulations for enforcing the laws are fully implemented. - Capital and reporting requirements: - NBU developed a supervisory risk assessment methodology distinguishing NBFI types; will test and refine by end-December 2025 to transition to risk-based supervision for NBFIs. - NSSMC will prepare a draft regulation for financial intermediaries by end-June 2025 to bring capital requirements in line with the EU acquis; to be enacted by NSSMC by end-December 2025 following IFI consultation. - NBFI governance: - NBU will strengthen review of NBFIs and ownership structures to ensure compliance with transparency standards and that owners meet requirements for business reputation and financial/property status. - Payments market: - Priorities in consultation with IFIs: - (i) develop early warning system and transition to risk-based supervision in the payment market by end-December 2025; - (ii) develop the reporting system; - (iii) strengthen supervision capacity through hiring specialists and building analytical competence; - (iv) prepared a concept note in June 2024 on regulatory requirements for person to person (p2p) and other electronic payments; - (v) developed a concept note in August 2024 on establishing a public register to record card holder and merchant violations and potential use by market participants; - (vi) prepare market guidance by end-March 2025 on measures to strengthen risk-based payments monitoring by banks and non-bank payment service providers. - Introduce regulation in the self-governed market to restrict abnormal behavior. - To minimize illegal use of payment infrastructure, NBU will prepare by end-May 2025 a legislative proposal to: - (i) extend supervisor’s authority to limit operations of payment service providers non-compliant with regulatory requirements; - (ii) establish a public register to be used by banks when establishing business relations and servicing customers; - (iii) align services with EU norms. - By end-September 2025 prepare a legislative proposal to: - (i) align payment and acquiring services with EU norms; - (ii) extend supervisory and regulatory powers to technology operators on the payments market; - (iii) clearly delineate financial and payment licenses, while providing transition options to market players; - (iv) establish clear ownership structure requirements for payment service providers to enhance transparency and integrity. - Capital market regulation and IOSCO harmonization: - Following Law 3585-IX in March 2024, move to align with IOSCO principles by conducting screening to become a signatory of IOSCO’s multilateral MoU by end-June 2025 with full implementation of other provisions by end-December 2025. - NSSMC preparatory steps in consultation with IFIs: - (i) proposed reorganizational and operational strategy; - (ii) updated Commission’s Employees Code of Ethics; - (iii) initiated 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) strengthened effectiveness of capital flow measures, including harmonization and aligning capital flow restrictions for securities operations with those applied to bank operations (Structural Benchmark, end-January 2025, not met). - NSSMC will complete the independent fit and proper review (proposed Structural Benchmark, end-June 2025). - Require that OTC FX bond operations carried out by non-banks are settled through the Settlement Center by end-March 2025. - Related parties and insurance transparency: - Submit a draft law to Parliament to strengthen related parties definition and adjust restrictions on related party market transactions; facilitate adoption by end-September 2025. - Required auditors to confirm insurers have acceptable assets and assess their value for the 2023 financial year. - Assess feasibility of updating disclosure requirements for insurance and reinsurance brokers by end-December 2025. - Strengthening NBU legal capacity: - NBU, in collaboration with Ministry of Internal Affairs and National Police, will propose coordination arrangements by end-June 2025 to improve detection, documentation, and processing of administrative offenses related to unauthorized provision of financial and payment services. - In consultation with IMF staff, develop proposals to improve legislation regulating license revocation and liquidation procedures for non-bank financial institutions to respond to adverse court rulings regarding NBU decisions. ### Monitoring and adjustments under Martial Law; debt market infrastructure - Debt 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 to expand foreign investors’ access. - NBU, in consultation with NSSMC, MOF, and IFIs, will develop a targeted model for capital market infrastructure development, including resolution of the CSD regulator and shareholder conflict of interest, to facilitate engagement of foreign investors by end-March 2025. - CMU, NSSMC, and NBU will implement the agreed targeted model of capital markets infrastructure by end-May 2025. *Source: 1ukrea2025001-print-pdf - 53. We will refrain from making any changes to the allocation of roles and responsibilities* ### 2025. Following undercapitalization of the largest stock exchange, which threatened the smooth ### 1ukrea2025001-print-pdf - 2025. Following undercapitalization of the largest stock exchange, which threatened the smooth ### Financial market functioning and stability - Settlement Center (NBU majority owned CCP) to launch contract making and clearing services for over-the-counter transactions in government bonds; coordinated by NBU and NSSMC to preserve secondary government bond market functioning. - Concept note on financial market infrastructure reforms to be prepared by NBU, NSSMC, and MOF, in consultation with IFIs, by end-May 2025 to identify reforms aimed at maximizing opportunities to attract private investment; formation of an interagency working group under the Financial Stability Council to diagnose and close key market infrastructure gaps. - Commitment to update the Financial Sector Strategy as appropriate following the concept note. ### War risk insurance, financial inclusion, and specialized banking - War risk insurance: FSC drafted and submitted a draft law to parliament in December 2024 following public consultation; authorities will work with the parliamentary committee to facilitate adoption by end-June 2025. - Financial inclusion: - Collated fresh data with assistance of the World Bank using a best-efforts approach; update of the 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 (#13018) for a specialized and restricted banking license expected to be adopted by end-June 2025. These 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. ### Lending development and mortgage market - Financial Stability Council approved a lending support strategy in July 2024, including a prioritized interagency NPL resolution action plan informed by the 2023 NBU resilience assessment. - Strategy focuses on targeted subsidized lending instruments to priority sectors during the war and developing credit infrastructure for risk management and lending decisions. - NBU regulation and supervision continue to apply to institutions providing services to large volumes of clients; institutions supporting the lending development strategy will face more intensive proportionate supervision. - NBU to prepare detailed action plans by end-March 2025 to implement the Strategy’s second (implementation) phase, including exchange of information, protection of creditors’ rights, and tackling NPLs. - NBU, in consultation with IFIs, will prepare a concept note for the development of the mortgage lending market by end-June 2025. ### Consumer protection and monetary instruments - Responsible consumer lending: - Draft law on improving state regulation and functioning of credit bureaus submitted to Parliament in February; authorities will facilitate adoption by Parliament by end-June 2025. - Enhance supervision of credit bureaus by establishing requirements for ownership and internal controls within six months of the law being adopted and signed. - Monetary derivative instruments: - NBU, in consultation with IFIs and via technical assistance, prepared a concept note setting steps, conditions and timing to introduce and develop foreign exchange derivative financial instruments (including forwards) to hedge FX and interest rate risks and improve monetary transmission. ### Market standards, EU alignment, and valuation - By end-June 2025: - Prepare a roadmap to close gaps in the Joint Investment Institutions (JII) framework relative to international good practice, including strengthening regulation and monitoring and fully considering fiscal implications of associated tax expenditures. - Further align banking norms with the EU to achieve Regulatory Equivalence: achieved about 70 percent convergence with the EU Acquis, and aim to achieve 75 percent convergence by end-June 2025. NBU to prepare legislative amendments by end-September 2025 aimed at aligning banking secrecy and disclosures with Directive 2013+36/EC (CRD IV). - Implement European valuation standards (EVS): - State Property Fund (SPF) to close gaps with TEGOVA “Blue Book” EVS in consultation with NBU, NSSMC and IFIs. - In coordination with the World Bank, submit to Parliament amendments to the law “On Valuation of Property, Property Rights and Professional Valuation Activities in Ukraine”. - By end-December 2025, propose an implementation roadmap including transitional arrangements, supportive regulation/guidance, steps to strengthen the valuers’ profession (additional training requirements for valuation of financial assets), and the creation of a register of valuations for financial assets. ### Asset recovery - Recommitment to continue efforts to recover value from former shareholders of failed banks and to abstain from interference with current asset recovery strategies of the largest bank nationalized in 2016 and of the DGF. ### Governance of reconstruction and audit institutions - Law enacted that enhances independence, mandate and effectiveness of the Accounting Chamber of Ukraine (ACU); Structural