## IMF staff report — Ukraine: Executive Summary and Program Chapters (content unit) ## Source details **Canonical URL:** [IMF staff report — Ukraine: Executive Summary and Program Chapters (content unit)](https://www.imf.org/-/media/files/publications/cr/2026/english/1ukrea2026001-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1ukrea2026001-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1ukrea2026001-source-pdf.pdf.json) --- ### Context and recent developments - Russia’s full-scale war in Ukraine continues, soon entering its fifth year; aerial attacks in 2025 five times as high as in 2024 and severe attacks starting in early October on gas and energy facilities. - Real GDP in 2025: about 20 percent below pre-war levels. - Q3 2025 growth: 2.1 percent (y/y). - Estimated real GDP growth range for 2025: 1.8–2.2 percent. - Headline CPI inflation in December 2025: 8 percent (y/y); peak 15.9 percent (y/y) in May 2025. - Current account deficit excluding grants in 2025: US$44.6 billion (2024: US$26.4 billion). - International reserves at end-2025: US$57.3 billion (134.7 percent of the estimated ARA metric). - Real credit growth in November 2025: 13.5 percent (y/y). - One small bank (0.04 percent of total sector assets) placed in resolution by end-September 2025. - Political change: new government led by Prime Minister Svyrydenko took office July 17, 2025; economic team reconfirmed commitment to 2023 EFF goals. ### Program request, objectives, and design - Authorities requested a 48-month extended arrangement under the EFF to address additional adjustment and financing needs and restore external viability. - Proposed IMF program access (normal): SDR 5,935.3 million (295.0 percent of quota, about US$8.1 billion). - Proposed external support package for 2026–29 in the baseline: US$136.5 billion (official financing through grants and concessional loans, as well as debt relief). - Program designed to: - Resolve Ukraine’s balance of payments problem. - Restore medium-term external viability under the Fund’s policy on lending under exceptionally high uncertainty (EHU). - Be recalibrated quickly in case of successful peace negotiations. - Duration: until early 2030 with frontloaded access for 2026; quarterly reviews envisaged at least for the duration of EHU. - Eligibility/assurances: - Ukraine assessed to meet the five EHU criteria. - Firm financing assurances for the first 12 months and specific assurances thereafter; a group of countries provided capacity-to-repay assurances. ### Macroeconomic baseline projections and key statistics (selected, preserved verbatim) - Real GDP growth (percent): 2025 1.8-2.2; 2026 1.8-2.5; 2027 3.5; 2028 4.2; 2029 3.9; 2030 3.7. - Inflation, eop (percent): 2025 8.0; 2026 7.5; 2027 7.0; 2028 5.4; 2029 5.0; 2030 5.0. - Current account balance (Billion U.S. dollars): 2025 -31.9; 2026 -42.6; 2027 -39.5; 2028 -24.3; 2029 -22.1; 2030 -21.9. - Current account balance (Percent of GDP): 2025 -15.0; 2026 -19.1; 2027 -16.7; 2028 -9.7; 2029 -8.5; 2030 -8.0. - Gross international reserves (Billion U.S. dollars): 2025 57.3; 2026 65.5; 2027 73.4; 2028 74.8; 2029 80.2; 2030 80.6. - Overall fiscal balance (pct of GDP): 2025 -23.3; 2026 -18.4; 2027 -17.7; 2028 -7.4; 2029 -2.9; 2030 -2.0. - Overall fiscal balance ex. grants (pct of GDP): 2025 -23.8; 2026 -19.4; 2027 -17.8; 2028 -11.1; 2029 -5.5; 2030 -3.6. - Public debt (pct of GDP): 2025 108.7; 2026 122.6; 2027 137.1; 2028 135.5; 2029 131.9; 2030 125.7. - Financing gap (baseline cumulative 2026–29): US$136.5 billion; 12-month basis gap: US$52.0 billion. - Official financing on 12-month basis: US$47.6 billion (EU: US$26.8 billion; World Bank: US$0.3 billion; Other bilateral: US$9.8 billion; ERA: US$10.6 billion). - IMF (prospective) on 12-month basis: US$3.8 billion. - In 2026, US$18.4 billion of the US$52 billion gap filled by EU’s €90 billion USL (as noted in source context). ### Downside and upside scenarios (structure and implications) - Downside summary: - War stronger in 2026, continues into 2027, frozen conflict by end-2028; modeled security shock with persistent impacts. - Near term (2026): growth 1.5 percent; year-end inflation 10 percent; overall deficit excluding grants close to 22½ percent of GDP. - 2027–28: real GDP growth 1.0 percent in 2027 and ½ percent in 2028; deficits average 19 percent of GDP; higher imports and reserve deterioration; increased domestic borrowing and potential financial repression. - Medium term: exit EHU by end-2028 if security normalizes; inflation reaches 5 percent in 2030; reserves accumulate to 110.7 percent of ARA metric by 2035. - Upside summary: - Durable peace yields faster normalization: post-war growth could reach averages up to 4.8 percent and per capita income could rise materially by 2035 (detailed assumptions in Annex IV). - Upside investment needs: US$74 billion per year (27 percent of GDP); baseline: US$63 billion per year (24 percent of GDP). - Upside TFP assumption: 2 percent per annum vs baseline 1.5 percent. ### Fiscal policy, revenue measures, and budget framework - 2026 Budget highlights: - General government expenditures projected at UAH 6,228 billion (62.2 percent of GDP). - Tax revenues projected at UAH 3,906 billion; tax-to-GDP ratio about 39 percent (up from just over 36½ percent in 2025). - Overall deficit excluding budget support grants envisaged at UAH 1,927 billion (19 percent of GDP). - Contingency buffer up to 0.6 percent of GDP tied to customs revenue overperformance. - Medium-term objective: - Return to a primary surplus over the medium term; primary surplus target range (excluding grants): 0.2–0.4 percent of GDP. - Authorities commit to maintain tax revenues above 37.5 percent of GDP. - Key revenue and tax measures (timing preserved): - End-March 2026 structural benchmark: Parliament to adopt package including taxing incomes from digital platforms; eliminate de-minimis exemption for postal shipments (postal imports: US$3.1 billion in 2024; US$5.1 billion over 2025Q1–Q3); prior action: level playing field for VAT payers in public procurement. - VAT reform: remove VAT exemption for Simplified Tax (ST) regime taxpayers above general VAT threshold effective January 1, 2027; threshold to remain below UAH 4 million. - CIT anti-avoidance: submit legislation by end-June 2026 to strengthen transfer pricing and fully implement interest limitation rule (Article 4 EU ATAD); further alignment by end-September 2026. - Military Tax: remove sunset clause on PIT surcharge (extend beyond Martial Law). - JIIs reforms: require regular distributions and tax-agent responsibilities to curb tax avoidance. - One-time levy on banks: authorities instituted a one-time levy raising the CIT rate to 50 percent for (text in source cuts off). ### Public investment management (PIM) and PIM reforms - Achievements: Single Project Pipeline (SPP) approved August 2025. - Near-term actions: - By end-March 2026: approve framework and action plan for sectoral strategies. - Update Budget Code to integrate PIM into medium-term budget planning and fiscal risk management. - By end-August 2026: Strategic Investment Council to approve SPP update for 2027 budget; only projects prepared and appraised using PIM methodologies eligible. ### Monetary policy, exchange rate, and reserves - Monetary stance: - Following cumulative hikes of 200 bps in 2025Q1, KPR maintained at 15.5 percent through end-2025; January MPC modest cut of 50 bps (to 15 percent) in January 2026. - Guidance: retain tightening bias until inflation expectations decline; aim to return inflation to 5 percent over a three-year horizon. - Exchange rate policy: - Greater exchange rate flexibility recommended to avoid external imbalances and support external sustainability; FX interventions can smooth excessive volatility but should not be relied upon to achieve near-term price stability. - Net FX interventions in 2025: US$36.2 billion (2024: US$34.8 billion). - Nominal exchange rate 2025: broadly stable versus US dollar (depreciating by 2.6 percent in 2025Q4) and depreciated about 13.5 percent against the euro. - Reserves and NIR: - Net international reserves end-2025: US$57.3 billion (134.7 percent of ARA); projected 2026: US$65.5 billion (131.1 percent ARA). - NIR definition and adjustors set out in the TMU; targets adjusted for shortfalls in external budget support or net issuance of FX domestic securities. ### Financial sector policy, supervision, and infrastructure - Financial soundness indicators (selected comparison 2024–2025Q3, table entries preserved): - Tier 1 capital to risk weighted assets: 16.9 15.2 - Nonperforming loans to total gross loans: 30.3 25.0 - Nonperforming loans net of provisions to capital: 22.1 19.0 - Loan concentration by economic activity: 70.4 73.1 - Interest margin to gross income: 60.4 62.4 - Liquidity coverage ratio: 259.5 259.4 - Net stable funding ratio: 168.4 154.0 - Customer deposits to total (noninterbank loans): 228.6 208.9 - Supervisory and structural reforms: - NBU completed 2025 Resilience Assessment of the 21 largest banks; follow-up capital management plans and gap-closure schedules prepared. - Targeted AQR and bank viability assessments planned once conditions stabilize (Terms of Reference by end-April 2026). - Regulatory alignment with EU acquis: aim for equivalence and harmonization by 2027 for capital and liquidity rules. - Structural benchmarks: third-party risk regulatory requirements by end-June 2026. - State-owned banks (SOBs): - Strengthen SOB supervisory boards; amended NomCom framework (end-February 2026); prepare sale of two systemic SOBs with independent advisors; non-systemic SOBs to be resolved via DGF if prudentially required. - DGF and financial safety net: - DGF governance amendments to be submitted to parliament in March 2026; maintain current financial backstops until reserve ratio reached. ### Governance, anti-corruption, AML/CFT, and SOE reforms - Governance setbacks in mid-2025: July 2025 legislation briefly stripped independence of NABU and SAPO; quickly reversed but damaged trust. - Energoatom corruption scandal (November 2025) highlighted weaknesses in SOE governance and AML/CFT. - Commitments and benchmarks: - Preserve and strengthen independence of NABU, SAPO, HACC, and ACU; fill ACU board vacancies by end-December 2026 (structural benchmark). - NACP to issue risk-based verification regulations for asset declarations (end-June 2026 structural benchmark) and publish semi-annual verification outcomes; independent external audit of NACP for 2024–2025 performance. - Forensic services legal framework to be enacted (MEFP ¶63). - SOE reforms: rescind CMU Resolution 1441 (by end-March 2026), amend charters to mandate simple majority voting for supervisory boards (end-June 2026), resume publication of financial statements and annual audits for largest SOEs (by end-August 2026), and conduct forensic and compliance audits for top SOEs by end-June 2026. - Energy reforms: publish technical analysis of QFA costs and adopt liberalization roadmap by end-June 2026; begin tariff adjustments with social protections. ### Debt sustainability, restructuring strategy, and capacity to repay - Pre-restructuring DSA: debt would increase to 137.1 percent of GDP in 2027 and decline to 97.1 percent by 2035 absent further treatments. - Forward-looking targets (post-restructuring/with assurances): - Debt (excluding ERA and USL) should fall below 68 percent of GDP by 2035. - Average GFN below 7.0 percent of GDP in 2030–35. - Debt service to external creditors (excluding multilaterals) in 2026–28 should not exceed US$1 billion per year. - Restructuring strategy: - Group of Creditors of Ukraine (GCU) committed to a two-step process: extension of standstill with a new cutoff date, followed by definitive treatment once EHU abates; commercial restructurings largely completed in 2024–25 with significant haircuts; further actions contingent on downside risks. - Financing packages and gaps: - Baseline cumulative financing gap 2026–29: US$136.5 billion; official financing cumulative 2026–29: US$125.0 billion; IMF prospective cumulative 2026–29: US$8.1 billion. - Downside cumulative financing gap 2026–29: US$146.3 billion; exceptional financing cumulative 2026–29: US$12.6 billion. - Capacity-to-repay assurances: - A significant group of countries provided assurances recognizing Fund preferred creditor status and committing to support Ukraine’s ability to service obligations to the Fund; list of countries preserved in source. ### Program conditionality, QPCs, ITs, structural benchmarks, and reporting - Quantitative performance criteria (selected): floor on non-defense cash primary balance excluding grants; floor on tax revenues excluding SSC; ceiling on government guaranteed debt; floor on net international reserves; continuous QPC on non-accumulation of external payment arrears. - Indicative targets: floor on general government overall deficit excluding grants; floor on social spending; ceiling on general government budgetary arrears; ceiling on NBU claims on general government. - Structural benchmarks and prior actions (selected and timing preserved): - Prior actions met: Adopt 2026 Budget; decree leveling playing field for VAT payers in procurement; submit Labor Code employment definition amendments. - Structural benchmarks through end-December 2026 span tax legislation, customs head selection (end-March 2026), NSSMC governance amendment (end-December 2026), ACU board appointments (end-December 2026), technical analysis of QFA costs in energy (end-July 2026), SOB NomCom amendments (end-February 2026), and others listed in the MEFP/TMU. - Reporting and data provision: extensive reporting requirements for NBU, MoF, STS, SCS, DGF, Naftogaz, GTSO, SOEs, and macro/fiscal/financial statistics with specific frequencies and formats (daily/weekly/monthly/quarterly) detailed in the TMU. ### Risks, enterprise risks, mitigants, and staff appraisal - Major risks: - Duration and intensity of the war (primary risk). - Ability to mobilize sufficient and durable donor budget support in 2026–27. - Reform fatigue, governance backsliding, renewed attacks on infrastructure, and political economy constraints. - Mitigants: - Authorities’ decisive policymaking, contingency planning, IMF technical assistance and capacity development (UCDF), and strong international donor commitments including ERA and EU instruments. - Enterprise risks to the Fund under a new UCT program are significant but judged manageable under the Fund’s multi-layered risk management framework given financing assurances and program safeguards. - Staff appraisal: - Recommends approval of the 48-month EFF arrangement with SDR 5,935.3 million access; program appropriately designed under exceptional uncertainty but contingent on strict implementation and donor follow-through. *Source: IMF staff report (content unit: 1ukrea2026001-source-pdf).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context and recent developments - Russia’s full-scale war in Ukraine continues, soon entering its fifth year, with aerial attacks in 2025 five times as high as in 2024 and severe attacks starting in early October on gas and energy facilities. - Real GDP in 2025 is estimated at about 20 percent below pre-war levels. - A new government led by Prime Minister Svyrydenko took office on July 17, 2025; key members of the economic team remained and reconfirmed commitment to the 2023 EFF goals. - Q3 growth estimate: 2.1 percent (y/y). - Estimated real GDP growth range for 2025: 1.8–2.2 percent. - In October 2025 attacks affected up to 60 percent of daily gas production, causing widespread blackouts and record levels of electricity imports. - Headline CPI inflation in December 2025: 8 percent (y/y); peak was 15.9 percent (y/y) in May 2025. - Current account deficit excluding grants in 2025: US$44.6 billion (2024: US$26.4 billion). - International reserves at end-2025: US$57.3 billion (134.7 percent of the estimated ARA metric). - Real credit growth reached 13.5 percent (y/y) in November 2025. - One small bank (0.04 percent of total sector assets) was placed in resolution by end-September 2025. - The external sector assessment based on 2024 outturns shows Ukraine’s overall external position was significantly weaker than implied by fundamentals and desirable policies in the medium term after an end to the war. ### Program request, objectives, and design - Authorities requested a new 48-month extended arrangement under the Extended Fund Facility (EFF) to address additional adjustment and financing needs and restore external viability. - Program access (normal): SDR 5,935.3 million (295.0 percent of quota, about US$8.1 billion). - Proposed external support package for 2026–29 in the baseline: US$136.5 billion (official financing through grants and concessional loans, as well as debt relief). - The program is designed to: - Resolve Ukraine’s balance of payments (BoP) problem. - Restore medium-term external viability under the Fund’s policy on lending under exceptionally high uncertainty (EHU). - Be recalibrated quickly in case of successful peace negotiations. - Program duration would run until early 2030 and includes frontloaded access for 2026 to meet large BoP needs. - Program monitoring: a set of quantitative and structural conditionality with quarterly reviews envisaged, at least for the duration of the EHU. ### Macroeconomic and fiscal performance in 2025 - Macroeconomic policies remained on track in 2025: - The budget deficit excluding grants was lower than expected due to revenue overperformance and under-execution of spending. - Monetary conditions remained appropriately tight amid elevated but decelerating inflation. - Nominal exchange rate broadly stable against the US dollar during 2025, with sizeable FX interventions by the National Bank of Ukraine (NBU). - Net international reserves ended the year higher than projected. - Fiscal framework and medium-term objective: - The 2026 Budget assumes another year of war and continued large deficits. - Medium-term fiscal path anchored on returning to a primary surplus and mobilizing sufficient revenues for expenditure needs, including reconstruction. - Key macro figures and outcomes to preserve (as reported): - Real GDP in 2025: about 20 percent below pre-war levels. - Q3 growth: 2.1 percent (y/y). - 2025 headline CPI December: 8 percent (y/y); peak 15.9 percent (y/y) in May. - Current account deficit excluding grants in 2025: US$44.6 billion. - 2024 current account deficit excluding grants: US$26.4 billion. - Reserves: US$57.3 billion (134.7 percent of ARA). - Real credit growth in November 2025: 13.5 percent (y/y). - One small bank in resolution: 0.04 percent of total sector assets. ### Structural reforms, governance, and institutional developments - Progress on structural reforms in 2025 was mixed; majority of structural benchmarks for 2025H2 under the 2023 EFF were not met. - Political buy-in for governance reforms has weakened. - Enactment in July 2025 of legislation stripping key anti-corruption enforcement institutions of their independence damaged trust in anti-corruption efforts, even though the law was quickly reversed. - A major corruption scandal at Energoatom highlighted weaknesses in corruption prevention, SOE governance, and the AML/CFT system. - Authorities committed to preserve and strengthen existing anti-corruption institutions. - Additional governance reform priorities include: - Strengthening independence of Ukraine’s supreme audit institution. - Strengthening the AML/CFT framework. - Improving SOE corporate governance. ### Key policy priorities under the program - Fiscal policy: - Return to a primary surplus over the medium term. - Mobilize sufficient revenues for reconstruction and other expenditure needs. - Tax measures to broaden the tax base, level the playing field, improve the investment climate, support formalization, and tackle tax avoidance and evasion. - Comprehensive energy sector reform, including eventual liberalization of gas and electricity markets, to reduce SOE losses from quasi-fiscal activities. - Reforms to public investment management to ensure efficient use of scarce reconstruction resources. - Financing strategy and debt sustainability: - Large-scale external financing on highly concessional terms is essential to restore fiscal and debt sustainability. - Group of Creditors of Ukraine committed to a two-step process: extension of existing standstill with a new cutoff date, followed by definitive debt treatment once EHU abates. - Majority of commercial debts restructured in 2024–25 with significant haircuts; authorities remain committed to further actions if downside risks materialize. - Monetary and exchange rate policy: - Monetary policy should retain a tightening bias to anchor expectations, guided by the NBU’s flexible inflation targeting framework. - Inflation is targeted to return to the 5 percent target over the three-year policy horizon. - Greater exchange rate flexibility recommended to avoid external imbalances, boost competitiveness, and support external sustainability; this would facilitate return to full-fledged inflation targeting when conditions permit. - Financial sector policy: - Position banks for post-war reconstruction while closely monitoring financial sector stability risks. - Reform priorities include reducing government footprint in banking, improving governance of state-owned banks and the securities market regulator, enhancing banking norms (including aiming for equivalence with the EU acquis), and closing gaps in financial market infrastructure. - Governance, anti-corruption, AML/CFT: - Preserve and strengthen anti-corruption institutions and restore confidence after recent scandals. - Strengthen supreme audit institution independence, AML/CFT framework, and SOE governance. ### Program modalities, safeguards, and monitoring - Ukraine assessed to meet eligibility criteria for UCT-quality financing under the Fund’s EHU policy. - Adequate safeguards for IMF resources are in place, including: - Firm financing assurances for the first 12 months of the program. - Specific and credible assurances about financing thereafter to restore debt sustainability in the baseline. - Credible assurances for the downside. - A group of countries provided adequate assurance of Ukraine’s capacity to repay the Fund in view of exceptionally high uncertainty and tail risks. - Program conditionality: quantitative and structural measures to encompass key program objectives; quarterly reviews envisaged during the EHU. ### Risks and enterprise risks - The exceptionally high uncertainty from the war implies large risks to macroeconomic forecasts, reform timelines, and adequacy of external support. - The program is highly dependent on large-scale external support; shortfalls and/or delays could cause suboptimal policy measures or unresolvable financing gaps. - Other headwinds: reform fatigue and opposition by vested interests to reforms. - Mitigants: authorities’ decisive policymaking, contingency planning, and the international community’s commitment to support Ukraine. - Enterprise risks associated with a new UCT program are significant and only partially mitigated by standard Fund policies and additional safeguards under EHU; staff considers the enterprise risks manageable under the Fund’s multi-layered risk management framework. *International Monetary Fund — EXECUTIVE SUMMARY (PDF chapter: 1ukrea2026001-source-pdf)* ### 4. Macroeconomic policy implementation under the 2023 EFF remained on track in the ### 4. Macroeconomic policy implementation under the 2023 EFF remained on track in the ### Implementation and fiscal/monetary outcomes in H2 2025 - Preliminary estimates put the overall deficit excluding budget support grants (measured below-the-line) at UAH 2,059 billion in 2025, narrower than expected. - Tax revenues were overall solid despite large-scale aerial attacks toward the end of the year. - Large-scale external disbursements in Q4 and positive net domestic financing enabled the authorities to accumulate a buffer going into 2026. - Domestic bond financing (monthly pattern shown in source charts) includes gross issuance, net issuance, gross redemptions, and net redemptions for 2024–2025Q3 (chart labels preserved). - Following cumulative hikes of 200 bps in 2025Q1, the NBU maintained its key policy rate (KPR) at 15.5 percent through end-2025. At the January MPC meeting, the NBU adopted a modest rate cut of 50 bps. - Monetary conditions remain moderately tight. - The nominal exchange rate in 2025 was broadly stable against the US dollar (albeit depreciating by 2.6 percent in 2025Q4) and depreciated by about 13.5 percent against the euro. - Net FX interventions (FXI) in 2025 remained sizeable at US$36.2 billion, compared to US$34.8 billion in 2024, to meet structural demand and mitigate excessive volatility. ### Financial soundness indicators (selected, comparison 2024–2025Q3) - Capital Adequacy: Tier 1 capital to risk weighted assets 16.9 15.2 - Asset Quality: Nonperforming loans to total gross loans 30.3 25.0 - Asset Quality (net of provisions): Nonperforming loans net of provisions to capital 22.1 19.0 - Loan concentration by economic activity 70.4 73.1 - Earnings: Interest margin to gross income 60.4 62.4 - Liquidity: Liquidity coverage ratio 259.5 259.4 - Liquidity: Net stable funding ratio 168.4 154.0 - Customer deposits to total (noninterbank loans) 228.6 208.9 - Source: IMF Financial Soundness Indicators (table preserved as in source). ### Corruption, SOE governance, and AML/CFT developments - In November 2025, law enforcement authorities initiated high-profile investigations involving nuclear power operator Energoatom concerning alleged large-scale procurement-related corruption and money laundering schemes involving company officials and related parties. - The Energoatom investigations highlighted vulnerabilities in corruption prevention, SOE governance, and the AML/CFT system, while also illustrating operational capacity of specialized anti-corruption enforcement institutions. - July 2025 events: Legislation approved and enacted within 24 hours stripped the independence of NABU and SAPO, triggering large-scale domestic protests and international criticism; the legislation was quickly reversed to reinstate their independence, but public trust was compromised. - Corporate governance reform setbacks from mid-2025: charters of Ukrenergo, Ukrhydroenergo, GTSOU, Energoatom amended to give de facto veto power to state representatives on strategic decisions including CEO nominations; partial reversal for Ukrenergo did not prevent continued disagreements between independent supervisory board members and the Ministry of Energy. - Governance-related structural benchmarks under the 2023 EFF: - Reforms to the Criminal Procedure Code have not advanced (remain part of reform agenda). - Structural benchmark on selection and appointment processes for SOE supervisory board members was achieved with a delay. - New head of the Economic Security Bureau (ESBU) appointed with a short delay. - Selection of a new permanent head of customs and the external assessment of NEURC are both behind the schedule envisaged in the 2023 EFF. ### Progress on other structural reforms under the 2023 EFF - Progressing reforms to lay groundwork for scaling up private and public investment after the war: - Roadmap for financial market infrastructure reforms advanced. - Approval of the Single Project Pipeline (SPP) in August 2025—an important milestone for public investment management (PIM) reform. - Independent fit and proper review of the NSSMC completed to improve NSSMC governance. - Development and approval of an operational plan to implement the updated IT strategy for revenue administration. - Missed end-December structural benchmarks under the 2023 EFF: - Preparation of sectoral strategies for PIM is behind schedule. - Implementation of European and international valuation standards is behind schedule. ### Achievements and lessons from the 2023 EFF - Achievements during eight on-time reviews (March 2023–June 2025): - Achieved macroeconomic stabilization while delivering financeable budget deficits and progress on domestic revenue mobilization and other reforms. - Catalyzed large-scale external financing and progress on external debt relief including private sector debt restructuring. - Quarterly program reviews and engagement with partners supported monitoring and coordination. - EHU lending framework contributed to program resilience to shocks. - Scope for improvement identified: - Need to be parsimonious in program conditionality, prioritizing critical structural reforms. - Greater exchange rate flexibility is critical to ensure buffers and restore external viability. - Domestic revenue mobilization should prioritize durable reforms rather than temporary wartime measures. - Scenario design should include greater buffers in the baseline and a downside that reflects higher likelihood of a substantially longer war. - A robust approach is needed to guide decisions regarding an exit from EHU. ### New program objectives and policy mix - Program aims: - Anchor macroeconomic stability, restore fiscal and debt sustainability amid large war-related expenditure shocks. - Ensure price stability through credible forward-looking monetary policy. - Guard against external imbalances through increased exchange rate flexibility. - Safeguard financial stability. - Lay foundation for medium-term growth and EU accession via structural reforms including governance, formalization, and strengthened fiscal/financial institutions. - Policy directions: - Fiscal policy recalibrated to address larger defense spending needs; medium-term fiscal path anchored on returning to a primary surplus and mobilizing sufficient revenues for reconstruction and social spending. - Monetary policy should retain a tightening bias to achieve the NBU’s inflation target under the current flexible inflation targeting regime; transition to full-fledged Inflation Targeting (IT) with a fully flexible exchange rate as uncertainties recede. - Medium-term policy mix: fiscal consolidation, gradual easing of FX controls, and increasing exchange rate flexibility to reduce external imbalances, boost competitiveness, and restore external sustainability. ### Capacity development support - The Ukraine Capacity Development Fund (UCDF) will continue to fund technical assistance (TA) and training. - Structural reforms will be supported through IMF TA, including dedicated long-term experts. - A full-time CD coordinator is in place to align CD activities with program objectives and lead coordination with UCDF donors. - Long-term experts for tax policy, tax administration, customs administration, public financial management, public investment management, and macroeconomic modelling have recently been selected and will begin activities in 2026. Recruitment of additional long-term experts in other policy areas, including on bank supervision, is underway. ### EHU eligibility assessment (Box 1: five criteria) - Staff assesses that the five EHU criteria are met: 1. Exceptionally high uncertainty originates in an exogenous shock: the overall security situation (Russia’s full-scale war) with large negative effects on public finances, growth, and the balance of payments; dire humanitarian situation; recent attacks causing power and water outages. 2. Impact depends on events outside authorities’ control in the near term: mounting infrastructure damages driving high import needs and restraining exports; attacks on energy sector increasing imports of natural gas and electricity. 3. Severe and continuing balance of payment impacts: scale of BoP needs difficult to assess with usual confidence for UCT lending; large fiscal and BOP revisions under the 2023 EFF. 4. No single “central” scenario; significant adverse tail risks where shock/impacts could continue beyond usual Fund program timeframe; downside scenario may still understate tail risks. 5. Official bilateral creditors’ ability to ensure debt sustainability through upfront write-downs is impaired: lack of sufficiently “central” scenario and large downside risks require catalyzing broader financing; EHU accepts a two-stage restructuring approach with debt standstill and commitment to definitive treatment when EHU ends. - Reference: Changes to the Fund’s Financing Assurances Policy in the Context of Fund Upper Credit Tranche (UCT) Financing under Exceptionally High Uncertainty. ### Outlook and risks; baseline scenario (summary of key projections and assumptions) - Outlook described as extremely challenging and exceptionally uncertain. Staff and authorities agreed on a baseline and a downside scenario per EHU framework; Annex IV explores an upside scenario. - Baseline downgraded relative to the 2023 EFF’s Eighth Review; reflects deterioration in outlook and lessons to adopt a prudent baseline. - Key baseline projections/assumptions: - 2026: - Real GDP growth: 1.8–2½ percent (-2pp to -2.7pp vs. the Eighth Review). - Inflation: 7.5 percent y/y (+0.5pp vs. the Eighth Review). - Overall fiscal deficit excluding grants: projected above 19 percent of GDP. - Current account deficit excluding grants: 19.9 percent of GDP. - International reserves: projected to increase to US$65.5 billion (131.1 percent of the ARA metric; +US$12.8 billion vs. the Eighth Review). - Real credit growth: 5.5 percent. - 2027: - Real GDP growth: 3.5 percent. - Fiscal deficit excluding grants: 17.8 percent of GDP. - Inflation: 7 percent y/y. - FX reserves: expected to increase to US$73.4 billion (126.5 percent of ARA). - Real credit growth: picks up after the war but by less than previously assumed. - 2028–2029: - Real GDP growth: staff projects averaging 4 percent over 2028–29. - Recovery revised down compared with the Eighth Review due to fewer returning refugees and slower reconstruction-related investment. - Negative output gap helps steer inflation towards the NBU’s 5 percent target by end-2029. - Post 2030 (long run): - Real GDP growth converges to staff’s revised estimate of potential of around 3.5 percent (-0.5 pp vs. the Eighth Review). - Inflation remains at the 5 percent target. - Defense expenditures taper off but remain higher than pre-war levels; fiscal deficits broadly in line with the Eighth Review path. - Current account deficit narrows but does not converge to Eighth Review baseline levels; real credit growth marginally weaker in outer years. - Figures and charts compare Baseline and Downside scenarios across Real Credit Growth, Current Account and Gross Intl. Reserves, Investment and Population, Consumer Price Inflation, Overall Deficit Excluding Grants, and Real GDP Growth (labels and axes preserved as in source). *Source: IMF staff summary of Chapter 4 from the provided IMF PDF content unit.* ### 15. Although the duration of the war is the major risk (see the downside scenario below), ### 1ukrea2026001-source-pdf - 15. Although the duration of the war is the major risk (see the downside scenario below), ### Major risks to the baseline - Duration of the war remains the major risk; additional shock dimensions could affect the baseline. - Ability to continue mobilizing sufficient budget support: - Swelling financing needs, particularly in 2026–27, require prompt disbursement of large-scale donor financing to close financing gaps on terms consistent with restoring debt sustainability. - Ukraine will need adequately concessional donor financing even after the program for recovery and reconstruction needs. - Durability of international security assistance: - Financing for Ukraine’s security needs must remain adequate and durable; delays or shortfalls could force second-best policy responses. - Reform fatigue or backsliding: - Attempted neutralization of anti-corruption institutions illustrates challenges in maintaining structural reforms and safeguarding institutions. - Limited progress or renewed backsliding would reduce potential growth when higher productivity growth is needed to offset demographic and competitiveness challenges. - Renewed attacks on infrastructure: - Large-scale damage to electricity generation or heating infrastructure would cause substantial economic disruption: lower growth, higher inflation, budget pressures, higher energy import needs, and reduced export-oriented activity (e.g., metallurgy). - Continued attacks on railway and port infrastructure would depress exports and widen the current account deficit; comprehensive repairs could be lengthy and delay recovery. - Upside risk: - A durable peace settlement could end the war earlier than assumed, implying less damage and faster normalization. - If war ends later this year as assumed, stronger rebounds in investment, productivity, larger population returns, and faster labor market reintegration could yield post-war growth reaching 4.8 percent on average and lift per capita income to more than 150 percent of pre-war levels by 2035 (with productivity boosts from reforms to promote entry and competition). ### Revised baseline — key macro projections and changes (selected figures preserved exactly as in source) - Real GDP growth (percent) by year: 2025 1.8-2.2; 2026 1.8-2.5; 2027 3.5; 2028 4.2; 2029 3.9; 2030 3.7. - Inflation, eop (percent) by year: 2025 8.0; 2026 7.5; 2027 7.0; 2028 5.4; 2029 5.0; 2030 5.0. - Current account balance (Billion U.S. dollars) by year: 2025 -31.9; 2026 -42.6; 2027 -39.5; 2028 -24.3; 2029 -22.1; 2030 -21.9. - Current account balance (Percent of GDP) by year: 2025 -15.0; 2026 -19.1; 2027 -16.7; 2028 -9.7; 2029 -8.5; 2030 -8.0. - Goods trade balance (US$ bn) by year: 2025 -51.0; 2026 -48.8; 2027 -44.2; 2028 -40.7; 2029 -38.0; 2030 -36.6. - Gross international reserves (Billion U.S. dollars) by year: 2025 57.3; 2026 65.5; 2027 73.4; 2028 74.8; 2029 80.2; 2030 80.6. - Gross international reserves (Percent of the IMF composite metric (float)) by year: 2025 134.7; 2026 131.1; 2027 126.5; 2028 120.9; 2029 122.4; 2030 118.0. - Overall fiscal balance (pct of GDP) by year: 2025 -23.3; 2026 -18.4; 2027 -17.7; 2028 -7.4; 2029 -2.9; 2030 -2.0. - Overall fiscal balance ex. grants (pct of GDP) by year: 2025 -23.8; 2026 -19.4; 2027 -17.8; 2028 -11.1; 2029 -5.5; 2030 -3.6. - Public debt (pct of GDP) by year: 2025 108.7; 2026 122.6; 2027 137.1; 2028 135.5; 2029 131.9; 2030 125.7. ### Downside scenario — structure and projections - Overview: - War has stronger impacts in 2026, continues into 2027, and gradually transitions into a frozen conflict by end-2028. - Scenario based on Ukraine’s experience and consultations with international security experts; modeled as security shock persisting much longer than under the 2023 EFF but without rapid intensification. - Fiscal deficits remain wide; unresolved security situation weighs on economic performance; balance of payments takes longer to normalize. - Three periods: - Near term (2026): - Growth at 1.5 percent. - Year-end inflation at 10 percent. - Overall deficit excluding grants at close to 22½ percent of GDP. - Current account deficit widens vis-à-vis Eighth Review downside due to higher war-related imports. - Unsettled security situation transitioning to frozen conflict (2027–28): - Combat continues with lessening intensity; frozen conflict assumed by end-2028 with isolated skirmishes. - Post-war refugee returns and reconstruction activities delayed and lower; real GDP growth: 1.0 percent in 2027 and ½ percent in 2028. - Inflation (year-end) elevated but slowly decreasing, driven by continued supply shocks. - Defense spending remains on a higher path; authorities expected to adhere to MEFP commitment of contingent increase in main VAT rate (MEFP ¶14). - Overall fiscal deficits excluding grants average 19 percent of GDP over this period; financed through external disbursements included in the baseline and further external debt relief, plus additional domestic government debt issuance which could require financial repression and strengthen sovereign-bank nexus. - Increased imports due to higher defense spending and attacks on energy infrastructure (partial offset from VAT hike) drive deterioration in current account and reserves. Credit to the economy remains weak. - Medium term (2029–35): - By end-2028 security sufficiently normalized to enable exit from EHU. - Authorities expected to implement policies to restore debt sustainability and medium-term external viability in 2029; short-lived bounce after the war (shallower than Eighth Review downside). - Slower growth in later years partly reflecting worse demographic trend. - Inflation slows, reaching the 5 percent target in 2030. - Gradual tapering of defense spending narrows fiscal and current account deficits; reserves accumulate, reaching 110.7 percent of the ARA metric by 2035. - Credit to the economy begins expanding but remains well below baseline levels. - Comparison table (selected rows preserved exactly as in source): - Real GDP growth (percent): Baseline 2025–2030: 1.8-2.2; 1.8-2.5; 3.5; 4.2; 3.9; 3.7. Downside 2025–2030: 1.8-2.2; 1.5; 1.0; 0.5; 3.4; 3.9. - CPI inflation (end-of-period; percent): Baseline 2025–2030: 8.0; 7.5; 7.0; 5.4; 5.0; 5.0. Downside 2025–2030: 8.0; 10.0; 9.0; 8.0; 7.0; 5.0. - Current account balance (percent of GDP): Baseline 2025–2030: -15.0; -19.1; -16.7; -9.7; -8.5; -8.0. Downside 2025–2030: -15.0; -22.8; -20.7; -14.7; -10.5; -8.3. - Overall fiscal deficit excluding budget support grants (percent of GDP): Baseline 2025–2030: -23.6; -19.3; -17.8; -11.1; -5.5; -3.6. Downside 2025–2030: -23.6; -22.5; -20.5; -17.3; -8.4; -5.1. ### Enterprise risks for IMF program participation - New UCT program under EHU entails significant enterprise risks, partially mitigated by additional safeguards required under EHU; staff considers risk level manageable under Fund’s multi-layered risk management framework. - Risk types: financial, strategic, business, operational, reputational. - Mitigants: - Financial/credit risk mitigated by NBU’s international reserve position and capacity-to-repay assurances by significant group of Fund shareholders. - Delivery of external financing mitigated by renewed donor commitments, including European Council’s decision to provide € 90 billion in support via the Ukraine Support Loan (USL) over 2026–2027. - Conservative program design features, authorities’ track record, and strong donor support mitigate risks in line with Fund policies. - Reputational risks remain, particularly on evenhandedness and coherence of consecutive programs under EHU. ### Fiscal policy, financing, and budget framework (policy actions and