Benchmark end-December 2024 met. - Selection process started for six vacant ACU members aiming to achieve full ACU membership in line with law timelines. ### Anti-corruption and rule of law reforms - Preserve independent and effective anti-corruption infrastructure to combat high-level corruption and support EU accession objectives. - Amendments to the Criminal Procedural Code to be enacted to: (i) enable the Prosecutor General to delegate to SAPO management of extraditions and mutual legal assistance for corruption investigations; (ii) remove mandatory dismissal of pre-trial investigations due to lapse of time limits after notice of suspicion; (iii) enable an investigating judge, upon expiration of timelines and motion of defendant or affected parties, to compel prosecutors to decide on pre-trial investigation or reject the motion (Structural Benchmark, end-December 2024; not met and proposed to be reset for end-July 2025). Provide full legal certainty on timelines of pre-trial investigation after notice of suspicion. - External audit of NABU’s effectiveness with three independent international experts to be completed and report published (Structural Benchmark, end-February 2025; not met and proposed to be reset for end-July 2025). Audit to include clear, reasoned, evidence-based conclusions and prioritized recommendations on NABU effectiveness and independence. - Ensure NABU access to independent and competent forensic experts by end-July 2025. - NABU preparations for wiretapping implementation in the post-Martial Law period: securing resources, equipment and technological solutions to intercept communications of landlines and mobile devices. - Law enacted in December 2024 to enhance corporate criminal liability to support accession to the OECD Anti-Bribery Convention; applicable to private and public legal entities resident or non-resident in Ukraine and covering domestic corruption offenses. - Commit to conduct an external independent audit of SAPO and publish the audit report consistent with the two-year period in the December 2023 SAPO law amendments. - NACP monitoring of restored public access to asset declarations since January 2024; enhance risk-based verification focusing on public officials under NABU jurisdiction in higher risk areas, including reconstruction and recovery; maximize lifestyle monitoring investigations, technologies (including increasing data warehousing capacities), and information requests to other agencies and foreign counterparts. - Public Council of International Experts (PCIE) appointed to vet candidates for 24 HACC vacancies; law enacted November 2024 to extend PCIE mandate to complete selection. Ensure open and competitive selection and adequate provision for HACC staffing and premises. - ACU audit of HACC published December 2024 with recommendations: provide proper premises, develop indicators of average duration of anti-corruption cases, and improve internal control systems. ### Specialized Administrative Court and judicial reforms - Enact a law to establish the Specialized Administrative Court (SAC) to hear administrative cases against national state agencies with judges vetted for competence and integrity with decisive vote of independent international experts following PCIE model (Structural Benchmark, end-December 2024; not met). Swift operationalization and appointment of minimum number of judges within legal timelines to enable independent adjudication. ### AML/CFT, beneficial ownership, and FIU strengthening - NBU guidance (August 2024) implemented: financial institutions and covered non-bank institutions adopting a risk-based approach to politically exposed persons; NBU monitoring for compliance within a risk-based supervisory approach. - Enhance UBO regime: two commitments by September 2025: - Amend the Law "On Public Procurement" to require publication of UBO information for companies that received direct contracts or negotiated procedures. - Publish UBO information for successful non-resident bidders (currently only successful resident bidders are subject). - Revise legal framework, in consultation with the IMF, to enhance the sanctioning regime for non-compliance with beneficial ownership requirements. - Strengthen SFMS (FIU) operations and suspicious transaction report analysis/dissemination; develop and implement a technical assistance roadmap. - Independent fact-finding review of SFMS strengths and weaknesses to be undertaken by end-December 2025 in consultation with the IMF and stakeholders; review to be carried out by an internationally recognized firm and aligned with EU AML/CFT legislative package and FATF Standards. ### Corporate governance of SOBs and SOEs - Strengthen SOB governance: uphold corporate governance reforms to ensure professional, commercial operation without political interference; reviewed framework for remuneration of Senior Management of all SOBs in December 2024 in consultation with IFIs; remuneration principles: internationally competitive, consistent, proportionate, consider part-time nature and Martial Law restrictions. - Implement performance assessments for all SOBs in 2025: first assessments by MoF by end-July 2025; MOF to publish key findings and CMU proposed actions in December 2025. - Update SOB Nomination Committee rules in consultation with IFIs and ensure filling of all SOB independent supervisory board vacancies: - Update independent supervisory board selection process by end-April 2025 to enable applicants for one SOB to be considered for vacancies in other SOBs. - Update NomCom processes by end-June 2025 based on lessons learned and in consultation with IFIs. - Strengthen SOE corporate governance through law #3587-IX and the state ownership policy (SOP): - CMU approved regulation for financial indicators in August 2024 (No. 984); will review indicators if necessary in early 2027 before 2028 SOE financial planning season. - Produced comprehensive SOP, State Dividend Policy and privatization strategy; implement SOP including classification of strategic SOEs, framework for future privatizations, concept consolidated SOE management, CMU resolution for mandatory supervisory boards, IFRS financial statements subject to transition, SOE information disclosure and remuneration policy. Commit to review and publish the SOP by December 2025. - Assess financial viability of key SOEs as input to framework for quasi-fiscal costs and legacy PSOs with IMF TA. - Revise selection and appointment processes for SOE supervisory board members and adopt changes to CMU by-laws (Resolutions 142 and 143) by August 2025 (proposed Structural Benchmark, August 2025) in consultation with Fund staff; roadmap for medium-term reforms of SOE board recruitment to streamline, centralize, clarify roles, increase efficiency, ensure proper compositions and improve onboarding. - Advance energy corporate governance reforms: - Supervisory Boards of GTSO, Naftogaz and Ukrenergo to select new CEOs under OECD standards. - Framework for assessing supervisory board activity approved; independent evaluation of supervisory boards of GTSO, Naftogaz and Ukrenergo launched January 2025 and to be concluded and published by end-May 2025. *1ukrea2025001-print-pdf - 2025.* ### 72. We are exploring options, in close consultation with international partners, to enhance ### We are exploring options, in close consultation with international partners, to enhance SOE management, including the potential introduction of a centralized SOE management ### SOE management - Exploring options, in close consultation with international partners, to enhance SOE management, including the potential introduction of a centralized SOE management model, consistent with the SOE corporate governance reform agenda in the SOP and best international practices. - Will define roles and mandates of key government institutions engaged in SOE management: MOF, MOE, CMU, and the State Property Fund (SPFU). - Ensure a strong gatekeeper role of the MOF for SOE financial oversight to limit quasi-fiscal risks and help safeguard debt sustainability. - Any new SOE management framework must not dilute government authority over dividend policy; SOE dividends must be directed to the state budget and transparently reported. - Any primary legislation to formalize a centralized SOE management model for non-major SOEs will be consistent with the principles of the medium-term reforms envisaged in the NomCom Roadmap (see ¶72) and other SOP reforms, which will have helped to enshrine modern SOE corporate governance practices. - Structural Benchmark specific to SOEs: - Revise the selection and appointment processes for SOE supervisory board members and adopt appropriate changes to the relevant CMU by-laws, in line with MEFP ¶71, 3rd bullet. Timing: End-August 2025 (Table 2, Structural Benchmark 53). ### Energy sector reforms and crisis response - Immediate priority: mitigate adverse impact of the war on the energy sector; multi-pronged approach coordinated via the Ukraine Donor Platform (UDP) and the G7+ energy group. - Repairs and new generation: - Repaired 4GW of energy capacity in 2024 with another 3GW of repairs planned for 2025. - Over 0.8GW of new power generation was commissioned and connected to the energy grid in 2024. - 0.9GW of distributed gas-fired generation planned in 2025. - Resilience and decentralization: - Aim to make the energy system more resilient to future attacks through decentralized energy generation, including gas turbines, and the Green Transformation in a conducive market and regulatory environment with an independent energy regulator. - Affected companies rely mostly on working capital for repairs; donor support continues for equipment. - Need additional financial assistance from donors for repairs and decentralized electricity generation support programs, including gas generation projects. - Expanded role of 5-7-9 and the BDF to support the energy sector and implementing SOB energy support lending programs, including for households. - Gas imports, PSO compensation, and fiscal accommodation: - For 2025, plan