targets) - 2026 Budget enacted January 1 (MEFP ¶13): - Expenditures: - General government expenditures projected at UAH 6,228 billion (62.2 percent of GDP) in 2026. - Defense receives largest allocation given continuing war assumption. - Non-defense priorities: 1 percent of GDP allocated to policy initiatives in demographics (prenatal support, programs for small children), healthcare (expand Medical Guarantee Program and health screening), and education (teachers’ wages, school feeding, scholarships). - Revenues: - Tax revenues projected at UAH 3,906 billion; tax-to-GDP ratio rises to about 39 percent of GDP (up from just over 36½ percent of GDP in 2025). - Revenue increase reflects: - Measures already in effect: annual increase of excise tax rates on tobacco and fuel products (enacted in 2024); lapse of tax exemption on imports of electric vehicles at end-2025; one-off gains from improved methods to collect tax debt fully operationalized in late 2025. - Package of new tax measures (see next section). - New contingency buffer of up to 0.6 percent of GDP in additional resources to be spent only in case of customs revenue overperformance (recorded as part of contingency reserve; see Tables 6a and 6b). - Continued strong wage growth expected to support tax collections in 2026. - Financing: - Overall deficit excluding budget support grants envisaged at UAH 1,927 billion (19 percent of GDP). - Deficit financeable through concessional external donor disbursements, including from the EU (Ukraine Facility and Ukraine Support Loan agreed by European Council on December 18), remaining resources under G7’s Extraordinary Revenue Acceleration (ERA) initiative, and World Bank financing. - Risks and contingency: - Shocks could affect budget implementation and projected tax revenue increase if economy slows. - Authorities prepared to take action, including increasing taxes if needed; increasing the main VAT rate viewed as most efficient contingency option (MEFP ¶14). - Medium-term fiscal objective: - Return to sustainability anchored on primary surplus in the range of 0.2–0.4 percent of GDP for the primary balance excluding grants (MEFP ¶11). - Expenditures: - Post-war conditions allow lower expenditures but defense spending expected to stabilize above pre-war levels, declining only gradually. - Non-defense expenditures to remain tightly prioritized for longer; post-war capital and social expansions proceed at a more measured pace, implying somewhat lower growth (see ¶14). - Revenues: - Authorities committed to maintain tax revenues above 37.5 percent of GDP as a demonstration of intent to pursue sustainable fiscal policies. - Financing: - Large-scale highly concessional financing essential for restoring fiscal and debt sustainability; domestic financing expected at smaller magnitudes than recent years to preserve space for downside risks. - If shocks materialize, authorities ready to step up issuance to enable budget implementation consistent with maintaining stability (MEFP ¶17). - Budget Declaration for 2027–29: - Will update medium-term fiscal plans, prepared in consultation with Fund staff and consistent with program parameters (MEFP ¶11). - Will incorporate methodological improvements (MEFP ¶32). ### Tax measures and structural benchmarks (revenue mobilization and base-broadening) - Objectives: Mobilize revenues by broadening tax base, remove growth-hampering distortions, alleviate tax avoidance/evasion, support formalization—implementation with IMF TA. - Proposed measures and timing: - Parliament to adopt package of permanent tax policy measures for 2026 and 2027 (proposed end-March, 2026 structural benchmark), to include: - Tax incomes from digital platforms and give State Tax Service (STS) access to related information. - Eliminate de-minimis tax exemption for imports via postal shipments. - Postal packages accounted for US$3.1 billion (1.6 percent of GDP) in imports in 2024 and US$5.1 billion (3.3 percent of GDP) over 2025Q1–Q3. - Repair the VAT by removing the VAT exemption for taxpayers under the Simplified Tax (ST) regime whose turnover exceeds the general VAT registration threshold, effective January 1, 2027. - Authorities considering increasing the VAT threshold but committed to keeping it below UAH 4 million. - Streamline VAT compliance requirements with IMF TA; ST provisions related to income tax remain in place. - Prior action: removal of tax-related competitive disadvantage for VAT payers in public procurement in 2026 to reduce disincentives to VAT registration. - Military Tax: - Authorities will remove sunset clause from the Military Tax, a PIT surcharge, extending it beyond end of Martial Law. - Simplified Tax (ST) system reforms to eliminate avoidance: - Submit to Parliament amendments to the Labor Code to clarify the definition of employment (prior action) to reduce disguised employment. - Exclude activities with high compliance risks from ST. - Limit opportunistic switching between ST and general tax system for tax optimization. - Limit practice of companies artificially fragmenting to remain within ST eligibility thresholds. - Corporate Income Tax (CIT) avoidance limits: - Submit legislation to Parliament (proposed end-June 2026 structural benchmark) to: - Strengthen transfer pricing rules. - Fully implement the interest limitation rule in line with Article 4 of the EU Anti-Tax Avoidance Directives (ATAD). - Abolish tax exemption for income of foreign companies whose place of effective management is located in Ukraine. - Additional legislation to fully align the Tax Code with the EU ATAD to be submitted by end-September 2026 (MEFP ¶25). - One-time levy on banks: - Authorities have instituted a one-time levy on banks, raising the CIT rate to 50 percent for (text cuts off in source). *Source: Ukrainian authorities and IMF staff projections (excerpts from 1ukrea2026001-source-pdf).* ### 2026. In staff’s view, continued reliance on such measures should be avoided going forward, as it ### 2026. In staff’s view, continued reliance on such measures should be avoided going forward, as it ### Tax policy and investment vehicles (JIIs) - Current situation and risks: - Joint Investment Institutions (JIIs) are currently untaxed, face no mandatory distribution requirements, and have few restrictions on asset classes. - Investment returns can accumulate untaxed for many years, and JIIs are mainly used by legal entities, including as tax shelters. - 2026 measures and recommendations: - Authorities will develop legislation to reduce tax avoidance losses related to JIIs. - Reforms should require JIIs to make regular distributions and to act as tax agents. ### VAT base, Simplified Tax (ST) regime, and VAT reform - Key facts and comparative statistics: - Current VAT threshold for ST (~US$230,000) is far above VAT thresholds in OECD countries. - Ukraine has about 246,000 active registered VAT payers; Poland has about 2.4 million. - On a per-capita basis, Ukraine has 0.5 VAT payers per 100 people (EU median: 7.7). - Problems identified: - The ST regime’s generous VAT exemption has led to an extremely narrow VAT base. - The size-based ST eligibility thresholds encourage firms to stay small or fragment into multiple entities, leading to inefficiencies and underreporting of turnover. - VAT exemptions create uneven competition and can foster smuggling and bribery incentives. - Program measures and timeline: - 2026: Measures aim to (i) eliminate unfair competition from VAT-exempt imports through postal shipments and (ii) conduct public procurement tenders based on prices excluding VAT. - 2027: Authorities are eliminating the VAT exemption for ST so that all businesses with turnover above the general VAT threshold become VAT payers; the VAT threshold will be raised but will remain below the EU maximum VAT threshold for small businesses of €85,000. - Potential impact and implementation needs: - The VAT reform could affect more than 250,000 businesses, with a combined turnover of more than UAH 1.4 trillion (US$32 billion). - Success will depend on preparing the Tax Service’s work processes (supported by IMF TA) and reducing VAT compliance burden through streamlined reporting, particularly for small businesses, and a less heavy-handed approach to compliance. - Survey and cost metrics: - In the 2024 Tax Compliance Cost Survey, respondents estimated that businesses similar to their own declared only 61.1 percent of actual revenue. - SMEs report annual VAT compliance costs averaging more than UAH 100,000. ### Revenue administration and IT/data reforms - Institutional priorities and benchmarks: - Selection process for a new permanent head of the State Customs Service (SCS) is a proposed end-March 2026 structural benchmark. - Design of a data warehouse proposed end-December 2026 structural benchmark, supported by IMF TA. - Recommended operational changes: - Strengthen effectiveness of SCS, STS, and ESBU with adequate budgets, access to necessary data, and greater operational independence. - Abolish several constraints in the Tax Code that reduce STS effectiveness (examples cited include publication of risk algorithms, requirement to prove non-compliance before audits, 30-day statutory audit limit, requirement to pre-announce audits, inability to collect tax debts until court confirmation). - Empower STS to adopt a more risk-based approach to compliance management and implement an automated, data-driven taxpayer risk assessment system to reduce discretionary interventions. ### Public Investment Management (PIM) - Status and priorities: - Full implementation of the home-grown PIM reform, supported by IMF TA, is critical for post-war reconstruction. - Completion of the first stage, notably establishing the SPP using new methodologies and procedures for project preparation, appraisal, and selection, was a key success of the 2023 EFF. - Near-term actions and timelines: - Approval of a framework and action plan for development of sectoral strategies by end-March 2026 is a key intermediate step toward completing sectoral strategies by end-2026. - Update the Budget Code to improve integration of PIM into medium-term budget planning and fiscal risk management. ### Monetary policy and exchange rate - Monetary stance and guidance: - The NBU should maintain tight monetary conditions until inflation expectations begin to trend down. - Monetary policy should communicate a focus on returning inflation to the 5 percent target over the three-year policy horizon. - The NBU should monitor elevated inflation expectations and signal readiness to raise the KPR if the inflation outlook deteriorates. - Operational context: - Monetary transmission is constrained by excess liquidity, shallow markets, and limited lending opportunities in wartime conditions; it operates mainly through deposit rates and inflation expectations. - The current operational framework includes use of benchmark government bonds to meet reserve requirements and limits on banks’ access to the NBU’s 3-month CDs, with access tied to retail deposit growth. - Exchange rate policy: - Exchange rate policy should strengthen external buffers and enhance flexibility, allowing the exchange rate to act more as a shock absorber. - FX interventions (FXI) can smooth excessive volatility but should not be relied upon to achieve near-term price stability because significant FXI can generate external imbalances and undermine the return to a full-fledged IT regime. - FX liberalization approach: - FX liberalization should proceed cautiously under a conditions-based roadmap; NBU has periodically eased restrictions introduced by Resolution No. 18. - Continue close monitoring of FX flows and compliance via bank-level data analysis; consider controls on virtual asset transactions and enforcement of capital flow management measures by the NSSMC. - Conduct a stocktaking exercise to ensure controls remain effective for supporting external stability (MEFP ¶45). ### NBU governance and safeguards - Ongoing actions and benchmarks: - NBU is implementing recommendations of the 2023 safeguards assessment, including steps to enhance secured creditor status under bank resolution and improve Audit Committee oversight. - Legal amendments to strengthen secured creditor status have been submitted to Parliament. - Legal amendments to establish a mechanism to strengthen the NBU Council’s collective fitness have been developed but not yet submitted to Parliament. - Completion of filling vacancies on the Council is expected by end-March 2026 (MEFP ¶46). - An updated safeguards assessment, in connection with the new program, will be undertaken by the first review. ### Financial sector resilience, supervision, and safety nets - Resilience work and supervisory tools: - The NBU finalized the 2025 Resilience Assessment of the 21 largest banks, combining loan file reviews with solvency stress testing. - Following the Assessment, capital management plans and schedules for closing gaps in regulatory capital requirements and harmonization with the EU acquis were developed. - NBU will conduct an ad hoc analysis to identify banks’ bandwidth to contribute to post-war recovery and any potential weaknesses; a targeted, risk-based asset quality review will be conducted once conditions stabilize. - Regulatory alignment and timelines: - NBU aligned regulatory capital structure, minimum capital requirements, and leverage ratio calculations with international standards and EU rules (MEFP ¶55). - Implementation of risk-based supervision and finalization of methodology for Basel Pillar II capital and liquidity requirements aim to put regulatory requirements in place by 2027 (MEFP ¶50). - New regulatory requirements to address critical third-party risk are proposed to enter into force by end-June 2026 (structural benchmark, MEFP ¶50). - Deposit Guarantee Fund and governance: - Changes to legal framework to close gaps in early intervention, temporary administration, and resolution have been submitted (MEFP ¶48). - Adequacy of the DGF financial resources has been reviewed; current financial backstops will remain in place at least until the target reserve ratio is reached. - A Financial Stability Council working group provided a first draft of reforms to align DGF governance with best practices; the draft should be amended to ensure simple governance with equal representation of all financial safety net participants. ### State-owned banks (SOBs) and CMU actions - Governance and privatization: - Strengthen SOB supervisory boards and the independence and professionalism of the nomination process ahead of several upcoming 2026 appointments. - CMU will adopt an amended SOB Nominations Committee framework incorporating recommendations set out in MEFP ¶51 (proposed end-February 2026 structural benchmark). - Authorities are preparing to sell two systemic SOBs; independent advisors should conduct thorough assessments of the business case for privatization. - CMU will update the general SOB strategy (proposed end-June 2026 structural benchmark) to outline strategies for individual SOBs and determine legal protections for majority government-owned banks. - Authorities committed to not using fiscal resources to recapitalize non-systemic banks under government ownership; such banks will be referred to the DGF for resolution upon breach of prudential requirements (proposed continuous structural benchmark). ### National Securities and Stock Market Commission (NSSMC) reforms - Capacity and governance challenges: - An independent fit and proper review of the NSSMC Chair and Commissioners was conducted, but replacement of the Chair and resignations of several Commissioners and experienced staff reduced capacity. - NSSMC faces challenges in appointing new Commissioners, attracting and training staff, implementing internal restructuring, and managing workload related to EU acquis alignment and financial market infrastructure reforms (Annex VI). - Governance reform and timeline: - Authorities will establish a majority independent supervisory board to oversee the executive, provide strategic guidance and expertise, and monitor decision making. - New governance structure will be implemented through an amendment of the NSSMC organic law (proposed end-December 2026 structural benchmark), which will also move responsibility for the NSSMC from the President to the CMU (MEFP ¶53). *IMF staff report (excerpts).* ### 31. Closing existing gaps in the financial and capital market infrastructure (FCMI) is ### Closing existing gaps in the financial and capital market infrastructure (FCMI) ### FCMI reforms and priorities - FCMI reforms finalized in October 2025 by the Financial Stability Council aim to: - further coordinate and develop public, private, and public-private deal pipelines; - reform market instruments; - reform existing investment funds frameworks through the investment funds law (also covering JIIs). - Legislative and regulatory priorities: - Legislative proposals to align market instrument reforms with international standards, including securitization and covered bonds frameworks to be submitted to Parliament in 2026Q1. - Enhancement of creditor protection and adoption of valuation standards of real estate and bank collateral in line with international (IVS) and European (TEGOVA) standards. - Creation of a vertically integrated financial market infrastructure (FMI): - Structure to streamline exchanges, clearing and settlement, and depositaries involving the State, strategic partners, and SOBs based on an MOU between the EBRD, MOF, MOE, NBU and NSSMC. - Management of the State’s stake in the National Depositary of Ukraine (NDU) transferred from the NSSMC to the NBU in September 2025. - Further governance changes at the NDU reflecting the MOU and IMF TA, and embedding vertical integration of the FMI in a new law expected to be adopted by March 2026. - Achieving regulatory equivalence with the EU: - NBU aims to amend the legal framework on bank secrecy consistent with relevant EU standards in 2026Q1. - Achieving EU Regulatory Equivalence is expected to permit a reduction of Ukraine’s sovereign regulatory risk weights and increase EU banks’ incentives to hold Ukrainian sovereign debt, while noting potential crowding out of EU banks’ lending to Ukraine’s private sector; transition should be appropriately managed. - Closing gaps in supportive FCMI frameworks: - Implementation of the Lending and Mortgage development strategies. - Strengthening land and cadastral registers, property price registers and indices, credit data registers, insolvency and collateral enforcement regimes, non-performing loans market, etc. ### Virtual assets law - Ukraine ranked among the top 10 countries worldwide in crypto adoption in 2025. - Recommendation: Ensure the Virtual Assets law currently in parliament provides regulators with sufficient powers and tools to monitor and regulate the market. - Identified required improvements in the current parliamentary version: - Identification of regulators (including the role of the NSSMC) and distribution of responsibilities. - Licensing and market access of virtual asset service providers. - Potential controls to limit crypto transactions to preserve the efficacy of CFMs. - Alignment with international recommendations and best practices and Ukraine’s goal of EU accession. ### Governance, Anti-Corruption, and AML/CFT - Anti-corruption reforms are central to mobilizing revenues, curbing the shadow economy, and leveling the playing field; program includes a targeted anti-corruption agenda focusing on tax, customs, procurement, and energy. - Independence and resourcing commitments: - Authorities committed to refraining from measures that would diminish the independence, powers, or resources of NABU, SAPO, or the High Anti-Corruption Court (HACC) (MEFP ¶61). - Priority: enact legal framework for independent, reliable, timely, and high-quality forensic services for criminal investigations under NABU’s jurisdiction (MEFP ¶63); framework should align with European forensic science guidance and Article 6 ECHR fair-trial guarantees. - Operational reforms and timelines: - Extend statute of limitation in corruption cases and reform procedural rules to address investigative and trial delays (MEFP ¶63). - NACP to issue new regulations establishing a risk-based system for verification of asset declarations prioritizing senior officials in identified high-risk areas (proposed end-June 2026 structural benchmark). - Semi-annual publication of NACP verification outcomes and an independent external audit of NACP assessing 2024–2025 performance (MEFP ¶62). - Supreme audit institution: - December 2024 amendments reinforced independence and financial autonomy of the Accounting Chamber of Ukraine (ACU) and expanded its oversight mandate. - Next steps: fill all vacancies for ACU board members in accordance with the 2024 amendments (proposed end-December 2026 structural benchmark); establish an advisory vetting group by end-April 2026 (MEFP ¶35). - AML/CFT approach: - Risk-based application of due diligence by banks on politically exposed persons consistent with the narrowly defined scope of FATF standards. - Strengthen the beneficial ownership framework to enhance procurement transparency and detect conflicts of interest (MEFP ¶65). - By end-March 2026, prepare an action plan to address gaps identified in the State Financial Monitoring Service review against FATF standards. ### SOE governance - Energoatom investigation highlighted corporate governance weaknesses; staff urged rescinding CMU Resolution 1441 which suspended independent board evaluations and allowed immediate dismissal of the Energoatom supervisory board. - Recent actions: - Nominating Committee (NomCom) procedures revamped; new supervisory board appointed in January 2026 in closed consultation with international partners; board to select a new CEO and launch an independent forensic audit of Energoatom’s accounts. - Commitments and key measures to restore best practices and contain quasi-fiscal activities (QFA): - Amend SOP and Law “On Joint Stock Companies” to mandate simple majority voting for supervisory board decisions in all SOE charters, except approval of the strategic development plan (MEFP ¶68 and ¶73). - Continue comprehensive reform of the SOE NomCom with a time-bound roadmap to improve nominations across all SOE segments (MEFP ¶68). - Resume publication of financial statements and mandate annual financial audits for the largest SOEs (MEFP ¶69). - Regular publication of annual SOE reports presenting main performance indicators, financial flows between the state and SOEs, PSOs, and alignment with corporate governance standards. ### Energy sector challenges and reforms - Constraints: - Attacks on energy infrastructure and the burden of public service obligations (PSOs) continue to weigh on SOE profitability (MEFP ¶72). - Naftogaz secured domestic and IFI financing to supply sufficient gas through end-2025 and is identifying financing for 4.4bcm of imports through the end of the heating season. - State Budget provided Naftogaz with UAH 8.4 billion for imports for the first time since the start of the war, creating a risk of future budgetary outlays given likely large import needs in 2026. - Energy SOEs remain saddled with uncompensated PSOs compressing profits and perpetuating inefficiencies and underinvestment. - Reform commitments: - Conduct and publish technical analysis quantifying QFA costs from price caps and PSOs in electricity, gas, and heating sectors, assess incidence of existing subsidies, and describe reform scenarios for gradual cost recovery with adequate protection of vulnerable consumers (proposed end-July 2026 structural benchmark) (MEFP ¶72). - Adopt a roadmap to liberalize gas and electricity markets by end-June 2026 in line with Ukraine Facility Plan commitments. - Begin gradual increases in electricity, gas, heating, and hot water tariffs early to raise resources for reconstruction and investment, accompanied by adjustments in utility-related social transfers to protect the most vulnerable. - Strengthen NEURC’s independence, reform commissioners’ nomination procedure to reduce political interference by including members proposed by the international community, and introduce regular independent assessments (MEFP ¶73). ### Program design, financing needs, and EFF access - Ukraine faces very large and protracted BoP needs; firm financing commitments in place for next twelve months. - Staff assessment: needed financing will be available on adequate terms and conditions to restore debt sustainability in both baseline and downside scenarios (¶46). - Financing gap figures: - Baseline scenario: cumulative financing gap amounts to US$136.5 billion over the program period (2026–29). - On a 12-month basis (A. Financing gap): US$52.0 billion. - Official financing components on 12-month basis (B. Official financing): US$47.6 billion. - EU: US$26.8 billion. - World Bank: US$0.3 billion. - Other bilateral: US$9.8 billion. - ERA: US$10.6 billion. - IMF (prospective) on 12-month basis (C): US$3.8 billion. - Budget prefinancing (E): 0.6 (noted as accumulation). - In 2026, a large part (US$18.4 billion) of the US$52 billion gap is filled with support under the EU’s recently approved €90 billion USL. - Continued disbursements under the ERA initiative (US$10.6 billion), the EU’s existing instruments for Ukraine (US$8.4 billion), other bilateral support (US$9.8 billion), and disbursements from the World Bank (US$0.3 billion) will close the remaining gap. - Downside scenario: cumulative financing gap projected at US$146.3 billion over the program period. - Exceptional financing measures, including further debt relief from a deeper debt restructuring, would fill the additional financing gap relative to the baseline. - Program request and access: - Authorities request a 48-month extended arrangement under the EFF. - Proposed access: SDR5,935.3 million (295 percent of quota), equivalent to about US$8.1 billion. - Access is frontloaded: disbursements amounting to 140 percent of quota in 2026 and 64 percent of quota in 2027. - For each purchase intended for budget support, a memorandum of understanding will be signed between the NBU and the Ministry of Finance to clarify responsibilities for timely servicing financial obligations to the Fund. - Proposed EFF schedule of reviews and available purchases (selected figures from Table 1, millions of SDR): - February 26, 2026 (Board approval): 1,106.5; cumulative access listed as 1,506.7; percent of quota component 55.0 and 88.5 shown in table context; memorandum items include quota 2,011.8. - June 1, 2026 (First review): 503.0 (12-month access) and cumulative 685.5. - Subsequent review dates and 12-month access entries include 503.0 (Sept 1, 2026), 704.0 (Dec 1, 2026), 643.8 (June 1, 2027), 643.8 (Dec 1, 2027), 322.0 (June 1, 2028), 342.0 (Dec 1, 2028), 543.2 (June 1, 2029), 624.0 (Dec 1, 2029). - Total SDR access: 5,935.3; Percent of quota: 295.0. - Baseline Scenario financing gap and cumulative sources (Table 3 summary, in billions of U.S. dollars): - A. Financing gap (cumulative 2026-29): 136.5 (broken down yearly as 52.0, 43.7, 22.5, 18.3). - B. Official financing (cumulative 2026-29): 125.0 (broken down yearly as 47.6, 41.0, 20.7, 15.7). - C. IMF (prospective) cumulative 2026-29: 8.1 (broken down yearly as 3.8, 1.8, 0.9, 1.6). - D. Flow relief from debt operations cumulative 2026-29: 2.8 (yearly 0.0, 0.9, 0.9, 1.0). - E. Budget prefinancing cumulative 2026-29: 0.6 (all in 2026). - Memorandum items: underlying BoP gap cumulative 2026-29: 113.5; gross international reserves Level (US$ billion) cumulative entries: 65.5, 73.4, 74.8, 80.2 culminating in 80.2. - Downside Scenario key figures (Table 4 summary, in billions of U.S. dollars): - A. Financing gap (cumulative 2026-29): 146.3 (yearly 53.7, 45.3, 24.3, 23.0). - B. Official financing cumulative 2026-29: 125.0 (yearly 47.6, 41.0, 20.7, 15.7). - C. IMF (prospective) cumulative 2026-29: 8.1 (yearly 3.8, 1.8, 0.9, 1.6). - D. Exceptional financing cumulative 2026-29: 12.6 (yearly 1.7, 2.6, 2.7, 5.7). - E. Budget prefinancing cumulative 2026-29: 0.6. *IMF staff summary based on the content of the source PDF.* ### 44. Ukraine’s debt on pre-restructuring terms is assessed to be unsustainable (Annex ### 44. Ukraine’s debt on pre-restructuring terms is assessed to be unsustainable (Annex VII). ### Debt sustainability assessment (pre-restructuring) - Absent any further debt treatments, debt would increase under the baseline scenario to 137.1 percent of GDP in 2027 and remain elevated thereafter, declining only to 97.1 percent of GDP by 2035, with average gross financing needs (GFN) in 2030–35 at 7.2 percent of GDP. - Relative to the June 2025 SRDSA, total debt in 2034 is now projected to be around 26 percentage points of GDP higher, reflecting mainly the cumulative impact of the longer war. - “Pre-restructuring” terms reflect any signed agreements between Ukraine and its creditors (the 2022 standstill, the 2024 Eurobond exchange, and the 2025 exchange of GDP-linked warrants are reflected in the pre-restructuring scenario). ### Recent debt treatments and implications - September 2025: agreement with China EXIM on a US$850 million government guaranteed loan, postponing repayment to 2034–40, with a grace period on interest until 2029. - December 2025: authorities exchanged all outstanding GDP-linked warrants, totalling US$2.6 billion, into a new series of vanilla Eurobonds; the exchange settled external arrears arising from the missed 2025 GDP-warrant payment. - The GDP warrant had potentially unbounded pay-outs and, if left untreated, could have constituted a major debt service and sustainability risk. - The new Eurobonds (“C-bonds”) amortize over 2030–32, with a coupon rate gradually increasing from 4 percent in 2026, reaching 7.25 percent in 2029. Only a small share (less than 1 percent) of warrant holders did not vote in favor of the exchange and, instead of C-bonds, received bonds from the “B-series” issued in the 2024 exchange. - The new Eurobonds include standard collective action clauses, facilitating any future external debt restructuring if needed. ### Forward-looking debt sustainability and targets (with creditor assurances) - Staff reassessed targets given the new program request. To achieve debt sustainability on a forward-looking basis, targets are: - Debt (excluding grant-like arrangements like ERA and USL) should fall below 68 percent of GDP by 2035. - Average GFN below 7.0 percent of GDP in 2030–35. - Debt service to external creditors (excluding multilaterals) in 2026–28 should not exceed US$1 billion per year. - The authorities’ strategy to meet these targets combines fiscal adjustment, restructuring, and specific and credible assurances from partners to provide highly concessional financing. ### Key elements of the restructuring strategy - Official bilateral debt: - The Group of Creditors of Ukraine (GCU), holding the majority of official bilateral debt, committed to a 2-step process: extension of the current debt standstill followed by a final debt treatment after the resolution of EHU. - GCU committed to the level of relief necessary in the baseline and to provide additional relief to restore sustainability as necessary. Non-GCU official bilateral creditors would be expected to provide comparable additional debt relief. - GCU members agreed at a meeting on January 15 to increase the perimeter of debt restructuring by moving the cutoff date. - Commercial debt: - The 2024 Eurobond restructuring and the 2025 GDP-warrant exchange both include an agreement to a second restructuring as necessary. - Authorities retain legal and financial advisors and have committed to a second restructuring if needed. Staff assesses a credible process is in place. - Remaining upfront restructuring efforts include restructuring a commercial loan owed to Cargill and an exchange of government guaranteed Eurobonds issued by Ukrenergo. ### Lending into sovereign arrears policy assessment - Staff assesses that policy requirements pertaining to lending into sovereign arrears to private creditors are met. - Ukraine currently does not have arrears to official bilateral creditors. - For commercial arrears to Cargill and to Ukrenergo bondholders, Ukraine is making good faith efforts: early and continuous dialogue, information sharing, opportunities for creditor input, and terms consistent with program parameters. ### Program monitoring: quantitative performance criteria (QPCs) and indicative targets (ITs) - Program QPCs comprise: - A floor on the general government’s cash non-defense primary deficit excluding grants; - A floor on tax revenues excluding social security contributions; - A ceiling on government guaranteed debt (issuance); - A floor on net international reserves. - A continuous QPC will ensure non-accumulation of external payments arrears (definitions retained from the previous program, e.g., excluding debt subject to restructuring). - ITs will include: - A floor on the general government’s cash overall deficit excluding grants; - A floor on social spending; - A ceiling on general government budgetary (domestic) arrears; - A ceiling on the NBU’s claims on the general government. - Standard continuous performance criteria prohibit: - Introduction or intensification of exchange restrictions; - Introduction or modification of multiple currency practices; - Bilateral payment agreements inconsistent with Article VIII; - Introduction of import restrictions for balance of payments reasons. ### Exceptionally High Uncertainty (EHU) - Staff assesses EHU persists and proposes to redefine the shock triggering EHU as the overall security situation (rather than continuation of the full-scale war). - Assessment of the five EHU criteria is guided by indicators of security, economic, social, and political conditions, with the highest weight on security indicators; staff maintains continual engagement with security experts. - Most relevant indicators have deteriorated or remained unchanged since the Eighth Review, supporting the assessment: - Security: Combat is in general escalating on the ground and in the air; Black Sea situation remains stable. - Economic performance: Defense needs continue to impart large fiscal and external shocks; outward export and investment linkages have not been able to be reestablished due to unsettled security and comprehensive FX controls. - Social conditions: Population outflows continue; disruptions to heat and electricity amplify the humanitarian toll. - Political development: No plans to relax or end martial law domestically; international settlement efforts yet to yield results. - If indicators converge sufficiently between baseline and downside scenarios and enterprise risks to the Fund decline, staff could recommend the Board conclude EHU has ended; only if risks of reversal are low. ### Capacity to Repay (CtR) and assurances - Given exceptionally high uncertainty, credible assurances about Ukraine’s CtR are needed to protect the Fund against tail risks beyond the downside. - A significant group of countries (Austria, Belgium, Canada, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Japan, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Kingdom, and the United States) provide assurances to: - Reaffirm recognition of the Fund’s preferred creditor status for amounts currently outstanding to Ukraine plus any purchases under the proposed extended arrangement; - Further undertake to provide adequate financial support to secure Ukraine’s ability to service all of its obligations to the Fund, in accordance with the Fund’s preferred creditor status and complementing the Fund’s multilayered risk management framework. - Indicators of capacity to repay under the baseline (Text Table 4, IMF staff projections): - Total stock of Fund credit, percent of GDP: 2026: 7.0; 2027: 6.9; 2028: 6.5; 2029: 6.2; 2030: 5.2; 2031: 4.0; 2032: 2.8; 2033: 1.9; 2034: 1.1; 2035: 0.7. - Total stock of Fund credit, percent of gross reserves: 2026: 24.0; 2027: 22.2; 2028: 21.9; 2029: 20.2; 2030: 17.7; 2031: 14.4; 2032: 10.5; 2033: 6.9; 2034: 4.1; 2035: 2.4. - Payments to the Fund, percent of GDP: 2026: 1.3; 2027: 0.9; 2028: 0.7; 2029: 1.0; 2030: 1.0; 2031: 1.1; 2032: 1.1; 2033: 0.9; 2034: 0.8; 2035: 0.5. - Payments to the Fund, percent of gross reserves: 2026: 4.3; 2027: 2.8; 2028: 2.3; 2029: 3.3; 2030: 3.5; 2031: 4.0; 2032: 4.2; 2033: 3.2; 2034: 2.8; 2035: 1.7. - Downside scenario peaks (Annex VI, Table AVI6): outstanding credit to the Fund would peak at 7.1 percent of GDP in 2027 and 31.7 percent of gross reserves in 2029; debt service to the Fund would peak at 1.3 percent of GDP in 2026 and 6.6 percent of gross reserves in 2032. ### Staff appraisal: main conclusions and policy recommendations - The new program provides a strong framework to anchor macroeconomic stability and reforms to support post-war reconstruction and EU accession; a 4-year EFF lasting through early 2030 will provide additional time to restore external viability and fiscal sustainability. - Risks remain exceptionally high and enterprise risks to the Fund are significant despite mitigation measures. Main risks: duration and intensity of the war; durability of international financial and military support; continuing attacks on civilian and energy infrastructure; reform fatigue. Policy agility and contingency planning are essential. Lending under the EHU framework provides appropriate safeguards against enterprise risks to the Fund. - Fiscal policy recommendations: - Restore medium-term fiscal and debt sustainability; advance domestic revenue mobilization to provide resources for expenditure priorities and narrow post-war fiscal deficits. - Implement authorities’ commitment to broaden the tax base, including removing VAT exemptions and closing loopholes—these measures must be implemented promptly. - Undertake administrative reforms to ease tax compliance and harden tax evasion deterrence. Avoid new tax exemptions and exercise tight controls on public spending and quasi-fiscal SOE activities. If downside shocks materialize, be prepared to increase tax rates, particularly the main VAT rate. - Scope for further external financing under grant-equivalent terms is very limited; continue efforts with creditors to treat all claims in the restructuring perimeter in line with the program and seek additional debt relief if needed after the resolution of EHU. - Monetary and exchange rate policy recommendations: - Maintain tight monetary conditions to anchor expectations and preserve confidence, with readiness to tighten further if inflationary pressures intensify. - Increase exchange rate flexibility to safeguard FX reserves and moderate external imbalances; adopt a cautious, conditions-based approach to FX liberalization with close monitoring. - Continue implementing safeguards recommendations to reinforce the NBU’s governance and credibility. - External position and structural reforms: - The external position in 2024 was substantially weaker than implied by fundamentals and desirable policies after an end to the war. To bring the current account to medium-term norms, policies should include fiscal consolidation, structural reform progress, gradual easing of FX restrictions, and increased exchange rate flexibility. - Growth-enhancing structural reforms remain essential: improve frameworks for financing public and private investment (including capital market development), strengthen the banking system for credit creation, remove tax distortions, and enhance governance. - De-shadowing and governance: - The program emphasizes de-shadowing the economy through digitalization and incentives to formalize businesses; legislative changes are critical (VAT exemptions, employment regulation, procurement rules) for meaningful progress. - The Energoatom case highlights the need to strengthen anti-corruption architecture and SOE corporate governance. Preserve and strengthen NABU and SAPO; reform the nomination process for SOE supervisory boards as a critical next step. *Source: IMF staff projections and program documentation.