additional gas imports for domestic consumption of up to 4 bcm under the baseline; additional gas could be stored by non-residents for EU strategic reserves. - Naftogaz secured additional financing for gas imports from the EBRD and bilateral donors. - If Naftogaz faces a liquidity shortfall, 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, available financing, and capped at UAH 60 billion (about 0.8 percent of GDP). - Medium-term reforms (post-war / when conditions allow): - Potential measures 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. - Restore and enhance competition in wholesale and retail gas markets; gradually increase gas and electricity tariffs to cost recovery while allocating adequate and well-targeted support to protect vulnerable households. - CMU will adopt a roadmap for the gradual liberalization of gas and electricity markets within 6 months of the end of Martial Law, with a time-bound implementation plan for the post Martial Law period; roadmap based on technical analysis of sector financial condition in coordination with the European Commission. - Adopt a law on market coupling over the coming months to significantly advance integration of Ukraine’s energy market with the EU. - Regulatory independence and assessment: - Commit to ensure independence of the National Energy and Utilities Regulatory Commission (NEURC) and develop an accountability framework enshrining regular external assessments of NEURC’s governance and independence frameworks in the 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 (Structural Benchmark, October-2025). - Ensure NEURC has sufficient staff to take on expanded mandates, including REMIT implementation and supporting energy decentralization plans. - District Heating Companies (DHCs): - Will tackle arrears and debt of DHCs comprehensively once war-related budget pressures subside by developing a new tariff methodology with cost-reflective tariffs. - Completed a review of arrears and debts of DHCs by a reputable audit firm to clarify stock of arrears and financial situation, including drivers of arrears accumulation (Structural Benchmark 30: Energy, End-October 2024, Met). ### Program monitoring, reviews, and conditionality - Program implementation monitored through quarterly reviews via quantitative performance criteria (PCs), indicative targets, and structural benchmarks. - Commit to providing IMF staff all data needed for adequate monitoring, including as detailed in the attached TMU. - Eighth, Ninth, and Tenth Reviews expected to take place on or after June 15, August 31, and November 30 respectively, based on quantitative performance criteria for end-March 2025, end-June 2025, and end-September 2025 respectively, and corresponding structural benchmarks. - Continuous performance criterion: non-accumulation of external payments arrears by the general government (PC monitored continuously). ### Key quantitative targets and memoranda (selection from Table 1) - Floor on the non-defense cash primary balance of the general government, excluding budget support grants: - Multiple entries in Table 1 (end-period values and adjusted QPCs appear across columns). - Floor on tax revenues (excluding Social Security Contributions): - Example end-period entries include 2,042,250; 485,000; 1,019,600; 1,622,200; 2,491,045; 599,000 (as presented in the table). - Ceiling on publicly guaranteed debt: - Example entries include 47,900; 13,718; 61,618; 46,799; 62,860; 64,357; 68,000 (as presented in the table). - Floor on net international reserves (in millions of U.S. dollars): - Example entries include 26,300; -206; 26,095; 28,228; 24,300; 27,200; 24,800; 27,700; 23,000; 24,000; 23,000; 42,000; 37,300 (as presented). - Indicative targets and memorandum items include: - Ceiling on general government arrears: 1,800 (repeated across periods). - Floor on social spending: 537,800; 132,000; 271,200; 414,000; 560,900; 160,000 (as presented). - Ceiling on general government borrowing from the NBU: entries such as 0, 000, -49, -984, -4,100, -1,500, -6,500, -2,500 (as presented). - External project financing (in millions of U.S. dollars): entries include 1,496; 1,564; 191; 378; 572; 1,133; 1,144; 2,266; 1,906; 3,776; 250 (as presented). - External budget financing (in millions of U.S. dollars): entries include 35,367; 36,390; 9,105; 12,198; 19,282; 25,011; 27,280; 34,336; 35,813; 54,488; 2,923 (as presented). - Budget support grants (in millions of U.S. dollars): entries include 10,012; 10,033; 429; 965; 1,286; 1,288; 1,608; 1,610; 161 (as presented). - Spending on gas purchases, PSO compensation and transfer to GTSO: 60,000 (listed as a memorandum item). - Cash balance of the general government, excluding budget support grants, treasury report at current exchange rates (- implies a deficit; in billions of Ukrainian hryvnia): -1,850.4; -1,320.7; -342.1; -410.5; -718.4; -821.0; -1,146.0; -1,248.6; -1,710.4; -1,710.4; -340.0 (as presented). ### Structural benchmarks (selection and timing/status highlights from Table 2) - Program-wide governance and fiscal reforms: multiple SBs across fiscal, governance/anti-corruption, financial sector, energy, and SOE corporate governance sectors; many marked Met, some Not Met (implemented with delay), and a set with future timings. - Notable SB timings and statuses: - First external assessment of NEURC by the Energy Community Secretariat to be completed and published by October-2025 (Structural Benchmark 54). - Several governance and anti-corruption benchmarks reset or Not Met with reset timings (e.g., SB 44, 51, 52). - Adoption of sectoral strategies in line with new PIM approaches: End-December 2025. - Appointments and institutional reforms with deadlines including End-June 2025 (appoint permanent head of SCS; submit 2026–28 Budget Declaration), End-July 2025 (appoint new Head of the ESBU — Not Met, Reset), and End-September 2025 (operational plan for updated IT Strategy). - Financial sector continuous benchmark: state responsibility for systemic banks under MOF; non-systemic banks transferred to DGF for resolution upon breach of prudential requirements (Continuous). - Several SBs completed (Met), including production of SOE state ownership policy, dividend policy and privatization strategy (End-October 2024, Met), adoption of National Revenue Strategy (End-December 2023, Met), and adoption of Budget Code amendments in line with PIM Action Plan (End-January 2025, Met). *Source: 1ukrea2025001-print-pdf - 72.* ### 1. This Technical Memorandum of Understanding (TMU) sets out the understandings between ### Technical Memorandum of Understanding (TMU) ### Overview and Purpose - Sets out understandings between the Ukrainian authorities and IMF staff regarding definitions of variables subject to targets—both quantitative performance criteria and indicative targets—for the Extended Arrangement under the Extended Fund Facility (EFF), as described in the authorities’ Letter of Intent dated March 21, 2025 and the attached Memorandum of Economic and Financial Policies. - Describes methods to be used in assessing program performance and information requirements to ensure adequate monitoring of the targets. - Quantitative performance criteria and indicative targets are shown in Table 1 of the MEFP; definitions and adjustors are described in Section I; the official exchange rate is defined in Section II; reporting requirements in Section III. ### Exchange Rates and Valuations - For program evaluation, all exchange rates used to evaluate reserve levels and monetary aggregates are: - 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 valued at 1,902.6 dollars per fine ounce - These accounting exchange rates are kept fixed over the program period; program exchange rate may differ from actual market exchange rate; program exchange rate does not imply an exchange rate policy target. ### General Government, Debt, and GDP Definitions - General government comprises: - central (state) government, including the road fund, - all local governments, - all extra budgetary funds, including the Pension and Unemployment Funds of Ukraine, - special accounts which provide resources to key spending units. - Budget of general government comprises: - (i) the state budget; - (ii) all local government budgets; - (iii) if not already included in (i), budgets of extra budgetary funds listed above, any other extra budgetary funds included in monetary statistics compiled by the NBU, and special accounts. - Government will inform IMF staff immediately of creation or pending reclassification of any new funds, programs, or entities. - Definition of debt for program purposes consistent with paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (IMF Executive Board Decision No.16919-(20/103), adopted October 28, 2020): - “debt” means 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, requiring obligor to make one or more payments in assets (including currency) or services at some future point(s) to discharge principal and/or interest. - Primary forms include: - loans (including deposits, bonds, debentures, commercial loans, buyers’ credits; repurchase agreements; official swap arrangements), - suppliers’ credits (deferred payments for goods/services), - leases (debt equals present value at lease inception of lease payments excluding payments for operation, repair, or maintenance). - Arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt. - Gross Domestic Product (GDP) compiled per System of National Accounts 2008 and excludes territories that are or were in direct combat zones and temporarily occupied by Russia. ### External Financing (Program Definition) - External financing defined as: - Budget support loans and grants: unearmarked financial support recorded in the general fund of government fiscal accounts; includes financing from official multilateral creditors (e.g., World Bank, European Commission) and official bilateral creditors. - Project support loans and grants: earmarked financial support for specific projects recorded in special fund expenditures; includes financing from official multilateral creditors (e.g., European Investment Bank, World Bank Group and European Bank for Reconstruction and Development) and official bilateral creditors. - Project support is in the form of loans and includes the UK's ERA contribution. ### Defense Expenditures, Own Revenues, and Special Provisions - Defense expenditures: expenditures of the defense and security sector pursuant to the Law of Ukraine “On National Security of Ukraine”; includes total amounts of all current (goods and services, wage bill, social payments, etc.) and capital 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 as payment for services, works, targeted activities, grants, gifts, charitable contributions, proceeds from sale of products or property, and other activities in 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) are recorded below the line as deficit financing sources with counter-entry into deposits of the Treasury Single Account. ### Overdue Accounts Payable (Arrears) - Arrears defined per Order of the Ministry of Finance No. 372 dated April 2, 2014: - arrears = amount of payments due on the 30th day after the deadline for mandatory payment per legal contract; if deadline unspecified, 30th day after confirmation of goods received/works done/services rendered. - Budgetary arrears on social payments and wages: all arrears of consolidated budget on wages, pensions, and social benefits of central or local governments; timeframe based on 30-day rule; security and defense sector arrears may be presented in aggregated form due to Martial Law specifics. - Wages include all forms of remuneration for work performed for standard and overtime work in all subcategories, including defense and security service. - Arrears of social funds (Pension and Unemployment Fund of Ukraine): arrears with regard to all insurance benefits of these funds; arrears refer to payments not executed at the 30th day after deadline; excludes unpaid pensions to individuals who continue to reside in territories that are or were in direct combat zones and temporarily occupied by Russia. ### I. Quantitative Performance Criteria and Indicative Targets — Net International Reserves (NIR) (Floor; Quantitative Performance Criterion) Definition - 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 Balance of Payments Manual (Sixth Edition) and the Special Data Dissemination Standard (SDDS) (Table 6.1, item A). - Excluded from usable reserves inter alia: - assets denominated in foreign currencies held at, or claims on, domestic institutions; all foreign currency claims of the NBU on domestic banks; NBU deposits held at the Interbank Foreign Currency Exchange Market and domestic banks for trading purposes; - any precious metals or metal deposits, other than monetary gold and gold deposits, held by the NBU; - any assets that correspond to claims of commercial banks in foreign currency on the NBU and any reserve assets that are (i) encumbered; or (ii) pledged as collateral (in so far as not already included in foreign liabilities, or excluded from reserve assets); or (iii) frozen; - any reserve assets not readily available for intervention in the foreign exchange market because not fully under NBU control or lack of quality or liquidity limiting marketability at book price. - Reserve-related liabilities comprise: - all short-term liabilities of the NBU vis-à-vis nonresidents denominated in convertible foreign currencies with remaining maturity of one year or less; - stock of IMF credit outstanding; - nominal value of all derivative positions (including swaps, options, forwards, and futures) of the NBU and general government implying sale of foreign currency or other reserve assets (notional value of commitments, not market value); - all foreign exchange liabilities of the NBU to resident entities which are not already excluded from reserve assets, excluding foreign exchange liabilities to the general government, or related to deposit guarantees. Table A: Components of Net International Reserves (selected items and account references) - International reserves: Monetary gold; Foreign exchange in cash; Demand deposits at foreign banks; Short-term time deposits at foreign banks; Long-term deposits at foreign banks; SDR holdings and Reserve Position in the IMF; Securities issued by nonresidents - NBU balance sheet and memorandum accounts references: 1100, 1107; 1011, 1017; 1201, 1202, 2746, minus 4746; 1211; 1212; IMF, Finance Department; 1300, 1305, 1307, 1308, minus 1306 - Short-term liabilities to nonresidents (in convertible currencies): Correspondent accounts of nonresident banks; Funds borrowed using repos; Short-term deposits of banks; Operations with nonresident customers; Operations with resident banks; Use of IMF credit - account references: 3201; 3210; 3211; 3401, 8805; 3230, 3232, 3233, 8815; IMF, Finance Department - Note: Definitions will be adjusted to reflect any changes in accounting classifications introduced during the program; definitions correspond to system of accounts in existence on October 31, 2022. Adjustors to NIR targets - NIR targets adjusted downward by full amount of cumulative shortfall in external budget support financing disbursements (defined in paragraph 7) relative to baseline projection (Table B). - NIR targets adjusted downward by full amount of cumulative shortfall in net issuance (gross issuance minus redemption and interest payments) of central government’s domestic foreign exchange securities relative to amounts expected under the baseline (Table C). - If NBU converts any non-reserve currency provided under a central bank swap agreement into a reserve currency through an outright sale: symmetric adjustor applied to NIR targets (adjust upward by amount converted at time of conversion; adjust downward by amount of reserve currency principal and interest when NBU repays non-reserve currency under swap). - If NBU draws any reserve currency provided under a central bank swap agreement with maturity over 1 year: symmetric adjustor applied (adjust upward by amount used with maturity over 1 year; adjust downward when NBU repays these amounts). Table B: Ukraine: Gross Disbursements from IFIs and Official Sources (Cumulative in USD millions, at program exchange rates) — selected cumulative figures - 2024 cumulative from January 1, 2024 and 2025 cumulative from January 1, 2025 (flows in USD million, cumulative): - 2025 end-Mar.: - Total official support: 12,576 - Budget support: 12,198 - Loans: 11,770 - Grants: 429 - Project support: 378 - 2025 end-Jun.: - Total official support: 26,144 - Budget support: 25,011 - Loans: 24,044 - Grants: 967 - Project support: 1,133 - 2025 end-Sep.: - Total official support: 36,601 - Budget support: 34,336 - Loans: 33,047 - Grants: 1,288 - Project support: 2,266 - 2025 end-Dec.: - Total official support: 58,264 - Budget support: 54,488 - Loans: 52,878 - Grants: 1,610 - Project support: 3,776 - 2026 end-Mar.: - Total official support: 3,173 - Budget support: 2,923 - Loans: 2,762 - Grants: 161 - Project support: 250 - Footnotes: - Flows in USD million, cumulative from January 1, 2024 for 2024 and from January 1, 2025 for 2025, calculated at program exchange rates. - Prospective IMF disbursements under the EFF are excluded. - Totals differ from Ukrainian authorities' projections under the budget due to different exchange rate assumptions. Table C: Ukraine: Issuance of Central Government Domestic FX Securities (Cumulative in USD millions, at program exchange rates) — selected cumulative figures - 2025 (cumulative from January 1, 2025): - Net issuance of central government domestic FX securities: - end-Mar.: -48 - end-Jun.: -78 - end-Sep.: -107 - end-Dec.: -128 - end-Mar. (2026): 0 - Gross issuance: - end-Mar. 2025: 1,014 - end-Jun. 2025: 1,463 - end-Sep. 2025: 2,697 - end-Dec. 2025: 3,597 - end-Mar. 2026: 0 - Repayment: - end-Mar. 2025: 1,062 - end-Jun. 2025: 1,540 - end-Sep. 2025: 2,804 - end-Dec. 2025: 3,724 - end-Mar. 2026: 0 - Redemption: - end-Mar. 2025: 1,014 - end-Jun. 2025: 1,463 - end-Sep. 2025: 2,697 - end-Dec. 2025: 3,597 - end-Mar. 2026: 0 - Interest: - end-Mar. 2025: 487 - end-Jun. 2025: 810 - end-Sep. 2025: 712 - end-Dec. 2025: 280 - end-Mar. 2026: (noted as blank/zero in table) - Footnote: - Flows in USD million, cumulative from January 1, 2025 for 2025 and from January 1, 2026 for 2026, calculated at program exchange rates. ### II. Ceiling on General Government Direct Borrowing from the NBU (Indicative Target) Definition - General government direct borrowing from the NBU, net of redemptions and repayments, defined as cumulative change in stock of outstanding claims on the general government held by the NBU, including: - general government securities, - direct loans and credits, - other accounts receivable, - 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 NBU balance sheet. - Exclusions: - securities acquired as collateral under loans provided by the NBU during the measurement period; - loans to the Deposit Guarantee Fund. - Change measured relative to stock as of end of preceding quarter over latest as of assessment and adjusted for exchange rate valuation effects using program exchange rates. - For the Seventh Review, preceding quarter is September 2024, latest as of assessment is December 2024. - Detailed account breakdown to be provided in a format agreed with IMF staff. Precondition and operational detail - Additional precondition for activating monetary financing: drawing down of government deposits (consistent with paragraph [48] of the MEFP), underpinned by a framework mutually agreed between MOF and NBU in consultation with IMF, and for which an NBU resolution was adopted in September 2024. Adjustors to the ceiling on general government borrowing from the NBU - Adjustors apply if both conditions are jointly satisfied: - (i) shortfall in external financing defined as any shortfall of financing listed in Table B; and - (ii) primary issuances on government bonds (measured at face value, excluding short-term issuances with primary maturities less than 3 months) during the 3-month period prior to the request for monetary financing exceed percentage thresholds of actual redemptions over the same period listed in first line of Table D (123 for the target dates in 2025 and 2026). - If both conditions verified, ceiling on general government borrowing from the NBU, net of redemptions and repayments, adjusted upward by the smaller of: - amount of 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. - Ceiling on general government borrowing from the NBU resets every quarter (March 31, 2025; June 30, 2025; September 30, 2025; December 31, 2025 for 2025 targets; and March 31, 2026 for 2026 targets) and is not carried over between quarters. - Amount of the shortfall in external financing assessed as total cumulative shortfall from end-December 2024 for 2025 targets, and end-December 2025 for 2026 targets and measured on the last day of the previous month. - Projected redemptions shown in Table D. *Source: Technical Memorandum of Understanding between the Ukrainian authorities and IMF staff (excerpt).