* ### 60. Staff recommends approval of the 48-month extended arrangement under the EFF ### Staff recommendation to approve 48-month EFF arrangement ### Program approval and design - Staff recommends approval of the 48-month extended arrangement under the EFF with access of SDR 5,935.3 million. - Staff assessment: in circumstances of exceptionally high uncertainty, the proposed program is appropriately designed to resolve Ukraine’s BoP problem and restore Ukraine to medium-term external viability in both a baseline and downside scenario. - Caveats: Ukraine’s capacity to repay the Fund is subject to exceptional risks and will depend critically on the authorities’ ability to fully implement the program. - Risk mitigation: capacity to repay assurances from a significant group of creditors/donors give management and staff the basis to assess that there are adequate safeguards in place for tail risks beyond the Fund supported program. ### Key macroeconomic projections and indicators (baseline scenario) - Real GDP (percent change): 2024 Act. -28.8; 2025 Act. 5.5; 2026 Act./EFF 8th Rev Est. 3.2; 2027 EFF 8th Rev Est. -31.8; 2028 Proj. -2.2; 2029 Proj. 4.5; 2030–35 Proj. range includes 1.8, -2.5, 3.5, 4.2, 3.9, 3.7, 3.6, 3.5, 3.5. - Nominal GDP (billions of Ukrainian hryvnias): 2024 Act. 5,451; 2025 Act. 5,239; 2026 Act. 6,628; 2027 Act. 7,662; projections through 2035 include 8,866; 8,877; 10,192; 10,005; 11,235; 12,468; 13,602; 14,811; 16,111; 17,509; 19,028; 20,678; 22,472. - Fiscal balance (general government, percent of GDP): 2021 Act. -4.0; 2022 Act. -15.6; 2023 Act. -19.3; 2024 Act. -17.2; 2025 EFF 8th Rev Est. -21.3; 2026 EFF 8th Rev Est. -23.3; 2027 Proj. -10.1; 2028 Proj. -18.4; 2029 Proj. -17.7; 2030–35 Proj. -7.4, -2.9, -2.0, -1.3, -1.1, -0.9, -0.8, -0.8. - Fiscal balance, excluding grants (percent of GDP): 2021 Act. -4.0; 2022 Act. -24.8; 2023 Act. -25.8; 2024 Act. -23.1; 2025 EFF 8th Rev Est. -22.1; 2026 EFF 8th Rev Est. -23.6; 2027 Proj. -10.4; 2028 Proj. -19.3; 2029 Proj. -17.8; 2030–35 Proj. -11.1, -5.5, -3.6, -2.8, -2.5, -2.3, -2.1, -2.0. - Public and publicly-guaranteed debt (percent of GDP): 2021 Act. 48.9; 2022 Act. 77.7; 2023 Act. 81.2; 2024 Act. 89.7; 2025 EFF 8th Rev Est. 108.6; 2026 EFF 8th Rev Est. 108.7; 2027 Proj. 110.4; 2028 Proj. 122.6; 2029 Proj. 137.1; 2030–35 Proj. 135.5, 131.9, 125.7, 119.6, 113.5, 107.9, 102.3, 97.1. - Current account balance (percent of GDP): 2021 Act. -2.7; 2022 Act. 4.6; 2023 Act. -5.2; 2024 Act. -8.0; 2025 EFF 8th Rev Est. -16.5; 2026 EFF 8th Rev Est. -15.0; 2027 Proj. -12.6; 2028 Proj. -19.1; 2029 Proj. -16.7; 2030–35 Proj. -9.7, -8.5, -8.0, -7.4, -6.8, -5.6, -4.6, -4.1. - Gross international reserves (end of period, billions of U.S. dollars): 2021 Act. 30.9; 2022 Act. 28.5; 2023 Act. 40.5; 2024 Act. 43.8; 2025 EFF 8th Rev Est. 53.4; 2026 EFF 8th Rev Est. 57.3; 2027 Proj. 52.8; 2028 Proj. 65.5; 2029 Proj. 73.4; 2030–35 Proj. 74.8, 80.2, 80.6, 81.3, 83.4, 90.1, 94.6, 100.7. - Months of next year's imports of goods and services: 2021 Act. 4.4; 2022 Act. 3.8; 2023 Act. 5.1; 2024 Act. 4.7; 2025 EFF 8th Rev Est. 6.3; 2026 EFF 8th Rev Est. 5.7; 2027 Proj. 6.3; 2028 Proj. 7.0; 2029 Proj. 7.8; 2030–35 Proj. 7.7, 7.9, 7.5, 7.1, 6.9, 7.1, 7.1, 7.1. - Total external debt (percent of GDP): 2021 Act. 64.7; 2022 Act. 81.6; 2023 Act. 89.1; 2024 Act. 95.0; 2025 EFF 8th Rev Est. 106.5; 2026 EFF 8th Rev Est. 111.1; 2027 Proj. 110.0; 2028 Proj. 123.8; 2029 Proj. 132.3; 2030–35 Proj. 129.0, 127.8, 123.7, 118.6, 114.1, 110.3, 104.9, 99.8. ### Financing, Fund exposure, and capacity-to-repay indicators - Approved Fund access: SDR 5,935.3 million. - Table 10 (Fund exposure, end of period and projections): - Existing Fund credit stock (end of period): 2026 Proj. 8,707; 2027 Proj. 7,794; 2028 Proj. 7,182; 2029 Proj. 5,902; 2030 Proj. 4,566; 2031 Proj. 3,230; 2032 Proj. 1,754; 2033 Proj. 780; 2034 Proj. 560; 2035 Proj. 0. - Prospective purchases disbursements: 2026 Proj. 2,817; 2027 Proj. 1,288; 2028 Proj. 664; 2029 Proj. 1,167; subsequent years reported as 0. - Stock of existing and prospective Fund credit (end of period): 2026 Proj. 11,523; 2027 Proj. 11,898; 2028 Proj. 11,950; 2029 Proj. 11,837; 2030 Proj. 10,367; 2031 Proj. 8,508; 2032 Proj. 6,322; 2033 Proj. 4,508; 2034 Proj. 2,794; 2035 Proj. 1,749. - Stock in percent of quota: 2026 Proj. 573; 2027 Proj. 591; 2028 Proj. 594; 2029 Proj. 588; 2030 Proj. 515; 2031 Proj. 423; 2032 Proj. 314; 2033 Proj. 224; 2034 Proj. 139; 2035 Proj. 87. - Stock in percent of GDP: 2026 Proj. 7.0; 2027 Proj. 6.9; 2028 Proj. 6.5; 2029 Proj. 6.2; 2030 Proj. 5.2; 2031 Proj. 4.0; 2032 Proj. 2.8; 2033 Proj. 1.9; 2034 Proj. 1.1; 2035 Proj. 0.7. - Obligations to the Fund from existing and prospective Fund credit (end of period): 2026 Proj. 2,079; 2027 Proj. 1,523; 2028 Proj. 1,245; 2029 Proj. 1,910; 2030 Proj. 2,071; 2031 Proj. 2,366; 2032 Proj. 2,566; 2033 Proj. 2,091; 2034 Proj. 1,927; 2035 Proj. 1,211. - Obligations in percent of quota: 2026 Proj. 103.3; 2027 Proj. 75.7; 2028 Proj. 61.9; 2029 Proj. 94.9; 2030 Proj. 102.9; 2031 Proj. 117.6; 2032 Proj. 127.6; 2033 Proj. 103.9; 2034 Proj. 95.8; 2035 Proj. 60.2. - Indicators of repayment pressure: - Stock of existing and prospective Fund credit in percent of exports of goods and nonfactor services: 2026 Proj. 25.6; 2027 Proj. 24.1; 2028 Proj. 21.8; 2029 Proj. 19.6; 2030 Proj. 15.7; 2031 Proj. 11.8; 2032 Proj. 8.0; 2033 Proj. 5.3; 2034 Proj. 3.0; 2035 Proj. 1.8. - Stock in percent of gross reserves: 2026 Proj. 24.0; 2027 Proj. 22.2; 2028 Proj. 21.9; 2029 Proj. 20.2; 2030 Proj. 17.7; 2031 Proj. 14.4; 2032 Proj. 10.5; 2033 Proj. 6.9; 2034 Proj. 4.1; 2035 Proj. 2.4. ### Program safeguards, conditionality, and monitoring - Quantitative performance criteria and indicative targets (selected, end of period; billions of Ukrainian hryvnia): - Floor on the non-defense cash primary balance of the general government, excluding budget support grants (cum.): Sep 2026 EBS/25/64 QPC 153.6; Dec 2026 310.0; Mar 2027 460.5; other listed cumulative targets include 687.4, 943.2, 1,076.3, 348.1. - Floor on tax revenues (excluding Social Security Contributions) (cum.): Sep 2026 599.0; Dec 2026 580.0; Mar 2027 1,292.8; others include 1,280.0, 2,057.0, 3,000.0, 651.3. - Ceiling on publicly guaranteed debt: target values include 68.0, 65.0, 68.0, 65.0, 65.0, 65.0, 73.0. - Floor on net international reserves (in billions of U.S. dollars): Sep 2026 34.3; Dec 2026 44.2; Mar 2027 34.3; subsequent targets include 51.3, 51.9, 49.2, 51.6. - Ceiling on general government arrears: 1.8 (repeated across dates). - Floor on social spending (cum.): Sep 2026 160.0; Dec 2026 160.7; Mar 2027 327.0; others include 330.3, 504.2, 684.0, 180.5. - Ceiling on general government borrowing from the NBU: Sep 2026 -2.5; Dec 2026 -2.5; Mar 2027 -6.3; subsequent targets include -6.3, 0.0, 0.0, 0.0. - Structural benchmarks and prior actions (selected, timing/status): - Prior Action: Adopt 2026 Budget consistent with the program — Met. - Prior Action: Issue a decree to level the playing field for VAT payers in public procurement tenders — Met. - Prior Action: Submit to Parliament legislation to amend the definition of “employment” in the Labor Code — Met. - Structural benchmarks with deadlines through End-Dec 2026 include reforms spanning fiscal, governance, financial sectors, customs, tax code amendments, SOB governance, third-party risk oversight, NACP verification system, technical analysis of QFA costs in energy, centralized data warehouse design for tax and customs, NSSMC governance amendments, and ACU board appointments. ### Financing outlook and balance of payments (selected) - Gross external financing requirements (billions of U.S. dollars): A. Total financing requirements: 2021 Act. 21.6; 2022 Act. 33.0; 2023 Act. 38.9; 2024 Act. 53.1; 2025 EFF 8th Rev Est. 54.7; 2026 EFF 8th Rev Est. 55.6; subsequent projections through 2035 listed (e.g., 38.7, 53.5, 48.6, 40.4, 37.5, 35.0, 34.5, 32.9, 29.2, 32.4, 33.7). - Total financing sources (billions of U.S. dollars): 2021 Act. 20.3; 2022 Act. 0.7; 2023 Act. 9.7; 2024 Act. 16.3; 2025 EFF 8th Rev Est. 14.2; 2026 EFF 8th Rev Est. 14.1; subsequent projections include 18.1, 12.3, 15.0, 21.1, 27.3, 26.8, 27.1, 27.5, 27.8, 28.7, 30.7. - Financing gap (A - B) (billions of U.S. dollars): 2021 Act. 1.3; 2022 Act. 32.3; 2023 Act. 29.3; 2024 Act. 36.8; 2025 EFF 8th Rev Est. 40.5; 2026 EFF 8th Rev Est. 41.5; subsequent annual gaps noted (e.g., 20.6, 40.6, 41.1, 33.6, 19.3, 10.2, 8.2, 7.4, 5.4, 1.4, 3.7, 3.0). - Official financing (billions of U.S. dollars): IMF and other official disbursements and loans are detailed (e.g., Official budget grants 2021 Act. 0.0; 2022 Act. 14.6; 2023 Act. 11.8; 2024 Act. 11.2; IMF purchases/repurchases and budget support loans appear in Table 8). *Source: IMF staff estimates and projections.* ### Annex I. Peer-Reviewed Assessment (PRA) ### Annex I. Peer-Reviewed Assessment (PRA) ### A. Background - Ukraine joined the Fund in 1992. Since then it entered into 13 Fund arrangements: one under the Systemic Transformation Facility (STF), nine Stand-by-Arrangements (SBA), and three arrangements under the Extended Fund Facility (EFF). - Cumulative envisaged access: SDR 68.7 billion or about US$90 billion; disbursed: SDR 33.9 billion or about US$44 billion. - Emergency liquidity support in 2022: about SDR 2 billion or about US$2.7 billion. - Program Monitoring with Board Involvement (PMB) was used for a few months in 2022–23. - Prior ex-post and peer-reviewed assessments were conducted in 2005, 2013 and 2020. The 2020 PRA noted: reduced external and internal imbalances, strengthened policy frameworks (central bank independence, elimination of quasi-fiscal deficits in the energy sector, governance measures), and persistent vulnerabilities (delays in judicial reform, vested interests, incomplete fiscal transparency and pension reform, and program durability concerns). It recommended focusing conditionality on a streamlined set of critical reforms with strong political commitment. - This PRA assesses IMF engagement since 2020 across three phases: the 2020 SBA (pandemic response), emergency support in 2022 (two RFIs and PMB) and the 2023 EFF under the Fund’s new EHU policy. ### B. Fund-Supported Programs and Instruments in 2020–2022 — Stand-By Arrangement (2020) - 2020 SBA: SDR 3.6 billion, or 179 percent of quota; 18-month program to address balance-of-payments needs during COVID-19. - Program objectives: preserve macroeconomic stability, safeguard gains from earlier arrangements, maintain prudent fiscal and monetary policies, protect NBU independence, uphold governance safeguards. - Implementation challenges: - NBU Governor forced to resign in July 2020, one month after program approval; credible plan to strengthen NBU independence took 16 months to put in place. - First and only review completed November 2021; program extended and rephased; total disbursements reached SDR 2.0 billion (US$2.8 billion). - Several quantitative performance criteria and indicative targets were met; only two of nine structural benchmarks were implemented on time, though most were completed by the first review (including as prior actions). - Institutional progress and constraints: - Progress: strengthened fiscal reporting, reinforced NBU’s legal framework for board appointments and dismissals, restored asset declarations for public officials, enhanced NABU’s operational autonomy. - Monetary policy: NBU operated inflation-targeting with exchange rate flexibility; FX interventions remained significant; monetary transmission constrained by shocks and limited financial intermediation. - Lagging reforms: judicial and anti-corruption reforms; contingent liabilities from SOEs and energy arrears remained unaddressed. - SBA effectively ended with Russia’s full-scale invasion (program cancelled in March 2022; shifted to emergency financing under RFIs). ### C. Rapid Financing Instruments and Program Monitoring with Board Involvement (2022) - Economic impact of the 2022 invasion: - Real GDP fell by almost 30 percent in 2022. - Inflation: 26.6 percent by December 2022. - July 2022: 25 percent devaluation and large-scale monetary financing noted. - Fiscal deficit excluding grants: close to 25 percent of GDP in 2022. - Public debt: rose to 78 percent of GDP by end-2022. - Current account: surplus of 5.7 percent of GDP in 2022 (reflecting exceptional transfers and grants). - International reserves: US$28.5 billion at end-December 2022. - RFI disbursements after SBA cancellation: - March 2022 RFI: US$1.4 billion. - October 2022 Food Shock Window disbursement: US$1.3 billion. - Complementary support: US direct budget support via the World Bank’s PEACE and EU macro-financial assistance totaling US$18.8 billion. - RFI design: minimal conditionality; rapid liquidity to maintain external stability and finance critical imports and urgent budgetary needs. - Authorities’ wartime measures in 2022 (despite minimal formal conditionality): - Spending reprioritized toward defense and security; total government spending rose to 50 percent of GDP. - NBU actions: initially fixed the exchange rate, devalued by 20 percent in July 2022 before re-pegging; tightened reserve requirements; introduced strict capital controls. - NBU provided budget support, launched “Power Banking” (network of over 2,000 bank branches for prolonged blackouts), granted loan moratoria, and used prudential forbearance to ensure continuity of banking services. - Authorities agreed a moratorium on external debt service to official bilateral and private creditors; later anchored by a strategy for comprehensive debt treatment. ### D. UCT Lending to Ukraine During the War - Standard Upper Credit Tranche (UCT) arrangements were assessed as impossible in the war context because UCT requires restoration of medium-term external viability and adequate safeguards. - Exceptionally high uncertainty (EHU) precluded anchoring a program around a sufficiently “central” scenario: BoP needs were large and persistent and could not be estimated with required confidence; debt sustainability and capacity-to-repay safeguards were not ascertainable upfront. - PMB was used as a bridge; the development of the Fund’s new EHU policy enabled later transition to a UCT-quality program. ### E. Program Monitoring with Board Involvement (PMB) (2022) - PMB approved in December 2022 as a non-financial program to complement RFI disbursement. - Functions and achievements: - Established a coherent macroeconomic framework and monitorable objectives during wartime. - Gauged authorities’ capacity to implement reforms and provide data—vital for potential UCT-quality program design. - Maintained alignment between authorities, the Fund, and international partners; catalyzed donor financing. - Policy pillars under PMB that fed into the EFF: - Enhance domestic revenue mobilization: initial measures equivalent to 0.6 percent of GDP and a broader roadmap for tax policy and administration reform. - Strengthen public financial management (PFM) and expenditure control. - Eliminate monetary financing through revival of domestic debt markets. - Prepare comprehensive financial sector strategy, including bank diagnostics and contingency planning. - Reinforce NBU independence and improve governance in SOEs and SOBs. - Performance under PMB: - Demonstrated capacity to design and implement UCT-level policies amidst war and EHU. - Highlighted the continuing need for predictable donor support and contingency planning to sustain stability and safeguard policy credibility. ### F. Extended Fund Facility (EFF) (2023) - EFF approved March 2023: access of SDR 11.6 billion (US$15.6 billion, 577 percent of quota) over four years. - Significance: first program approved under the Fund’s new EHU policy; catalytic role in coordinating international support package that expanded to exceed US$150 billion. - EHU framework features: - Enables UCT-quality program design while exogenous shock is still unfolding. - Program design based on two scenarios: a central scenario (gradual tapering of the war) and a downside scenario (longer, more intense conflict). - Financing assurances policy modifications: - (i) Official bilateral creditors may provide upfront credible assurances about delivering debt relief and/or financing, with contingent second-stage delivery once EHU is resolved. - (ii) Extends use of capacity-to-repay assurances from official bilateral creditors/donors from emergency financing to a UCT arrangement context. - Staff assessment: program plus capacity-to-repay assurances and financing assurances were judged strong enough in both baseline and downside scenarios to resolve BoP problems and restore medium-term external viability. - EFF objectives and program design to overcome severe shocks: - Fiscal projections and outcomes: - Government spending projected about 11 percent of GDP higher than planned in the 2023 budget; total expenditures near 68 percent of GDP for 2023 (driven by defense, security, social needs). - Deficit excluding grants for 2023 projected at 28.2 percent of GDP, to be financed primarily by concessional external support. - External sector and reserves: - Current account projected deficit of 4 percent of GDP (depressed exports, increased imports of essential equipment; Black Sea Corridor closed in mid-2023). - Reserves projected at almost US$30 billion (4 months of imports). - Monetary policy: - NBU held policy rate at 25 percent amid still-high—though easing—inflation and FX-peg pressures; domestic bond issuance gradually recovering. - EFF strategy to restore external viability and debt sustainability: - Improve medium-term fiscal primary balance: baseline primary deficit projected to decline from 28 percent of GDP at program approval to a primary surplus of 0.5–1.5 percent of GDP for the post-war medium term. - Adjustment supported by fiscal structural reforms, assuming defense spending declines after the war. - Fiscal structural reforms include: - Mobilizing domestic revenue under the National Revenue Strategy (NRS), restoring pre-war tax policies, and strengthening tax policy and administration to reduce tax evasion. - Enhancing public spending efficiency: make medium-term budget planning central (restore budget declaration; operationalize expenditure baseline), overhaul Public Investment Management (PIM), establish MOF as gatekeeper, and introduce a single project pipeline for capital spending prioritization. - Mobilize appropriate mix of external and domestic financing: external concessional financing expected to provide bulk of fiscal financing; program envisaged achieving positive net financing from domestic bond market and eliminating monetary financing. - Ensure monetary policy stance that maintains price and external stability and adequate FX reserves: support gradual transition back to more flexible exchange rate and inflation targeting; manage liquidity conditions and strengthen transmission of key policy rate (KPR); continue restrictions on FX outflows as needed. - Restore debt sustainability: program set clear debt targets—GFNs at 8 percent of GDP on average over 2028–33, and debt falling to 65 percent of GDP by 2033—to guide a two-step creditor strategy: - Bilateral official creditors to extend a debt service standstill and commit to delivering final debt treatment to restore sustainability before end of program or when EHU resolved. - Private-sector restructuring to be concluded by mid-2024, consistent with the DSA. - EFF structural and institutional reform priorities aligned with EU accession goals: - Financial sector and stability: contingency planning for operational/liquidity shocks; keep systemic banks well-capitalized; resolve weaker non-systemic banks; strengthen risk-based supervision; tackle legacy NPLs; improve SOB governance to curb fiscal risks; upgrade market infrastructure to deepen capital markets for recovery and reconstruction. - Institutional and external oversight: restore and enforce asset declarations for public officials; independent external audit of NABU; reforms to overhaul and professionalize the Economic Security Bureau (ESBU); measures to enhance functioning of the High Anti-Corruption Court (HACC) and the Accounting Chamber of Ukraine (ACU); support establishment of the new specialized administrative court (HAC). - SOE governance and fiscal risk containment: adoption of an SOE corporate governance law (OECD-aligned) and related measures to curb fiscal risks. *Annex I. Peer-Reviewed Assessment (PRA), 1ukrea2026001-source-pdf - Annex I. Peer-Reviewed Assessment (PRA)* ### introduction of an SOE state ownership policy, dividend policy and privatization strategy, ### introduction of an SOE state ownership policy, dividend policy and privatization strategy ### Program design and implementation - Program conditionality included: - introduction of an SOE state ownership policy, dividend policy and privatization strategy. - strengthening supervisory boards through a comprehensive revision of selection and appointment processes, and ensuring the full composition of the supervisory boards of Ukrenergo, GTSO, Naftogaz, and Energoatom. - an external audit of district heating arrears to Naftogaz to inform a strategy for addressing accumulated losses. - Program alignment with EU integration objectives: - measures to align laws and procedures with EU standards, complementing the European Commission’s Ukraine Facility. - fiscal measures under the National Revenue Strategy (NRS) to harmonize excise duties with EU directives and rationalize tax exemptions in line with the EU acquis. - support for the NBU and NSSMC to strengthen independence and supervisory practices toward EU “equivalence,” and reforms of settlement, collateral, and insolvency frameworks to modernize financial market infrastructure. - corporate governance benchmarks (e.g., restoring independent supervisory boards at major SOEs and adopting OECD-consistent governance practices) designed as building blocks toward EU accession. - Implementation performance: - Implementation of the EFF was strong through June 2025 despite the wartime environment, with a record eight reviews completed on time and most conditionality met. - The EHU framework preserved program integrity while allowing flexibility; quantitative performance criteria were observed throughout the program, with one waiver granted for a minor revenue shortfall due to customs revenue losses caused by border blockages in late 2023. - Structural conditionality was largely implemented, with some delays in the fiscal and financial sectors. ### Fiscal measures, burden sharing, and debt treatment - Revenue and tax policy changes: - In December 2024, parliament approved a package raising the “military tax rate” from 1.5 to 5 percent. - The package broadened the tax base to include simplified-system taxpayers, introduced presumptive taxation for fuel stations and currency dealers, aligned corporate profit tax rates for banks and non-banks (25 percent), and imposed the 50 percent extraordinary corporate income tax on bank profits for two consecutive years, alongside other tax measures including excises. - Together, this package increased revenues by 1.6 percent of GDP in 2025. - Debt treatments and debt sustainability: - After a two-year debt service standstill agreed in August 2022 on around US$20 billion of international bonds, Ukraine reached an agreement-in-principle in July 2024 and completed the Eurobond exchange in September 2024. - The transaction featured an upfront 37 percent nominal haircut and a new A/B bonds structure, delivering relief estimated at US$11.4 billion over three years. - The program assessment concluded debt remained sustainable on a forward-looking basis, conditional on