* ### 18. In cases where the 15-business-day interval for reaching agreement and making payments ### 18. In cases where the 15-business-day interval for reaching agreement and making payments (including as stipulated in the Memorandum of Understanding between the Ministry of Finance of Ukraine and the National Bank of Ukraine on the Repayment and Servicing of Obligations of the Government of Ukraine to the International Monetary Fund) falls past the relevant test date, the ceiling on general government direct borrowing from the NBU will be subject to an automatic upward adjustor by the amount of the payment. ### Adjustors for the Ceiling on General Government Direct Borrowing from the NBU - Table D referenced: Adjustors expressed in UAH billion (table not reproduced here). ### C. Floor on Overall Cash Balance of the General Government excluding Budget Support Grants (Indicative Target) — Definition and Measurement - Definition: - Overall cash balance of general government excluding budget support grants is the balance measured in paragraph 20, adjusted by budget support grants (Table B) recorded above the line in non-tax revenues. - Measured cumulatively starting January 1st of a calendar year. - For program target computation: a positive number is a surplus and negative number is deficit. - Measurement (paragraph 20): overall cash balance equals net financing flows excluding valuation changes, comprising: - Total net treasury bill sales (in hryvnias and foreign currency) as per NBU registry of treasury bill sales; net treasury bill sales = cumulative funds realized from primary auction sales and government securities issued for recapitalization of banks and SOEs less cumulative redemptions 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 domestic or foreign currency extended to general government by banks less change in all government deposits in banking system) plus any other financing by entities not reflected in NBU monetary statistics. - Total receipts from privatization (including change in stock of refundable participation deposits and sale of nonfinancial assets) and proceeds from uncompensated seizures. - Total proceeds from sales of confiscated Russian assets and bank account balances. - Change in sub-accounts 3551 and 3559 for pre-payments ahead of delivery of goods and services. - Difference between disbursements and amortizations on any bond issued by general government or the NBU to nonresidents for financing general government. - Difference between disbursements of foreign loans attracted by the State (including budget support, including associated non-cash transactions beginning with the end-December 2024 test date; project support, including on-lent to public enterprises) and amortization of foreign credits by 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). - 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. - Notes: - From here on, “treasury bills” defined as all treasury securities (including long-term instruments or treasury bonds). - Naftogaz recapitalization financing: included when used (as collateral for a loan, or as an outright sale) by Naftogaz to obtain financing. ### Accounting Conventions (paragraph 21) - All flows to/from the budget in foreign currency (including issuance of foreign currency denominated domestic financial instruments) are accounted per paragraph 3 of TMU, with exceptions: - External disbursements and amortizations of municipal governments and commercial bank direct credit accounted at current exchange rates. - Financing changes from exchange rate valuation of foreign currency deposits excluded from balance computation. - Government deposits in banking system exclude VAT accounts used for electronic administration and escrow accounts of taxpayers used for customs clearance. ### D. Floor on Non-Defense Cash Primary Balance of the General Government Excluding Budget Support Grants (Quantitative Performance Criterion) - Definition (paragraph 22): - Non-Defense Cash Primary Balance = Overall Balance of General Government excluding budget grants (section C) less interest payments (total interest paid on domestic and external debt, consistent with budget treasury codes 2410 and 2420) less defense spending of the state budget general fund as defined in paragraph 8 of TMU. - Measured cumulatively starting January 1st of each calendar year. ### Adjustors for Balances in Parts C and D - Upward adjustor: - Floor on overall cash balance excluding grants and on non-Defense Cash Primary Balance will be adjusted upward by the 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 shortfall: - Subject to automatic downward adjustor equal to full amount of shortfall if cumulative proceeds from external budget support loans (in hryvnia evaluated at program exchange rates) fall short of program projections. - Government bonds for bank recapitalization and DGF financing: - Automatic downward adjustor corresponding to full amount of such bonds, up to a cumulative maximum amount to be set in future reviews. Amount included in targets is zero. - NBU profits: - Automatic upward adjustment corresponding to 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, - UAH 63.9 billion for the remaining test dates in 2025. - Gas purchases / PSO compensation / transfer to GTSO: - Automatic downward adjustment to accommodate these up to cumulative maximum of UAH 60 billion in 2024 and UAH 0 billion in 2025, conditional upon availability of financing. - Proceeds from sales of confiscated Russian assets and transfers of bank accounts: - For test dates in 2024, automatic downward adjustor up to cumulative maximum of UAH 23.7 billion corresponding to full amount of such receipts; for test dates in 2025 cumulative maximum downward adjustment is UAH 0 billion. - This UAH 23.7 billion amount reflects the balance of the Fund for the Liquidation of the Consequences of the Armed Aggression, which stood at UAH 7.6 billion as of January 1, 2025. - 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 (paragraph 23): - Measured cumulatively from January 1st each calendar year. - Includes 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 (paragraph 24): - Social spending = spending on social programs through General Fund and Special Funds; covers categories in budget treasury code 2700. - Includes social insurance and social assistance programs on budget (e.g., 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 cumulative basis starting January 1st each calendar year. ### G. Ceiling on the General Government Domestic Arrears (Indicative Target) - Definition and target (paragraph 25): - Ceiling derived from definition in paragraph 11 and reporting format in paragraph 81 (excluding arrears of local governments). - Target cumulative from January 1st each calendar year; covers arrears of state budget (general and special funds) and social funds. - Stock of arrears measured that way will not exceed stock of arrears at end December 2022. - Arrears computation excludes arrears accrued in territories that are or were in direct combat zones and temporarily occupied by Russia as of applicable test date. ### H. Ceiling on Non-Accumulation of New External Debt Payments Arrears by the General Government (Continuous Performance Criterion) - Definition (paragraph 26): - Arrears = external debt obligations of general government not paid when due per contractual terms (taking into account contractual grace periods). - Excludes arrears on external financial obligations of government subject to rescheduling. - “External” defined as debt payments to non-residents. ### I. Ceiling on Publicly Guaranteed Debt (Quantitative Performance Criterion) - Definition and ceilings (paragraph 27): - Ceiling applies to amount of guarantees issued by central (state) government once underlying debt is disbursed. - For test dates in 2024 the ceiling = UAH 47.9 billion. - For test dates in 2025 the ceiling = UAH 62.86 billion. - In both 2024 and 2025, ceiling consistent with 3 percent of current year revenues of state budget general fund (as defined in Budget Code) and applies to cumulative amount of guarantees issued by central government from January 1st, 2024 calendar year including guarantees to priority sectors. - Program exchange rates apply to all non-UAH denominated debt. - Ceiling excludes guarantees for NBU borrowings from IMF. - Automatic upward adjustor for selected donor-financed projects (paragraph 28): - For test dates in 2024, eligible projects include guarantees for loans to: - UGV to purchase equipment for gas extraction; - Naftogaz for additional procurement of natural gas; - Ukrhydroenergo for emergency restoration of hydropower plants; - Working capital loan to Ukrenergo; - Boryspil International Airport for reconstruction of flight zone 2; - Urkhydroenergo for recovery equipment; - Urkhydroenergo for installation of energy storage. - Adjustor caps: - Capped at UAH 38.7 billion in 2024 and discussed in program reviews. - In 2025 capped at UAH 115 billion; projects subject to adjustor in 2025 will be discussed in subsequent program reviews. - In 2026, adjustor will be consistent with total public investment as published in the Budget Declaration for 2026-28 and subsequently the ceiling for public investment in the 2026 annual budget law; projects for 2026 adjustor will be discussed in subsequent program reviews. ### J. Other Continuous Performance Criteria - During the EFF period, Ukraine will not: - (i) impose or intensify restrictions on making of payments and transfers for current international transactions; - (ii) introduce or modify multiple currency practices; - (iii) conclude bilateral payments agreements inconsistent with Article VIII; - (iv) impose or intensify import restrictions for balance of payments reasons. ### II. Official Exchange Rate — Determination - Historical and current methodology (paragraph 30): - Official exchange rate of hryvnia against U.S. dollar was UAH/USD 36.5686 as set by NBU, effective 9am on July 21, 2022, until October 3, 2023. - Since October 3, 2023, NBU transitioned to a regime of managed flexibility. - Starting October 3, 2023, NBU sets official hryvnia/US dollar rate daily at weighted average based on interbank market transactions using a two-stage cut-off system for transactions with extreme parameters. - To calculate official exchange rate, NBU uses all tod, tom, and spot (T+2) USD purchase/sale transactions with volume USD 100,000 to USD 5 million inclusive between banks and between banks and NBU, reported via trade information systems before 3 p.m. same day. - Official exchange rates for other currencies determined by NBU on basis of official USD rate and cross rates. - Official exchange rates published daily on NBU’s website no later than 3:30 pm of day of calculation and take effect next business day. - Some foreign currencies have official exchange rate set by NBU on a monthly basis. ### III. Reporting Requirements — National Bank of Ukraine (NBU) - Monthly sectoral balance sheets (paragraph 31): - NBU will provide IMF monthly sectoral balance sheets for NBU and other depository corporations (banks) according to standardized reporting forms (SRFs), no later than the 25th day of following month. - SRFs for end of reporting year provided no later than the 41st day after the reporting year. - Weekly and monthly reserves data (paragraph 32): - Weekly basis: NBU provides IMF daily operational data on stock of net and gross international reserves, at both actual and program exchange rates, and full breakdown of NBU accounts included in net international reserves and any additional information needed to monitor developments. - Monthly (no later than the 21st of 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 following month): data on currency composition of reserve assets and liabilities. - Daily FX market and interventions data (paragraph 33): - NBU provides IMF daily information on total foreign exchange sales (including total from nonresidents and sales by clients in interbank market, and any obligatory sales, if any) and approved foreign exchange demand in interbank market, including Naftogaz foreign exchange purchases. - Daily information on official foreign exchange interventions and intervention quotations in breakdown agreed with IMF staff, and results of any foreign exchange auctions. - Weekly: information as agreed with IMF staff on indicators of FX interventions approved by NBU Board and related computations. - NBU will immediately notify IMF of any updates to FX interventions methodology documentation and any decisions that define these indicators. - Daily analytical account balances (paragraph 34): - NBU provides IMF 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 holdings and auctions (paragraph 35): - NBU will continue to publish daily holdings of domestic government securities and provide IMF information on: - Daily holdings broken down by type of holders at primary market prices at rate fixed on day of auction; - Domestic government securities sales from beginning of year at official rate as of date of placement; - Domestic government securities in circulation by principal debt outstanding at official exchange rate as of date of placement; - Reports on each government securities auction; - Data on purchase and redemption of domestic government bonds from Ministry of Finance in NBU’s portfolio; - Monthly report on government securities holdings in IMF-agreed format, broken down by currencies and by holders—non-resident investors, resident non-bank, and resident banks (further broken down by bank group: State Participation, Foreign Banking, and Private Capital). - Secondary market treasury bills transactions (paragraph 36): - NBU provides information on daily transactions (volumes and yields) on secondary market treasury bills including OTC transactions and breakout for any NBU transactions. - NBU financial statements and profit distribution (paragraph 37): - NBU provides IMF its financial statements (income and expenses, balances on general reserves and calculations of profit distribution to budget) for current year and, if available, projections for following two years, as approved by NBU’s Board. IMF to be notified immediately of any update. - NBU financing operations and collateral reporting (paragraph 38): - NBU provides daily and monthly data on NBU financing operations (including swaps or refinancing) of banks of Ukraine, and on liquidity absorption operations (including through CDs issuance) in formats and timeliness agreed with IMF staff. - Monthly: information on collateral pledged to NBU for loans (by bank and loan type and 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 of NBU loans and collateral will separately identify which banks are under temporary administration or liquidation. *Source: Excerpt from the TMU provisions in the referenced IMF document.* ### 39. T ### 39. T ### A. NBU reporting obligations — frequency and scope - Monthly reporting (no later than 30 days after the expiration of the reporting month; except end-of-reporting-year data: no later than on the 41st day after the reporting year ends): - Core FSIs for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group (as defined in the IMF Compilation Guide). - Projections for external payments falling due in the next 12 months. - Bank-by-bank for State Participation Group, Foreign Banking Group and Private Capital Group: - 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. - Amount of loans and claims (by households in domestic and foreign currency, legal entities in domestic and foreign currency, banks in domestic and foreign currency, maturity, and by borrower classification categories). - Collateral for loans and claims (by type of collateral and borrower category). - Provisions on loans and claims (by borrower category). - Large exposures (loans equal to or greater than 10 percent of equity), refinanced loans, restructured loans (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). - Deposits of related parties (by domestic and foreign currencies, and households and legal entities); deposits of related parties pledged as collateral; other liabilities to related parties; related-party loans; counterparty names and amounts of the largest 20 loans to related parties; collateral and 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; deposits (by households and legal entities, and domestic and foreign currencies); due from banks (by domestic and foreign currencies). - Nonperforming loans (NPLs) including migration between NPLs and performing loans (PLs); form of NPL repayments (cash, loan sales, collateral sales, etc.); write-offs; and other factors; comparison with banks’ respective timebound plans for reducing NPLs once approved. - Cumulative income statements: 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. - Amount by which regulatory capital has been increased and the instrument or transactions by which regulatory capital has been increased (e.g., capital injection, conversion of subordinated debt to equity, etc.). - 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. - 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. - 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). - Monthly reporting (no later than on the 25th day after the termination of the report month; except end-of-report-year data: no later than the 41st day after the report year): - Depository corporations surveys, including domestic claims, NBU loans and liabilities with banks, detailed information on loans of the banking sector provided to the general government with breakdown by indebtedness of the central (state) government and local budgets and the DGF, including in national and foreign currency, by loan and by security. - Balances of funds of the government held at the NBU, including the Single Treasury Account denominated in the national currency (account 3240 L) and the funds of the Treasury denominated in foreign currency (account 3513 L) and DGF. - Computation of Target on General Government Borrowing from the NBU in a format agreed with IMF staff based on monthly reporting data. - Information on reserve requirements at the individual bank level, including the breakdown between the reserve requirements fulfilled by reserves and that by government securities. - Bank-by-bank 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). - Aggregated and bank-by-bank data on short- and long-term external debt for both public and private sectors (quarterly) and continuous reporting of external arrears. - Monthly data for the entire banking sector and bank-by-bank on loans and claims, collateral, provisions, securities and debt instruments, and related metrics as specified above. - Quarterly reporting (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. - Detailed quarterly balance of payments data in electronic format. - Daily reporting: - Foreign exchange export proceeds and foreign exchange sales; data on import transactions for goods and services; amounts of foreign exchange transferred from abroad to the benefit of physical persons to be paid in cash without opening an