fiscal adjustment, concessional donor financing, and acommitment from the authorities to further debt restructuring as necessary; capacity-to-repay assurances from a large group of creditors provided additional safeguards. - External financing and ERA: - The program scenarios were reset at the Fifth Review to assume the war would wind down in late-2025 in the baseline and mid-2026 in the downside scenario, widening fiscal and external needs with a cumulative financing gap around US$30 billion higher over the program period compared to the Fourth Review. - The G7’s Extraordinary Revenue Acceleration (ERA) initiative—a financing package of about US$50 billion backed and repaid by profits from immobilized Russian sovereign assets—largely covered this gap. - Donor commitments exceeded US$150 billion overall. ### Monetary policy, FX policy, and reserves - NBU policy and FX liberalization: - The NBU gradually eased FX controls in line with its FX-liberalization strategy, phasing measures to support recovery while prioritizing reserve adequacy and market stability; measures were conditional and enforcement against circumvention was tightened. - Since the October 2023 move to managed exchange rate flexibility, the hryvnia traded with greater two-way movement and narrower spreads; FX intervention was calibrated to smooth excess volatility and protect reserves. - In September 2024, the NBU switched to a flexible inflation targeting framework, communicating inflation targets, publishing forecasts and adjusting the KPR; however, it continued to rely heavily on the exchange rate as the main monetary policy instrument. - Starting in 2025Q3, the NBU increased the flexibility of the exchange rate with the view of transitioning back to full-fledged inflation targeting over the medium term. - Inflation and reserves: - Inflation declined from above 25 percent at end-2022 to 11.9 percent by September 2025. - International reserves reached record levels of US$57.3 billion at end-2025. - Policy recommendation: - Future programs should emphasize greater exchange rate flexibility to protect foreign exchange reserves and avoid buildup of external imbalances, while gradually moving back towards an inflation-targeting framework in which the key policy rate serves as the main instrument. - The flexible inflation targeting framework, with the 3-year policy horizon, appropriately allows the NBU to remain nimble and respond to shocks while anchoring inflation expectations. ### Governance, judicial reform, and SOE governance issues - Progress and remaining challenges: - Stronger progress where authorities had ownership: restoration of asset declarations, SAPO’s operational independence, alignment of the AML/CFT regime to FATF standards, completion of an independent external audit of NABU, and steps to reconstitute supervisory boards in major SOEs. - Mixed progress in other areas: structural benchmarks involving personnel selection or detailed legal guidance encountered obstacles. - Specific governance frictions: - Tensions between time-consuming selection procedures (to safeguard independence and integrity, supported by civil society) and authorities’ desire for rapid appointments and control led to delays and conflicts (e.g., ESBU head appointment stalled; customs head appointment postponed twice). - Governance weaknesses in the energy SOE portfolio impeded timely CEO and board appointments: leadership disruptions at Ukrenergo raised concerns over political interference; GTSOU CEO selection stalled; delays in appointing state representatives slowed CEO competitions and left boards understaffed; the structural benchmark to reform the Nomination Committee framework was missed. - Recommendations and focus areas: - Avoid cross-conditionality with the European Commission and pivot toward reforms with maximal macroeconomic impact to level the playing field for private investors. - Focus on intersections between anti-corruption and macro policies (e.g., reducing the shadow economy), consolidating gains in anti-corruption institutions, advancing customs and ESBU reforms, strengthening monitoring of beneficial ownership in public procurement, and supporting empowerment of supervisory boards while avoiding involvement in individual selection processes. ### Program adaptability, conditionality design, and coordination - EHU framework lessons: - The EHU framework allowed the Fund to act decisively in crisis conditions, but success required exceptional donor commitment, program adaptability, and determined policy implementation. - Scenario calibration is critical: the 2023 EFF downside assumed a more intense escalation that did not materialize, while the main tail risk proved to be a longer-than-expected conflict; downside scenarios should better capture the risk of longer duration and be updated at each review with contingent buffers. - A parsimonious and flexible approach to structural conditionality—streamlining SBs to a manageable set of realistic, critical measures—supported implementation while preserving ownership and accounting for limited implementation capacity in wartime. - The quarterly review frequency provided flexibility, engagement, and discipline suitable under EHU, though it imposed a demanding schedule on authorities. - Coordination and capacity development: - Close coordination with internal and external partners supported program success; the IMF’s Ukraine Capacity Development Fund (UCDF), a $65 million facility, provided tailored technical assistance and training. - Strong collaboration across Fund departments and with external partners (EU, World Bank, G7, Ukraine Donor Platform, bilateral embassies) was essential to establish coherent funding and align IMF conditionality with partner priorities, mobilizing broad international buy-in. ### Outcomes, social impacts, and energy resilience - Macroeconomic and social outcomes: - The program achieved macroeconomic stabilization and advanced several structural reforms. - Fiscal sustainability was preserved through strong domestic revenue mobilization (about 2½ pp of GDP in additional revenues by end-2025) and unprecedented external support (donor commitments exceeding US$150 billion, official sector debt standstill, private sector debt restructuring). - Social protection remained constrained by limited fiscal space; high wages for frontline soldiers and targeted measures (transfers to IDPs, redirection of 4 percentage points of personal income tax to municipalities to sustain district heating companies) helped mitigate social pressures. - The current account deficit excluding grants widened throughout 2025 (to about 21 percent of GDP) due to imports of critical energy and defense-related goods and strong demand for small-value postal packages and electric vehicles amid an appreciating average real exchange rate. - Energy sector resilience and risks: - Energy supply was kept broadly intact despite repeated Russian attacks, demonstrating resilience of critical infrastructure, but escalations in October 2025 signaled a more aggressive strategy with new strikes inflicting severe damage. ### Lessons, risks, and priorities going forward - Key lessons: - Design UCT programs robust to severe downside risks, with credible safeguards for debt sustainability and capacity to repay. - Ensure downside scenarios and financing needs are updated at each review and define contingent buffers (financing assurances, potential debt relief). - Streamline structural conditionality to focus on realistic measures critical for stabilization and governance; adapt conditionality to evolving risks to catalyze donor engagement. - Maintain intensive coordination with donors and IFIs to mobilize financing and sustain program traction. - Priorities: - Mobilize durable revenue measures: broaden tax base, improve compliance, reform simplified taxation, eliminate tax exemptions, and repair VAT chain breaks to meet reconstruction and recovery needs estimated at US$524 billion over the next decade. - Transition toward greater exchange rate flexibility while moving back to full-fledged inflation targeting. - Target governance reforms that are owned by the authorities and have maximal macroeconomic impact, while avoiding involvement in individual appointment processes. *Source: IMF staff report chapter excerpt on program implementation, conditionality, and lessons under the 2023 EFF and EHU framework.* ### 36. Further steps are needed to ensure the financial sector is ready to support a durable ### Further steps are needed to ensure the financial sector is ready to support a durable credit recovery ### Financial-sector readiness and reform priorities - Context and goal: - Net credit to GDP ratio: 18 percent. - Post-war reconstruction will require substantial investment, including from the banking system. Banks and financial and capital market infrastructure should be prepositioned to facilitate investment and a durable credit recovery. - Required reforms (as enumerated in the source): - i) Accelerating state-owned bank (SOB) reform—such as governance safeguards, updated board nomination rules, and preparation for orderly privatizations—to reduce distortions and crowding out of private lenders. - ii) Fixing bottlenecks in the financial and capital markets infrastructure to broaden the financial products available for domestic and international investment. - iii) Mobilizing longer-term funding that complements bank credit. - iv) Aligning banking sector norms with the EU acquis. - Bank-level actions: - Strengthen the capital base and develop lending markets to enable banks to expand lending. - These steps aim to restore and improve lending capacity, lower risk premia, foster investment, and channel financing to reconstruction projects while preserving macro‑financial stability. ### Authorities’ views - General stance: - The authorities broadly agree with the PRA. - MOF and NBU acknowledge extraordinary international support and highlight nimble and decisive policymaking through multiple shocks starting with the COVID-19 pandemic in 2020. - Monetary policy and program frameworks: - NBU: monetary policy was consistent, transparent, and the proactive monetary stance was broadly effective in balancing inflation risks and supporting recovery. - On the 2023 EFF: authorities acknowledge IMF adaptability via the EHU framework and value strong ownership and close coordination with international partners. - Reflections and commitments: - Authorities note their financial sector and lending development strategies contributed to the lending recovery despite the ongoing war. - In hindsight, they feel more parsimony in structural conditionality could have been considered. - They appreciate continued IMF support, including capacity development, and reiterate commitment to sound macroeconomic policies and advancing the structural reform agenda. ### External position and NIIP - Overall assessment: - Against the war backdrop, Ukraine’s external position in 2024 was substantially weaker than the level implied by fundamentals and desirable policies in the medium term after an end to the war. - Public debt, of which 72 percent is external, continues to be assessed as unsustainable in the absence of a debt treatment, fiscal adjustment, and financing on sufficiently concessional terms. - Key NIIP and balance-sheet figures: - NIIP: widened from US$11.5 billion (6.3 percent of GDP) in 2023 to US$12.4 billion (6.5 percent of GDP) in 2024 owing to an increase in loan liabilities. - Gross assets at end-2024: US$214 billion; currency and deposits accounted for 71 percent of gross assets. - Gross liabilities at end-2024: US$227 billion; loan and FDI liabilities comprised 80 percent of gross liabilities. - Gross external debt at end-2024: US$180.6 billion (95 percent of GDP); public sector share US$116.8 billion. - Gross external debt rose by US$19.1 billion relative to end-2023, driven by an increase in general government external loan liabilities, mostly to official creditors on concessional terms. - Ukraine received over US$30 billion in budget loan financing from bilateral and multilateral donors in 2024. - Currency composition of gross external debt: 46.4 percent US$-denominated; 38.6 percent euro-denominated. - As of September 2025, NIIP widened to US$43.6 billion (20.5 percent of estimated 2025 GDP). ### Current account (CA) - Recent performance: - CA deficit deteriorated to 8 percent of GDP in 2024 from 5.2 percent of GDP in 2023, driven by a widening merchandise trade deficit and lower primary income. - In 2025, the estimated CA deficit excluding grants deteriorated by 7.1 percentage points of GDP. - Drivers: - Trade deterioration primarily driven by higher priority import needs for energy- and defense-related goods. - Decline in primary income reflects lower compensation of employees abroad and higher dividend payments. - Reduced import of travel services from migrants abroad partially offset these effects. - A later start to the 2025 harvest season led to somewhat lower exports compared to the same period in 2024. - Model-based assessment: - Cyclically-adjusted CA: -8 percent of GDP. - CA Norm (cyclically adjusted): -2.8 percent of GDP. - CA Gap (preferred CA approach): 5.2 percent of GDP. - Contribution of policy gaps: -2.7 percent of GDP (primarily driven by the fiscal balance gap reflecting the need for expansionary fiscal policy during the war). - ES approach CA gap: -6.2 percent. - REER model CA gap: 2.2 percent. - Staff judgment: CA-model–based assessment preferred; Ukraine’s external position in 2024 assessed as substantially weaker than implied by fundamentals and desirable policies in the medium term after an end to the war. ### Real exchange rate (REER) - Recent movements: - REER depreciated by 6.5 percent in 2024. - REER appreciated by 2.1 percent in 2025 (average). - Competitiveness concerns: - Trend private sector dis-saving and rising imports of specific goods such as small-value parcels point to eroding competitiveness. - Model estimates and staff view: - EBA-lite CA model suggests a REER overvaluation of 17.6 percent. - ES approach implies stabilizing NIIP at its 2024 level would require a REER depreciation of 20.8 percent. - REER approach finds an undervaluation of 7.4 percent. - Staff assesses Ukraine’s REER in 2024 was overvalued, noting large uncertainties in model estimates given the war. ### Capital and financial accounts, FX controls, and reserves - Capital and financial account flows: - Official donor financing accounted for the bulk of inflows in 2024, with on-budget loan financing equivalent to around 16 percent of GDP. - In 2025, net inflows remained robust, driven by continued high donor disbursements and lower outflows into FX cash. - FX controls and liberalization: - Following full-scale war outbreak in February 2022, the NBU deployed FX controls including restrictions on bank account withdrawals and repatriation of proceeds from nonresident government debt redemptions. - From April 2023, repatriation of interest payments on government bonds held by nonresidents was allowed, but in May 2023 required a minimum continuous holding period of 90 days before coupon payment. - In June 2023, the NBU adopted a three-stage FX liberalization roadmap guiding gradual easing. - In May 2024, the NBU introduced the largest FX controls easing package since the start of the war to relax FX controls for businesses and promote investment inflows. - Assessment: Financial account projected to continue recording a surplus on the back of strong donor support and FDI inflows; gradual easing of FX controls expected to continue consistent with authorities’ FX strategy. - International reserves and FX intervention: - Gross international reserves (GIR) at end-2024: US$43.8 billion (4.7 months of prospective goods and services imports and 122.4 percent of the ARA metric). - GIR at end-2025: US$57.3 billion (5.7 months of prospective imports). - NBU net FX sales: US$28.6 billion in 2023, US$34.8 billion in 2024, and US$36.2 billion in 2025. - Measures to ease FX demand pressure included increasing limits for debt servicing and Eurobond coupon payments, and import-related transactions. - Result: Spread between official and cash UAH/USD rates reduced and stabilized within 0-1 percent by December 2025. - Exchange-rate regime timeline: - Inflation targeting regime replaced by a hard peg to the US dollar at the start of the war. - October 3, 2023: transition to a managed flexible exchange rate regime. - Assessment: Donor financing expected to continue supporting GIR, but uncertainty around the war poses a significant risk. FX interventions should support NBU’s strategy of gradually increasing exchange-rate flexibility and moderate over time as market imbalances are addressed and the NBU returns to pre-war inflation targeting. ### Risk Assessment Matrix — selected risks, likelihoods, impacts, and policy responses - Durable peace settlement in the near term (↑) - Likelihood: Medium - Impact: High - Policy response: Step up arrangements for transition to post martial law; continue policies consistent with stability and unwind crisis measures only when conditions are met. - Geopolitical tensions/intensification of the war (↓) - Likelihood: High - Impact: High - Policy response: Use budget buffers for defense; apply contingent policies in downside scenarios; be prepared to deploy additional fiscal measures if worse than downside. - Decline in international aid/ability to mobilize budget support (↓) - Likelihood: Medium - Impact: High - Policy response: Mobilize domestic financing, deploy adjustment measures (revenue mobilization, reprioritizing expenditures), work with donors for new financing; limited monetary financing possible in tail-risk situations when pre-conditions met. - Rising social discontent (↓) - Likelihood: Medium - Impact: Medium - Policy response: Continue structural reforms and avoid policies that damage confidence in government. - Reform fatigue (↓) - Likelihood: Medium - Impact: High - Policy response: Avoid actions undermining governance institutions; immediately act to reverse such events; reaffirm commitment and accelerate reforms; maintain effective public outreach. - Intensified attacks on energy infrastructure (↓) - Likelihood: High - Impact: High - Policy response: Work with partners to ensure smooth heating season; emphasize financing modalities that do not exacerbate fiscal risks; if necessary, seek budget savings while respecting program parameters. - Stronger post-war returns to TFP, investment, and TFP (↑) - Likelihood: Low - Impact: High - Policy response: Implement reforms, maintain strong governance on reconstruction investment, and provide adequate social services to maximize persistence of positive outcomes. - Likelihood scale note (as in source): “low” (below 10 percent), “medium” (10-30 percent), and “high” (30-50 percent). *IMF staff summary based on the content of the cited chapter.