account; foreign exchange wires from Ukraine abroad for current foreign exchange nontrade transactions on the basis of the orders of physical persons; sales and purchases of foreign exchange cash by individuals (incl. through banks, exchange offices, and UkrPoshta). - Foreign assets and liabilities of the overall banking system (excl. the NBU); banks’ open foreign exchange positions by main groups of banks; deposits and loans on the aggregated basis for the overall banking system (excl. the NBU) broken down by households and legal entities, maturity, and by national and foreign currency. - Aggregated data on the main currency flows, including government foreign receipts and payments by currencies and interbank market operations by currencies; continued daily information on exchange market transactions including the exchange rate. - Aggregated data on foreign assets and foreign liabilities (broken down by domestic and foreign currency) for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group (weekly) and on a monthly basis broken down by type and holder and remaining maturity, with rollover rates for foreign credit lines and securities. - Bank-by-bank daily 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 daily 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 reported by households and legal entities and by maturity (current accounts, saving accounts, and time deposits). - Aggregated daily deposits and credits for overall banking system (excl. the NBU) excluding banks in liquidation starting from the beginning of 2014, broken down by households and legal entities, and by national and foreign currency. - Upon request: banks’ net expected outflow of cash for a 30-day period. - Weekly and other periodic reporting: - Weekly data on volumes of noncash foreign exchange purchases on behalf of banks’ clients and banks broken down by reasons. - Weekly data (after Martial Law is cancelled) — average interest rate on interbank borrowings (by domestic and foreign currency, and by maturity—overnight, 1–7 days, and over one week). - Weekly data on foreign assets and foreign liabilities for individual banks (State Participation Group, Foreign Banking Group, Private Capital Group). - Monthly reporting of aggregated and bank-by-bank data on the number and volume of household deposits (DGF) and insured deposits (DGF) — see Deposit Guarantee Fund section. ### B. Specific NBU operational and governance communications - 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; provide information on outstanding interest and principal payments. - NBU will inform IMF staff of any changes to reserve requirements for other depository corporations. - NBU will communicate (electronically) to IMF staff any changes in the accounting and valuation principles applicable to balance sheet data and will notify staff before introducing any changes to Charts of Accounts and reporting forms of both the NBU and the commercial banks. - NBU Internal Audit Department will provide an assurance report to the Fund, no later than six weeks after each test date, confirming: - (i) the monetary data are in accordance with program definitions and have been verified and reconciled to accounting records; and - (ii) that there have been no changes to the chart of accounts or valuation methods that would impact the data reporting. - NBU will continue to provide the IMF with a copy of the annual management letter from the external auditor within six weeks of completion of each audit (as required under the Fund's safeguard policy) for the duration of the arrangement and for as long as credit remains outstanding. ### C. Government securities, Treasury and related reporting - Monthly: - NBU will provide to the IMF and the Ministry of Finance data on the monthly coupons and principal to be paid for the period till the end of current and next year (in hryvnia and foreign currency, separately) on the outstanding stock of government securities held by NBU and the public (broken down by resident banks, resident non-bank; and non-resident investors). Data on resident banks further broken down by bank group (State Participation, Foreign Banking, and Private Capital) and include ISIN-level. - NBU will provide information on hryvnia-denominated securities that are indexed (i.e., to inflation; USD), broken down by the type of the owner (annually). - NBU will provide 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. - The Treasury will continue to provide to the IMF: - Daily operational budget execution indicators, daily inflow of borrowed funds (by currency of issuance) to the state budget and expenditures related to debt service (interest payments and principals) including data on government foreign exchange deposits, in a format agreed with IMF staff. - 10-day and monthly basis data on the execution of the state, local, and consolidated budgets on the revenue side and data on revenues from social security contributions, including by oblast breakdown. - Monthly data on funds deposited with the Single Treasury Account, on the registration accounts of entities not included in the state sector, information on balance of funds as of the 1st day of the month on account #3712 “accounts of other clients of the Treasury of Ukraine,” on inflow to the State budget from placing Treasury or any other liabilities to households in foreign and domestic currency and their redemption. - The Ministry of Finance will provide the IMF with 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. ### D. Deposit Guarantee Fund (DGF) reporting obligations - Monthly: - DGF will provide data on the total number and volume of household deposits broken down in groups by deposit size; data reported bank-by-bank for the largest 35 banks and on aggregate for the remaining banks. - DGF will report bank-by-bank for all banks the amount of insured deposits and total household deposits (by domestic and foreign currency) in an agreed format. - DGF will report bank-by-bank the total insured deposits and remaining insured deposits to be paid by the DGF for banks under liquidation and under provisional administration (by domestic and foreign currency). - DGF will report the financial position of the DGF, including information about the cash balance, bond holdings, credit lines, and loans (in an agreed format). - DGF will report the financing arrangements of the DGF, including contracted financing from MoF (in an agreed format). - DGF will report a one-year forecast of the amount and type of financial resources expected to be received 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). ### E. Other operational notes - The NBU will provide on a daily basis aggregated data on main currency flows, including government foreign receipts and payments by currencies as well as interbank market operations by currencies. - The NBU will continue to provide daily information on exchange market transactions including the exchange rate. - Certain reporting items are conditional on the cancellation of Martial Law (e.g., average interest rate on interbank borrowings weekly reporting; reporting of refinanced and restructured loans). *Source: 1ukrea2025001-print-pdf - 39. T* ### 75. The Ministry of Finance will continue to provide to the IMF in electronic form monthly and ### 1ukrea2025001-print-pdf - 75. The Ministry of Finance will continue to provide to the IMF in electronic form monthly and ### Ministry of Finance — recurring reporting requirements - Monthly and quarterly treasury reports (including accounts payable by budget institutions) to be provided in electronic form no later than "25" and "35" days after the end of the period, respectively. - Final fiscal accounts at the end of each fiscal year to be provided in electronic form no later than "March of the following year." - Quarterly reports to include expenditure data by programs and key spending units, and based on standard functional and economic classifications; quarterly reports also to contain standard information on budget expenses to cover called government guarantees. - Public wage bill reporting (excluding SOEs) in line with IMF-agreed template, including all payment categories, including defense wages (quarterly). - Quarterly Treasury reports on expenditure under the medical guarantee program by economic classification. - Quarterly reporting on municipal borrowing and amortization of debt in format agreed with IMF staff. - Monthly reporting, together with NBU, on redemptions of domestic bonds and bills in favor of residents and non-residents; weekly reporting, together with NBU, on face value of government bonds redeemed and face value of government bonds placed during the week. - Monthly reporting, no later than "15 days" after the end of the month, of 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 list, no later than "25 days" after the end of the quarter, of project financing credits to be disbursed to the special fund of the State Budget of Ukraine (project-by-project; distinguishing grant and loan financing), 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. - Treasury to report monthly data on accounts payable for state and local budgets (economic classification of expenditures). - Pension Fund to provide monthly reports on net unpaid pensions to 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 in accordance with the law (budget treasury code 25010000); and - other sources of own revenues of budgetary institutions (budget treasury code 25020000); - due no later than "25 days" after the end of the quarter. - Monthly reporting, 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 and nongovernment units guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients); - balances of sub-accounts "3551" and "3559"; - utilization of ERA financing. - Semi-annual reporting, no later than "25 days" after receiving information from the European Commission, on distribution of ULCM resources corresponding to ERA loans: total amounts distributed, amounts corresponding to interest and principal by donor, and outstanding balances of ERA loans by donor. - Quarterly, no later than "25 days" after the end of the quarter, to provide in electronic form: - data on the outstanding stock of domestic and external debt of the state and local budgets (including general and special funds); - 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 accumulation of any budgetary arrears on external and domestic debt service. - Semi-annual reporting, no later than "25 days" after the end of Q2 and Q4, of disaggregated bond-by-bond (loan-by-loan) data regarding the debt stock, associated payments, and disbursements. - Monthly reporting, no later than "25 days" after the end of the month, of data on external and domestic credit to key budgetary spending units and nongovernment units that is guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients). - Monthly information on number and amount of loans under the 5-7-9 program and breakdown by sectors. ### Pension Fund and other extra-budgetary funds - Provide data on approved budgets and quarterly operational data (daily for the Pension Fund only) on revenue, expenditures, arrears, and balance sheets of: - Pension Fund (detailed breakdown of revenues and expenditure by main categories expected), - Employment Fund (detailed breakdown of revenues and expenditure by main categories expected), - any other extra-budgetary funds managed at the state level; - reporting 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 to 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." ### Bank and SOE recapitalization, fiscal risks, and related reporting - Monthly data, no later than "15 days" after the end of each month, on budgetary costs associated with the recapitalization of banks and SOEs. This includes: - 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. - Registry of fiscal risks to be made available to IMF staff semi-annually or, if available, sooner. ### STS (State Tax Service) and SCS reporting - STS and State Customs Service 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, duration, and 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 continue 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. (Table headings included: Tax Arrears by Codes; 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.) - STS to provide quarterly information, no later than "25 days" after the end of each quarter, on number of tax appeals and associated disputed amounts received in each reporting period, and number of internally resolved appeals indicating appeals resolved in favor of the controlling body, in favor of taxpayer and partial satisfaction. ### SOEs, Naftogaz, GTSO, Ministry of Economy, and infrastructure reporting - Naftogaz Group and the GTSO to provide IMF staff with monthly cash flow information (in an agreed electronic format) no later than the "25th of the following month." Naftogaz’s report to include volumes and prices of gas purchases and sales (domestic and imported gas; sales to households, heating utilities, budget institutions, and industries), and main revenue, expenditure, and financing items. Monthly updates on Naftogaz’s financial liabilities with schedule of loan-by-loan interest and principal payments. - Ministry of Economy to provide consolidated quarterly information from the financial statements of the 10 largest SOEs no later than "80 days" after the end of each quarter, 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; - (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 IMF-agreed format. ### State Statistics Service - In case of any revisions of gross domestic product, 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: 1ukrea2025001-print-pdf — extract paragraphs 75–97.* ### 98. The Ministry of Social Policy will collect and submit to IMF staff on a quarterly basis data on ### The Ministry of Social Policy will collect and submit to IMF staff on a quarterly basis data on ### Social assistance data reporting - 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, which will 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 and humanitarian context - GDP grew by approximately 3.5 percent in 2024 and is projected to expand by 2–3 percent in 2025. - Preliminary external sector figures: - Current account deficit excluding grants amounted to US$25 billion in 2024, US$0.3 billion higher than estimated in the staff report. - This compares with US$21.3 billion in 2023. - Merchandise trade deficit amounted to $30.4 billion in 2024, compared with US$29.1 billion in 2023. - Reconstruction needs (RDNA-4, covering February 2022 to December 2024): - Direct damages are estimated at US$176 billion. - Total reconstruction and ‘build back better’ costs reaching US$524 billion. - Humanitarian and labor market impacts: - More than a quarter of Ukraine’s population has been displaced, either internally or abroad. - Tight labor market conditions are contributing to wage pressures and inflation. ### Monetary and exchange rate policies - Inflation and core inflation: - Headline inflation spiked to 13.4 percent y-o-y in February 2025. - Core inflation grew up to 12.0 percent y-o-y in February 2025. - NBU policy actions and stance: - The key policy rate was raised in several steps from 13 percent to 15.5 percent in March 2025. - The NBU aims to bring inflation back to its 5 percent target over the policy horizon. - The NBU will maintain policy focused on safeguarding price and external stability, maintaining sufficiently positive real interest rates, and transitioning toward a full-fledged inflation-targeting regime with a floating exchange rate when appropriate conditions allow. - FX market measures and capacity: - Commissioning of 0.9 GW of reserve distributed generation. - Expansion of electricity import capacity to 2.1 GW. ### Budget, fiscal, and debt policies - 2025 Budget aggregates: - Total revenues excluding budget support grants will be UAH 3,355 billion (38.4 percent of GDP). - Most will be tax collections UAH 3,087 billion (35.3 percent of GDP). - Tax measures and revenue mobilization: - The sizable new tax measures package signed by the President last November will yield around UAH 141 billion or around 1.6 percent of GDP in 2025. - The tobacco excise tax law was enacted on March 25, 2025, to align excise taxes on tobacco products with EU directives. - Public Investment Management (PIM) system: - Implementation of the first phase of the plan, covering 2024–2025, is already underway. - Amendments to the Budget Code have been enacted and the methodological framework for the PIM process has been approved, meeting structural benchmarks for end-January and end-February 2025. - International budget support and financing envelopes: - Since the start of the full-scale invasion, Ukraine has received nearly US$120 billion in budget support from international partners. - Under the EFF program, disbursements have reached US$78.1 billion, including US$3.1 billion received during January–February 2025. - Under the G7’s US$50 billion Extraordinary Revenue Acceleration (ERA) Loans initiative, Ukraine has received US$1 billion from the United States and €4 billion from the European Union—including a second €1 billion tranche disbursed in March. - In March 2025, Ukraine received the first tranche from Canada of CAD 2.5 billion (approximately US$1.7 billion) and the first tranche from the United Kingdom of £752 million (approximately US$1 billion). - The authorities state cumulative external financing envelopes of US$148.8 billion (baseline) and US$162.9 billion (downside) over the four-year period. - Debt restructuring and creditor engagement: - Authorities are progressing in restructuring Ukraine’s external public debt to restore debt sustainability. - The Group of Creditors of Ukraine (GCU) remains committed to a two-step process involving an extension of the debt standstill and a separate assurance to deliver a final debt treatment sufficient to restore debt sustainability before the final review of the IMF-supported program. ### Governance and structural reforms - Courts and justice sector: - A law creating new specialized administrative courts was enacted (landmark reform; end-December 2024 structural benchmark). - The courts will be established and judges appointed by Q3’2025, in line with the Ukraine Facility Plan. - Independent experts with international experience will have a decisive and crucial vote for a three-year period in the vetting process for candidates to the courts. - Anti-corruption and prosecutorial reforms: - Amendments to the Criminal Procedure Code to strengthen anti-corruption prosecution have been submitted; authorities request extension of the structural benchmark deadline to end-July 2025. - The external audit of the National Anti-Corruption Bureau (NABU) is underway; the authorities request an extension of the deadline for this structural benchmark to end-July 2025, with the audit report to be published by that time. - EU integration and regulatory alignment: - Ukraine has achieved approximately 75 percent convergence with EU banking norms. - Achieving bank secrecy equivalence is an essential precondition for full regulatory equivalence. - Ukraine completed the first phase of official screening of legislation for EU compliance; Clusters 1, 2, and 6 fully screened; bilateral sessions for Cluster 3 ongoing. - Draft roadmaps for the Rule of Law and Public Administration Reform were formally presented to the EU on March 10–11, 2025. ### Program implementation and requests - The authorities met all end-December 2024 fiscal targets. - The authorities met all end-December and continuous quantitative performance criteria and indicative targets, as well as most structural benchmarks. - The authorities request completion of the seventh review and agree with publication of the report. - The authorities requested a rephasing of IMF disbursements to better align them with Ukraine’s updated profile of balance of payments needs. *Source: UKRAINE SEVENTH REVIEW UNDER THE EXTENDED ARRANGEMENT—SUPPLEMENTARY INFORMATION, March 26, 2025.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1ukrea2025001-print-pdf.pdf_