* ### Annex IV. Upside Scenario ### Annex IV. Upside Scenario ### Overview and motivation - Scenario envisions post-war recovery driven by higher sustained high investment levels, greater inward migration, and completion of ambitious structural reforms to bolster growth. - As of December 2024, direct damages from the war stood at US$176 billion (according to RDNA4), about 90 percent of 2024 GDP. - As of December 2025, more than 5.8 million refugees from Ukraine were recorded worldwide (UNHCR), more than 14 percent of the pre-war population. - Recovery requires robust investment inflows and refugee returns, supported by confidence in the security situation, job opportunities, and strong institutions. - Pace of structural reform implementation in the EFF-supported program, the Ukraine Facility, and EU accession is key to catalyzing private investments and long-term productivity gains. ### Revisions since the Second Review of the 2023 EFF - Upside scenario updated to reflect scarring effects of a longer war: - Refugee surveys show return intentions below 50 percent, lowering likelihood of robust returns assumed in the end-2023 upside (which assumed the war winding down by end-2024). - Projected additional 0.9 million refugee outflows expected through the end of 2026 further depress labor contribution to potential output. - Pool of potential concessional resources for post-war reconstruction depleted by the need to finance the continuing defense effort, affecting baseline and upside investment projections. - Larger dislocations and frictions from prolonged wartime conditions are expected to be a larger drag on TFP growth than previously envisioned. - Revised upside still factors in higher investment levels, larger refugee returns, and deeper reforms delivering higher productivity than in the baseline; confidence-driven positive equilibrium expected in the immediate post-war period if reforms are deeper and faster. ### Growth, contributions, and channels (post-war 2027–2035 and 2027–2030) - In the post-war period 2027–2035: - Baseline assumes a medium- to long-term growth rate of around 3.5 percent, lifting real GDP level to around 111 percent of the pre-war level by 2035. - Upside would reach 122 percent of pre-war GDP, given a higher trend growth of 4 percent. - In the immediate post-war years (2027–2030), faster growth in the upside mainly due to larger refugee returns and higher productivity through rapid reintegration and reallocation of labor across sectors. - Across both baseline and upside, capital accumulation from reconstruction accounts for around 60 percent of total growth, and TFP for the remaining 40 percent over 2027–35. - Investment requirements: - Upside: investments would need to total around US$74 billion per year (stabilizing around 27 percent of GDP). - Baseline: average of US$63 billion per year (around 24 percent of GDP). - Both significantly up from 2024 levels of US$35 billion (around 19 percent of GDP). - In both scenarios, investment primarily financed by private sources; in the upside, private investment is 4.7 times public investment. - TFP assumptions: - Pre-war estimated average: 1 percent. - Baseline: 1.5 percent per annum. - Upside: 2 percent per annum (in line with growth effects experienced in past EU accession cases). - Larger productivity boost in the upside stems from more ambitious reform agenda, including de-shadowing, privatization in state-dominated sectors, and financial sector reform. ### Long-run outcomes and comparators - In the 2035 upside, despite a 50 percent increase in real per capita income, Ukraine would still lag EU peers. - The 2035 per capita income growth rate would need to be sustained for six more years to reach the level attained by Bulgaria in 2025. - This requires that successful reforms are not reverted, supporting high investment and productivity gains. ### Selected assumptions and results (Table AIV.1) - Average annual GDP growth, post-war period (end of projection horizon): - Baseline: 3.7 percent (3.5 percent) - Upside: 4.8 percent (4 percent) - 2nd Review Upside range: 5.8–7.3 percent (4.5–6.5 percent) - Investment to GDP, end of projection period: - Baseline: 24 percent - Upside: 27 percent - 2nd Review Upside range: 28–33 percent - Average investment per year, 2024 through end of projection period: - Baseline: US$63 billion - Upside: US$74 billion - 2nd Review Upside range: US$65–89 billion - Net refugee flows relative to end-2021: - Baseline: -5 million persons - Upside: -4.2 million persons - 2nd Review Upside range: -1.5 to 0 million persons *International Monetary Fund — Annex IV. Upside Scenario* ### 5. As in the previous program, discussions highlighted additional policy responses that ### 1ukrea2026001-source-pdf - 5. As in the previous program, discussions highlighted additional policy responses that ### Additional policy responses (authorities' options in worse-than-downside scenarios) - Revenues: - The main VAT or military tax rates could be hiked further, or solidarity or luxury taxes could be introduced. - Expenditures: - Options include resequencing capital expenditures or reversing the plans to implement social measures in the 2026 budget. - Domestic market financing: - Revised regulations requiring banks to hold a stipulated amount or introducing a minimum holding period for government securities (possibly differentiating among banks based on liquidity conditions). - Expand the range of instruments to include FX or inflation-linked securities, if that would better align with the market’s appetite. - In a severe adverse situation, secondary purchases by the NBU could serve as a backstop for primary markets. - Monetary and exchange rate policies: - If renewed pressures on the exchange rate occur but reserves remain at an adequate level, staff will review options with the authorities including a calibrated expansion of FX controls combined with tightening monetary policy to preserve positive real rates and allowing exchange rate adjustment to safeguard reserves. ### Key macroeconomic projections and indicators (Downside Scenario — select figures) - Nominal GDP (billions of Ukrainian hryvnias): - 2024: 5,451 - 2025: 5,239 - 2026: 6,628 - 2027: 7,662 - 2028: 8,877 - 2029: 10,091 - 2030: 11,160 - 2035: 22,424 - Real GDP (percent change): - 2024: 1/3.4 - 2025: -28.8 - 2026: 5.5 - 2027: 3.2 - 2028: 1.8 - 2029: -2.2 - 2030: 1.5 - 2035: 3.0 - GDP deflator (percent change): - 2024: 24.8 - 2025: 34.9 - 2026: 19.9 - 2027: 12.0 - 2035: 5.0 - Consumer prices (period average): - 2024: 9.4 - 2025: 20.2 - 2026: 12.9 - 2027: 6.5 - 2035: 5.0 - Unemployment rate (ILO definition; period average, percent): - 2024: 9.9 - 2025: 24.5 - 2026: 19.1 - 2027: 13.1 - 2028: 11.6 - 2030: 10.0 - 2035: 8.5 - Nominal wages (average): - 2024: 20.9 - 2025: 6.0 - 2026: 17.4 - 2027: 23.2 - 2035: 8.1 - Real wages (average): - 2024: 10.5 - 2025: -11.8 - 2026: 4.0 - 2027: 15.7 - 2035: 3.0 - Savings (percent of GDP): - 2024: 11.7 - 2025: 16.7 - 2026: 12.9 - 2027: 11.2 - 2029: 6.8 - 2035: 14.9 - Investment (percent of GDP): - 2024: 14.5 - 2025: 12.1 - 2026: 18.1 - 2027: 19.2 - 2035: 19.1 - General government fiscal balance (percent of GDP): - 2024: -4.0 - 2025: -15.6 - 2026: -19.3 - 2027: -17.2 - 2028: -23.3 - 2029: -21.7 - 2035: -0.6 - General government fiscal balance, excluding grants (percent of GDP): - 2024: -4.0 - 2025: -24.8 - 2026: -25.8 - 2027: -23.1 - 2028: -23.6 - 2030: -20.5 - 2035: -2.1 - External financing (net, percent of GDP): - 2024: 2.5 - 2025: 10.7 - 2026: 16.2 - 2027: 15.0 - 2028: 24.2 - 2029: 21.1 - 2035: -1.1 - Domestic financing (net), of which (percent of GDP): - 2024: 1.5 - 2025: 5.0 - 2026: 3.1 - 2027: 2.1 - 2028: -0.8 - 2029: -0.1 - 2035: -1.6 - Public and publicly-guaranteed debt (percent of GDP): - 2024: 48.9 - 2025: 77.7 - 2026: 81.2 - 2027: 89.7 - 2028: 108.7 - 2029: 126.7 - 2035: 108.9 - Base money (end of period, percent change): - 2024: 11.2 - 2025: 19.6 - 2026: 23.3 - 2027: 7.7 - 2035: 8.1 - Broad money (end of period, percent change): - 2024: 12.0 - 2025: 20.8 - 2026: 23.0 - 2027: 13.4 - 2035: 8.2 - Credit to nongovernment (end of period, percent change): - 2024: 8.4 - 2025: -3.1 - 2026: -0.5 - 2027: 13.5 - 2028: 22.5 - 2035: 17.6 - Current account balance (percent of GDP): - 2024: -2.7 - 2025: 4.6 - 2026: -5.2 - 2027: -8.0 - 2028: -15.0 - 2029: -22.8 - 2035: -4.2 - Foreign direct investment (percent of GDP): - 2024: 3.7 - 2025: 0.1 - 2026: 2.5 - 2027: 2.0 - 2035: 5.3 - Gross reserves (end of period, billions of U.S. dollars): - 2024: 30.9 - 2025: 28.5 - 2026: 40.5 - 2027: 43.8 - 2028: 57.3 - 2029: 60.3 - 2035: 6.2 - Months of next year's imports of goods and services: - 2024: 4.4 - 2025: 3.8 - 2026: 5.1 - 2027: 4.7 - 2035: 6.1 - Goods exports (annual volume change in percent): - 2024: 38.7 - 2025: -43.5 - 2026: -8.4 - 2027: 16.8 - 2029: 10.9 - 2035: 7.0 - Goods imports (annual volume change in percent): - 2024: 15.2 - 2025: -29.8 - 2026: 18.2 - 2027: 6.5 - 2029: 12.5 - 2035: 5.5 - Exchange rate (Hryvnia per U.S. dollar, end of period): - 2024: 27.3 - 2025: 36.6 - 2026: 38.0 - 2027: 42.0 - 2028: 42.4 ### Selected public finance details (Downside Scenario, billions of Ukrainian Hryvnia and percent of GDP) - Revenue (billions of Ukrainian Hryvnia): - 2024: 1,990 - 2025: 2,609 - 2026: 3,583 - 2027: 4,140 - 2028: 4,547 - 2029: 4,384 - 2035: 9,603 - Tax revenue (billions of Ukrainian Hryvnia): - 2024: 1,825 - 2025: 1,782 - 2026: 2,139 - 2027: 2,658 - 2028: 3,250 - 2029: 3,906 - 2035: 8,769 - Budget support grants (billions of Ukrainian Hryvnia): - 2024: 148 - 2025: 142 - 2026: 545 - 2027: 428 - 2035: 342 - Expenditure (billions of Ukrainian Hryvnia): - 2024: 2,207 - 2025: 3,426 - 2026: 4,865 - 2027: 5,458 - 2028: 6,617 - 2029: 6,573 - 2035: 9,738 - General government overall balance (billions of Ukrainian Hryvnia): - 2024: -216 - 2025: -817 - 2026: -1,282 - 2027: -1,318 - 2028: -2,070 - 2029: -2,189 - 2035: -135 - Public and publicly-guaranteed debt (billions of Ukrainian Hryvnia): - 2024: 2,666 - 2025: 4,072 - 2026: 5,383 - 2027: 6,871 - 2028: 9,653 - 2029: 12,789 - 2035: 24,430 ### Balance of payments and external financing (select highlights) - Current account balance (billions of U.S. dollars, select years): - 2024: -5.5 - 2025: 7.3 - 2026: -9.3 - 2027: -15.2 - 2028: -31.9 - 2029: -51.0 - 2035: -14.4 - Financial account balance (billions of U.S. dollars): - 2024: -6.2 - 2025: 8.4 - 2026: -21.7 - 2027: -13.8 - 2028: -40.9 - 2029: -52.6 - 2035: -17.6 - Gross international reserves (USD billions): - 2024: 30.9 - 2025: 28.5 - 2026: 40.5 - 2027: 43.8 - 2028: 57.3 - 2029: 60.3 - 2035: 6.2 - Gross external financing requirements (A. Total financing requirements, billions of U.S. dollars): - 2024: 21.6 - 2025: 33.0 - 2026: 38.9 - 2027: 53.1 - 2028: 55.6 - 2029: 61.9 - 2035: 33.6 - Financing needs (A - B, billions of U.S. dollars): - 2024: 1.3 - 2025: 32.3 - 2026: 29.3 - 2027: 36.8 - 2028: 41.5 - 2029: 48.0 - 2035: 5.9 - Official financing (D, billions of U.S. dollars): - 2024: 1.1 - 2025: 29.8 - 2026: 40.1 - 2027: 39.6 - 2028: 50.1 - 2029: 49.3 - 2035: 9.2 ### Monetary accounts (select end-of-period stock and changes; billions of Ukrainian Hryvnia) - Broad money (end of period): - 2024: 2,071 - 2025: 2,501 - 2026: 3,077 - 2027: 3,488 - 2028: 3,931 - 2029: 4,459 - 2035: 10,064 - Base money (end of period): - 2024: 662 - 2025: 793 - 2026: 977 - 2027: 1,052 - 2028: 1,175 - 2029: 1,395 - 2035: 3,222 - Credit to the economy (end of period): - 2024: 1,023 - 2025: 991 - 2026: 986 - 2027: 1,119 - 2028: 1,371 - 2029: 1,576 - 2035: 5,666 ### Capacity to repay the Fund (select metrics, Downside Scenario projections) - Stock of existing and prospective Fund credit (end of period, in millions of SDR): - 2026: 11,523 - 2027: 11,898 - 2028: 11,950 - 2029: 11,837 - 2030: 10,367 - 2035: 1,749 - Stock in percent of quota: - 2026: 573 - 2027: 591 - 2028: 594 - 2029: 588 - 2030: 515 - 2035: 87 - Stock in percent of GDP: - 2026: 7.0 - 2027: 7.1 - 2028: 7.0 - 2029: 6.7 - 2030: 5.5 - 2035: 0.7 - Obligations to the Fund from existing and prospective Fund credit (in millions of SDR): - 2026: 2,079 - 2027: 1,523 - 2028: 1,245 - 2029: 1,910 - 2030: 2,071 - 2035: 1,211 *Sources: Ukrainian authorities; National Bank of Ukraine; Ministry of Finance; World Bank, World Development Indicators; and IMF staff estimates and projections.* ### Annex VI. Policies to Strengthen NSSMC Governance ### Annex VI. Policies to Strengthen NSSMC Governance ### Institutional role and current situation - The National Securities and Stock Market Commission (NSSMC) performs regulation and oversight of activities in capital markets and organized commodity markets. - NSSMC is a collegial body subordinated to the President of Ukraine, is accountable to parliament, and consists of (i) the NSSMC Commission as a collegial body; and (ii) an executive office. - The NSSMC commission consists of the Chairman and seven Commissioners, all of whom are appointed by the President of Ukraine for six years and until January 2026 dismissed in accordance with his decrees. - As of January 2026: - the Chair has been replaced, - two Commissioners’ positions are vacant, - the resignation of one Commissioner is pending, - another Commissioner’s term in office has expired, - potentially making the Commission unable to function as quorum limits are now reached. ### Organizational challenges and capacity needs - Aligning Ukraine with the EU acquis and preparing financial markets for reconstruction presents organizational challenges for NSSMC. - NSSMC needs to draft and update a considerable volume of financial markets regulation and will require significant changes to the NSSMC organization to implement EU-aligned reforms and Financial Market Infrastructure roadmap post-war. - NSSMC needs to enhance its processes and staff capacity to meet 2026 objectives and key results and to support domestic and international investment. ### Governance weaknesses identified - Governance weaknesses stem from the organizational setup: - the executive office exclusively reports to the Chair, restricting Commissioners’ influence on key operational decisions impacting their portfolios; - shortcomings in the implementation of collegial decision-making; - the Commission is not supported by a supervisory board to help set priorities and ensure good governance. - Other financial sector regulators, including NBU and DGF, have a two-tier board structure. ### Reform proposal: Two-tier governance - Under the program, a two-tier NSSMC governance structure will be introduced with a part-time majority-independent supervisory board as the governing body. - The supervisory board would: - supervise the activities of the Commission, - act as a sounding board on the (medium-term) strategy, - be responsible for safeguarding governance arrangements, - oversee key decisions involving NSSMC’s structure, transparency and integrity. - The design of the SOB independent supervisory boards broadly offers a good implementation template, though roles and responsibilities must be tailored in consultation with IFIs. - Main benefits of a two-tier system include: - Enhanced Independence and Accountability: separation of roles between supervisory body and executive board ensures independence from political and commercial influences. - Improved Decision-Making: non-executive members provide diverse perspectives and can challenge executive proposals. - Clearer Roles and Responsibilities: reduces conflicts of interest and allows focus on specific functions. - Enhanced Transparency and Integrity: supervisory body ensures adherence to established policies and procedures. - Flexibility and Adaptability: supervisory body provides strategic guidance while the executive board responds to operational issues. ### Implementation steps - Establishing the new governance structure will involve: - Designing the new governance structure in consultation with IFIs and approving it; - Preparing the requisite changes to the NSSMC law and adopting the amendments (¶30); - Implementing the 2-tier Board structure, adjusting internal policies; - Selecting and appointing the supervisory body. ### Legal alignment with constitutional responsibilities - Legal reforms implementing a two-tier Board should ensure government responsibilities regarding NSSMC align with the constitution. - Currently, Article 6 of the Law on Regulation of Capital Markets and Organized Commodity Markets places NSSMC directly under the President as a state collegial body, unlike other regulatory agencies (executive authorities) which report to the Cabinet of Ministers (CMU) through the relevant Minister. - This structure may conflict with the constitution, which appoints responsibility for executive authorities to the CMU; the CMU has established procedures for agency oversight and is better positioned to oversee NSSMC. *Source: Annex VI. Policies to Strengthen NSSMC Governance (extracted from the provided IMF content).* ### Annex VII. Sovereign Risk and Debt Sustainability Analysis (SRDSA) — Summary ### Purpose and scope of the update - This annex updates the Sovereign Risk and Debt Sustainability Analysis (SRDSA) for Ukraine to reflect developments since June 2025. - Continues to be based on a baseline scenario, complemented by a downside scenario. - Following the 2023–26 program convention, only agreed debt restructurings are incorporated; other claims in the authorities’ restructuring perimeter maintain pre-restructuring terms. - The analysis continues to show further steps are needed to restore debt sustainability: (i) completing the remainder of the authorities’ restructuring strategy with sufficiently deep debt treatments; (ii) fiscal adjustment; and (iii) financing on sufficiently concessional terms during and after the new program. ### Key updates to macro and financing assumptions - Macroeconomic outlook revisions: - The new baseline (i) reflects the 2026 Budget which assumes a longer war and hence considerable additional defense spending needs and (ii) incorporates the authorities’ assumption of higher defense spending throughout the medium term. - Financing assumptions (baseline changes relative to the 8th Review SRDSA): - Total official external financing now amounts to US$133.7 billion over 2026–29, including: - US$11.9 billion in ERA disbursements, - US$113 billion in bilateral loans (including USL) and grants, - US$8.4 billion in multilateral financing. - Post-program financing is assumed to come largely in the form of EU MFA financing from the 2028–34 EU Budget. - Baseline envisages a return to market access only in 2029, with lower disbursements than previously assumed. - Downside assumes Ukraine is excluded from market access throughout the projection period. ### Debt perimeter, contingent liabilities, and treatment of ERA - Debt perimeter adjustments: - Three debts with Russia, on which the Ukrainian authorities continue representing a dispute, are excluded from this DSA’s debt stock, but remain contingent liability risks. - The 2024 US budget support not yet cancelled under the Ukraine Security Supplemental Appropriations Act continues to be treated as a contingent liability. - DSA’s debt stock includes US$1 billion of ERA financing through the FORTIS FIF in December 2024, consistent with treating ERA financing as loans on terms similar to the EU’s MFA. - Fiscal projections include materialized fiscal risks: bank recapitalization costs, payments of pension-related court judgements, and compensation to state-owned enterprises for energy-related quasi-fiscal activities during the war. ### Debt and GFN trajectories (pre-restructuring terms) - This SRDSA reflects end-December 2024 public debt and 2024 GDP outturn, which amounts to around 89.7 percent of GDP. - Under the baseline (absent further debt treatments): - Debt would increase, peaking at 137.1 percent of GDP in 2027 and remaining elevated thereafter, declining only to 97.1 percent of GDP by 2035. - Average gross financing needs (GFN) in 2030-35 at 7.2 percent of GDP. - Under the downside: - Debt would peak at 152.1 percent of GDP in 2028 and decline to 108.9 percent of GDP by 2035. - Average GFN of 9.7 in 2030–35. ### Derivation of the DSA's debt stock (as presented) - Public debt at end-2024, authorities' debt statisitcs6,98116691.2 - Less: disputed claims15242.0 - Add: ERA disbursed at end-20244210.5 - Public debt in the DSA6,87116389.7 - Memo: Public debt in the DSA, ex. ERA6,82916289.2 ### Staff assessment and risk classification - Staff assesses debt remains unsustainable in the pre-restructuring baseline and downside scenarios, and that risks are high. - Medium-term tools indicate risks at high levels; overall risk metrics are very high, consistent with an assessment of unsustainable debt in the absence of debt restructuring. - Long-term risks: if successful debt restructuring delivers targets consistent with a return to debt sustainability, debt would remain in sustainable ranges; nevertheless, staff continues to assess long-term risks as high given high uncertainty and risks from refinancing concessional debt on less favorable terms. ### Conditions to restore debt sustainability - Restoration depends on three conditions: - fiscal adjustment; - substantial concessional financing; - debt restructuring. - Staff’s forward-looking assessment that debt is sustainable requires: - (i) an agreement on macroeconomic policies in line with the proposed new program; - (ii) specific and credible assurances from donors to provide concessional financing; - (iii) credible and specific assurances from bilateral creditors, and a credible process to restructure private debt as needed. ### Reassessment of sustainability targets under the new program - ERA financing is treated as neutral for the assessment of the DSA targets; the USL is also neutral for the assessment of DSA targets. - New debt restructuring targets: - Public debt (excluding ERA and USL) should reach 68 percent of GDP by 2035. - Gross financing needs should average no more than 7.0 percent of GDP in the post-program period (2030–35). - Debt service payments to external creditors (excluding multilateral institutions) should not exceed US$1 billion per year in 2026-28. ### Forward-looking assessment under baseline and downside - In light of financing assurances, assurances from official creditors, and the authorities’ ongoing efforts to restructure commercial claims, debt is assessed as sustainable on a forward-looking basis contingent on: - official bilateral creditors providing a debt standstill for the EHU period (including for debt disbursed after end-August 2022), - completion of restructuring of remaining unrestructured commercial claims in 2026 on terms comparable with the 2024 Eurobond treatment. - Under the baseline macroeconomic and financing assumptions, these steps together would be sufficient to reduce debt and GFN below the respective targets. - In the downside, additional measures would continue to be needed; official creditors have provided assurances of additional debt relief under the downside, and the authorities remain committed to a potential second restructuring of commercial claims if downside risks materialize. ### Overall risk judgment - The overall risk of sovereign stress continues to be high in the baseline scenario, and vulnerability is amplified in the downside scenario, reflecting high vulnerabilities in the medium-term horizon. - Ukraine's debt continues to be assessed as unsustainable pending full implementation of the authorities' debt restructuring strategy. - Debt sustainability on a forward-looking basis is contingent on treatment of remaining external commercial claims following the 2024-25 commercial debt restructurings, strong policy commitments, financing assurances, and specific and credible assurances of debt relief that achieve: - GFNs that average 7 percent of GDP over 2030-35 and - public debt of 68 percent of GDP by 2035 (in a post-restructuring scenario and excluding ERA and comparable financing). *Source: Annex VII. Sovereign Risk and Debt Sustainability Analysis (extracted from the provided IMF content).* ### 1. Debt coverage in the DSA: 1/CGGG ### 1. Debt coverage in the DSA: 1/CGGG ### Coverage scope and exclusions - The coverage of the DSA includes: - central government direct debt; - domestic and external government-guaranteed debt (loans and bonds) extended to state-owned enterprises (SOEs); - debt of local governments; - Ukraine's liabilities to the IMF that are not included in central government direct debt. - The DSA does not include: - non-guaranteed domestic and external liabilities of SOEs; - disputed debts. - Data concerning debt consolidation across sectors are not available (Data unavailable; color code indicates chosen coverage █ Missing from recommended coverage █). ### Subsectors included in the chosen coverage - Subsections captured in the baseline (Inclusion): - 1 Budgetary central government: Yes - 2 Extra budgetary funds (EBFs): No - 3 Social security funds (SSFs): Yes - 4 State governments: Yes - 5 Local governments: Yes - 6 Public nonfinancial corporations: Yes - 7 Central bank: Yes - 8 Other public financial corporations: Yes ### Instrument coverage, accounting principles, and valuation notes - Basis/valuation notes provided: - Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. - IPSGSs refer to Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities. - Recording bases mentioned include accrual recording, commitment basis, due for payment, etc. - Nominal value definition: the amount the debtor owes to the creditor at any moment in time; 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). - Face value definition: the undiscounted amount of principal to be paid at (or before) maturity. - Market value: value as if acquired in market transactions on the balance sheet reporting date; only traded debt securities have observed market values. - Reporting on intra-government debt holdings: table headings list sectors (Budgetary central govt, Extra-budget funds, Social security funds, State govt., Local govt., Nonfin. pub. corp., Central bank, Oth. pub. fin corp) but specific consolidated holder/issuer numeric cells are shown as zeros (e.g., Budget. central govt 0, Extra-budget. funds 0, etc.), and Total rows display sequences of zeros (Total 0000, 00000). ### Public debt levels and projections (Baseline scenario, pre-restructuring) - Public debt (Percent of GDP) — Est. 2024 and projections: - 2024: 89.7 - 2025: 108.7 - 2026: 122.6 - 2027: 137.1 - 2028: 135.5 - 2029: 131.9 - 2030: 125.7 - 2031: 119.6 - 2032: 113.5 - 2033: 107.9 - 2034: 102.3 - 2035: 97.1 - Change in public debt (Percent of GDP) — single-year change for the first listed year: - 2024: 8.5 (implied change) - 2025: 19.1 - 2026: 13.8 - 2027: 14.5 - 2028: -1.6 - 2029: -3.6 - 2030: -6.2 - 2031: -6.1 - 2032: -6.1 - 2033: -5.6 - 2034: -5.6 - 2035: -5.1 - Contribution of identified flows to debt change (Percent of GDP): - 2024: 14.2 - 2025: 19.4 - 2026: 13.5 - 2027: 15.2 - 2028: -2.5 - 2029: -5.1 - 2030: -5.6 - 2031: -5.8 - 2032: -5.6 - 2033: -5.4 - 2034: -5.1 - 2035: -4.9 - Primary deficit (Percent of GDP): - 2024: 13.2 - 2025: 19.3 - 2026: 13.3 - 2027: 14.1 - 2028: 3.5 - 2029: -0.9 - 2030: -1.4 - 2031: -1.8 - 2032: -1.8 - 2033: -1.7 - 2034: -1.7 - 2035: -1.6 - Noninterest revenues (Percent of GDP): - 2024: 54.0 - 2025: 51.2 - 2026: 43.8 - 2027: 41.7 - 2028: 44.9 - 2029: 43.8 - 2030: 42.8 - 2031: 42.7 - 2032: 42.6 - 2033: 42.5 - 2034: 42.4 - 2035: 42.3 - Noninterest expenditures (Percent of GDP): - 2024: 67.3 - 2025: 70.5 - 2026: 57.1 - 2027: 55.8 - 2028: 48.4 - 2029: 43.0 - 2030: 41.5 - 2031: 40.9 - 2032: 40.8 - 2033: 40.8 - 2034: 40.7 - 2035: 40.7 - Automatic debt dynamics (Percent of GDP): - 2024: -0.7 - 2025: -1.8 - 2026: -0.4 - 2027: -3.5 - 2028: -4.6 - 2029: -4.1 - 2030: -4.2 - 2031: -4.0 - 2032: -3.8 - 2033: -3.6 - 2034: -3.4 - 2035: -3.3 - Real interest rate and relative inflation (Percent): - 2024: 1.6 - 2025: -0.2 - 2026: 1.7 - 2027: 0.7 - 2028: 1.0 - 2029: 1.0 - 2030: 0.5 - 2031: 0.4 - 2032: 0.3 - 2033: 0.2 - 2034: 0.2 - 2035: 0.2 - Real interest rate (Percent): - 2024: -3.1 - 2025: -6.6 - 2026: -4.9 - 2027: -5.7 - 2028: -4.1 - 2029: -2.4 - 2030: -2.7 - 2031: -2.7 - 2032: -2.6 - 2033: -2.6 - 2034: -2.4 - 2035: -2.3 - Relative inflation (Percent): - 2024: 4.7 - 2025: 6.4 - 2026: 6.6 - 2027: 6.3 - 2028: 5.0 - 2029: 3.4 - 2030: 3.2 - 2031: 3.0 - 2032: 2.9 - 2033: 2.8 - 2034: 2.7 - 2035: 2.5 - Real growth rate (Percent) — selected entries: - 2024: -2.6 - 2025: -1.6 - 2026: -2.1 - 2027: -4.1 - 2028: -5.5 - 2029: -5.1 - 2030: -4.7 - 2031: -4.4 (notation shows "a.-4.4") - 2032: -4.0 - 2033: -3.8 - 2034: -3.6 - 2035: -3.5 - Other identified flows (Percent of GDP): - 2024: 1.7 - 2025: 1.9 - 2026: 0.7 - 2027: 4.6 - 2028: -1.4 - 2029: 0.0 - 2030–2035: 0.0 (repeated) - Contingent liabilities and other transactions (Percent of GDP): - 2024: 0.0 - 2025: 0.3 - 2026: 0.0 - 2027: 4.2 - 2028–2035: 0.0 - Contribution of residual (Percent of GDP): - 2024: -5.7 - 2025: -0.3 - 2026: 0.3 - 2027: -0.7 - 2028: 0.8 - 2029: 1.5 - 2030: -0.6 - 2031: -0.3 - 2032: -0.5 - 2033: -0.2 - 2034: -0.5 - 2035: -0.2 - Gross financing needs (Percent of GDP): - 2024: 25.1 - 2025: 30.2 - 2026: 24.7 - 2027: 29.3 - 2028: 12.5 - 2029: 10.8 - 2030: 9.1 - 2031: 8.1 - 2032: 7.6 - 2033: 5.7 - 2034: 6.5 - 2035: 6.2 - Of which: debt service (Percent of GDP): - 2024: 11.9 - 2025: 10.6 - 2026: 11.5 - 2027: 11.0 - 2028: 8.9 - 2029: 11.7 - 2030: 10.5 - 2031: 9.9 - 2032: 9.4 - 2033: 7.5 - 2034: 8.2 - 2035: 7.8 - Local currency debt service (Percent of GDP): - 2024: 5.9 - 2025: 6.5 - 2026: 7.2 - 2027: 7.1 - 2028: 5.0 - 2029: 6.8 - 2030: 5.6 - 2031: 5.6 - 2032: 5.7 - 2033: 4.5 - 2034: 3.7 - 2035: 3.1 - Foreign currency debt service (Percent of GDP): - 2024: 5.9 - 2025: 4.1 - 2026: 4.3 - 2027: 3.9 - 2028: 4.0 - 2029: 4.9 - 2030: 4.9 - 2031: 4.4 - 2032: 3.7 - 2033: 3.0 - 2034: 4.6 - 2035: 4.6 - Memo macro variables (selected): - Real GDP growth (percent): 3.2, 1.8, 2.0, 3.5, 4.2, 3.9, 3.7, 3.6, 3.5, 3.5, 3.5 (years correspond to early projection years) - Inflation (GDP deflator; percent): 12.0, 13.8, 10.5, 8.5, 6.5, 5.0, 5.0, 5.0, 5.0, 5.0, 5.0 - Nominal GDP growth (percent): 15.6, 15.8, 12.7, 12.3, 11.0, 9.1, 8.9, 8.8, 8.7, 8.7, 8.7 - Effective interest rate (percent): 7.6, 5.2, 5.4, 3.3, 3.2, 3.0, 2.8, 2.7, 2.6, 2.6, 2.6, 2.5 ### Analytical narrative (Baseline) - Ukraine's public debt continued to rise in 2025 and further increases are expected through 2027, given large deficits in 2026 and assuming materialization of contingent liabilities in 2027. - After the war winds down, an expected recovery arising from improving macroeconomic conditions and confidence will lead to a downward trajectory over the forecast horizon. - The downtrend reflects contributions from both the real interest rate-growth differential and a better primary balance, including through fiscal adjustment. - Debt service projections reflect the 2022 standstill with a group of official bilateral creditors. - Projections also reflect the impact of commercial debt restructurings in 2024-25. ### Downside scenario projections (pre-restructuring) - Public debt (Percent of GDP) — Est. 2024 and projections under downside scenario: - 2024: 89.7 - 2025: 108.7 - 2026: 126.7 - 2027: 144.0 - 2028: 152.1 - 2029: 151.5 - 2030: 142.1 - 2031: 134.1 - 2032: 126.3 - 2033: 120.3 - 2034: 114.5 - 2035: 108.9 - Change in public debt (Percent of GDP) under downside: - 2024: 8.5 - 2025: 19.1 - 2026: 18.0 - 2027: 17.2 - 2028: 8.2 - 2029: -0.6 - 2030: -9.4 - 2031: -8.0 - 2032: -7.8 - 2033: -5.9 - 2034: -5.8 - 2035: -5.5 - Contribution of identified flows (Percent of GDP) — downside: - 2024: 14.2 - 2025: 19.4 - 2026: 17.1 - 2027: 16.2 - 2028: 7.1 - 2029: 0.1 - 2030: -7.6 - 2031: -7.7 - 2032: -7.3 - 2033: -5.7 - 2034: -5.4 - 2035: -5.3 - Primary deficit (Percent of GDP) — downside: - 2024: 13.2 - 2025: 19.3 - 2026: 17.1 - 2027: 16.3 - 2028: 8.9 - 2029: 0.9 - 2030: -2.6 - 2031: -3.5 - 2032: -3.3 - 2033: -2.0 - 2034: -1.9 - 2035: -1.9 - Gross financing needs (Percent of GDP) — downside: - 2024: 25.1 - 2025: 30.2 - 2026: 28.3 - 2027: 28.6 - 2028: 20.0 - 2029: 19.2 - 2030: 12.5 - 2031: 10.1 - 2032: 9.4 - 2033: 8.7 - 2034: 9.3 - 2035: 8.4 - Of which: debt service (Percent of GDP) — downside: - 2024: 11.9 - 2025: 10.6 - 2026: 11.2 - 2027: 12.2 - 2028: 11.2 - 2029: 14.8 - 2030: 15.2 - 2031: 13.5 - 2032: 12.7 - 2033: 10.7 - 2034: 11.2 - 2035: 10.3 - Memo downside macro variables (selected): - Real GDP growth (percent): 3.2, 1.8, 1.5, 1.0, 0.5, 3.4, 3.9, 3.6, 3.4, 3.2, 3.1, 3.0 - Inflation (GDP deflator; percent): 12.0, 13.8, 12.0, 9.5, 9.0, 7.5, 6.0, 5.0, 5.0, 5.0, 5.0, 5.0 - Nominal GDP growth (percent): 15.6, 15.8, 13.7, 10.6, 9.5, 11.2, 10.1, 8.8, 8.6, 8.4, 8.3, 8.2 - Effective interest rate (percent): 7.6, 5.2, 4.9, 3.6, 3.1, 3.2, 3.2, 3.0, 2.8, 2.7, 2.6, 2.3 ### Medium-term risk assessment (baseline and downside) - Baseline scenario (pre-restructuring) risk metrics: - Debt fanchart module: Fanchart width 173.2 (percent of GDP) - Probability of debt non-stabilization (percent): 17.6 - Terminal debt-to-GDP x: 83.4 1.8 (format in table shows "83.41.8") - Debt fanchart index (DFI): 4.5 (High) - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 19.4 6.6 (table shows "19.46.6") - Banks' claims on the gen. govt (pct bank assets): 26.6 8.6 (table shows "26.68.6") - Change in banks' claims in stress (pct banks' assets): 42.9 14.3 (table shows "42.914.3") - GFN financeability index (GFI): 29.6 (High) - Medium-term index: Risk signal: 5/High; Final assessment: High - Prob. of missed crisis, 2025-2030, if stress not predicted: 90.9 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 0.0 pct. - Downside scenario (pre-restructuring) risk metrics: - Debt fanchart module: Fanchart width 188.4 (percent of GDP) - Probability of debt non-stabilization (percent): 13.1 0.1 (table shows "13.10.1") - Terminal debt-to-GDP x: 94.4 2.1 (table shows "94.42.1") - Debt fanchart index (DFI): 4.9 (High) - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 23.1 7.9 (table shows "23.17.9") - Banks' claims on the gen. govt (pct bank assets): 26.6 8.6 (table shows "26.68.6") - Change in banks' claims in stress (pct banks' assets): 65.5 21.9 (table shows "65.521.9") - GFN financeability index (GFI): 38.4 (High) - Medium-term index: Risk signal: 5/High; Final assessment: High - Prob. of missed crisis, 2025-2030, if stress not predicted: 100.0 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 0.0 pct. - Narrative conclusions: - Both medium-term modules signal high sovereign stress risks in the baseline and downside scenarios. - The DFI remains deeply in high-risk territory in both scenarios. - The GFI indicates high liquidity-related risks, reflecting elevated average GFN-to-GDP ratios and large changes in bank claims on the government in a stress scenario. - The current level of bank exposures reflects the published end-December 2024 value. - Overall, the medium-term index is consistent with high risk in line with mechanical signals from both tools. ### Realism of assumptions and forecast track record - Forecast track record and realism notes: - The forecast track record continues to point to persistent optimism for the debt-to-GDP; stock-flow adjustment indicators flag upward surprises in the medium-term horizon. - The scale of the war shock and uncertainties about its duration suggest caution in assessing realism of baseline forecasts based on backward-looking tools. - The primary deficit and the real interest rate/relative inflation will exert upward pressure on debt ratios. - Substantial long-term official financing drives the maturity structure and interest rate assumptions. - The realism of the three-year fiscal adjustment critically depends on the duration of the war and the speed at which deficits can be reversed. - Ukraine has previously achieved a relatively large fiscal adjustment, although this will face considerable headwinds from a slow recovery. - Assumptions on multipliers are uncertain amid a deep structural break. - The output gap is assumed to close gradually. - Comparator group and methodological footnotes: - Comparator group: Emerging Markets, Non-Commodity Exporter, Program. - Projections made in the October and April WEO vintage per footnote. - Laubach (2009) rule referenced for implied spread: bond spreads increase about 4 bps per 1 ppt increase in projected debt-to-GDP ratio. *Source: IMF staff estimates and projections (excerpted tables and text from the DSA chapter).* ### Appendix I. Letter of Intent ### Appendix I. Letter of Intent ### Program request and financing - Request for a new 48-month Extended Fund Facility (EFF) from the IMF equivalent to SDR5,935.3 million (295 percent of quota, about US$8.1 billion). - Initial purchase requested: SDR1,106.5 million (55 percent of quota; about US$1.5 billion). - Approval of the IMF arrangement, together with significant official financing assurances, would provide a financing envelope of US$136.5 billion in the baseline over the program period. - The 2023 EFF previously provided a financing envelope of US$85.5 billion over eight reviews through June 2025. - Decision to cancel the existing EFF arrangement, effective as of the date of the letter. - For each purchase intended for budget support, a special agreement between the National Bank of Ukraine and the Ministry of Finance will be signed to clarify responsibilities for timely servicing obligations to the Fund. ### Program goals, scope, and anchors - Ultimate goals: restore fiscal and debt sustainability, restore external viability, and promote long-term growth in the context of post-war reconstruction and EU accession. - Program anchors: - Maintain external and financial stability. - Restore medium-term external viability in both baseline and downside scenarios. - Preserve macroeconomic and financial stability while pursuing durable structural reforms. - Structural reform priorities: - Mobilizing domestic revenue and reforms to VAT and CIT. - De-shadowing the economy and leveling the playing field. - Combatting corruption and safeguarding independence of anti-corruption institutions. - Improving SOE corporate governance and transparency. - Progressing towards energy sector liberalization. - Positioning the financial sector to mobilize resources for post-war reconstruction. - Strengthening public investment management and enhancing fiscal transparency. - Commitment to consult the IMF in advance of any revisions to policies in the MEFP and to adhere to IMF consultation policies. ### Program monitoring, conditionality, and reviews - Program monitoring through quarterly reviews at least until exceptional uncertainty ends, based on prior actions, quantitative performance criteria, indicative targets, and structural benchmarks as described in the MEFP and TMU. - Nine reviews over the arrangement: - First review to be completed on or after June 1, 2026. - Second review to be completed on or after September 1, 2026. - Continuous performance criteria include: - Not introducing or intensifying any exchange restrictions. - Not introducing or intensifying import restrictions for BoP reasons. - Not introducing or modifying multiple currency practices. - Not concluding bilateral payment agreements in violation of Article VIII of the Articles of Agreement. - Commitment to provide IMF staff with the data and information needed to monitor program implementation, adhering to the TMU data provision requirements. - Consent to IMF publication of this letter, the MEFP, the TMU, and accompanying Executive Board documents. ### Recent developments and key macroeconomic indicators - Context: Russia’s invasion approaching its fifth year; civilian casualties rising; over a third of the population displaced; infrastructure damage, including to gas and electricity; drone launches were five times higher in 2025 relative to the previous year; strikes on gas and electricity infrastructure intensified in October 2025. - Macroeconomic performance and outlook: - Real GDP growth: estimated at 1.8–2.2 percent in 2025, down from 3.2 percent in the previous year. - Projected growth for 2026: 1.8–2.5 percent. - Inflation: trending down since June 2025, reaching 8 percent (y/y) at end-December. - Current account deficit excluding grants: estimated at US$44.6 billion in 2025, up from US$26.4 billion in 2024; projected to remain broadly similar in 2026. - International reserves: US$57.3 billion by end-2025, projected to rise to US$65.5 billion in 2026. - Exchange rate movements: hryvnia-dollar exchange rate broadly stable over 2025; hryvnia depreciated more than 13½ percent against the euro over the period. - Banking and credit: credit to the economy likely to remain low; financial inclusion and deepening supported through subsidized lending programs including the 5-7 -9 program and the eOselya mortgage program; financial institutions report solid earnings, liquidity adequate, gross nonperforming loans still falling, loan default rates have approached pre-war levels. ### Risks, scenarios, and contingent policy responses - Upside scenario drivers: - Rapid improvement in security, high return migration, rapid energy repairs, recovery in sentiment, restoration of supply routes. - Forceful implementation of structural reforms, particularly EU integration and energy sector reforms. - Significant investments—private or official—in macro-critical sectors. - Downside risks (exceptionally high uncertainty): - More damaging or frequent attacks, especially on energy infrastructure or export transit routes. - Wider fiscal and current account deficits, re-ignited inflation, increased balance-of-payments pressures, and weaker international reserve accumulation. - Long-term risk if war concludes without credible security guarantees and/or adequate reconstruction resources: weaker recovery, lower investment, persistent labor market mismatches, higher macroeconomic volatility, weaker medium-term potential growth. - Contingent policy responses if downside materializes: - Identify additional revenue-enhancing measures (e.g., raising the main VAT rate). - Implement expenditure savings through efficiency gains or tighter reprioritization. - Increase issuance on the domestic government bond market to finance deficits not met by concessional external financing. - Deploy foreign reserves, adjust monetary policy stance, and recalibrate FX controls as needed. ### Policy framework for 2026–29 (overview) - Fiscal policy: - Robust budget policies for 2026 anchored in a strong medium-term budget framework and the upcoming Budget Declaration for 2027–30 to guide fiscal policy and financing gap assessment. - Monetary and exchange rate policy: - Focused on maintaining price and external stability with managed exchange rate flexibility to absorb shocks, reduce external imbalances, and sustain adequate reserves. - Key policy rate remains tight to anchor inflation expectations. - Cautious approach to further FX liberalization, guided by a conditions-based roadmap. - Structural reform acceleration: - Shift focus toward expansive structural reforms to entrench macro stability and accelerate reconstruction. - Reforms aimed at catalyzing investment, supporting inward migration, rebuilding human capital, fostering an enabling business environment, deshadowing the economy, privatization of state-dominated sectors, and financial sector reform. - EU accession process viewed as a major anchor shaping regulatory regime and recovery/reconstruction. *Letter of Intent dated February 13, 2026, signed by Volodymyr Zelenskyy, Yulia Svyrydenko, Sergii Marchenko, and Andriy Pyshnyy.* ### 11. We will ensure that fiscal policy under the program contributes to and achieves the ### 11. We will ensure that fiscal policy under the program contributes to and achieves the restoration of fiscal and debt sustainability ### Fiscal stance and targets - Medium-term primary balance excluding grants consistent with restoring sustainability: 0.2–0.4 percent of GDP. - Tax-to-GDP ratio expected to be above 37.5 percent of GDP each year over the medium term to support the medium-term fiscal path. - Legislation to remove the sunset date of the 5 percent military levy (adopted in 2024) will be enacted to ensure resources for post-war defense and reconstruction. - 2026 Budget parameters: - General government expenditures: UAH 6,228 billion (62.2 percent of GDP), with defense receiving the largest allocation. - Contingency reserve buffer increased to enhance resilience to expenditure shocks. - Limited additional non-defense expenditures amounting to around 1 percent of GDP. - Revenue projection: about 39 percent of GDP (underpinned by new tax revenue measures). - General government overall deficit excluding budget support grants (indicative target): UAH 1,927 billion (19.3 percent of GDP). - Fiscal performance metric under program: cash non-defense primary balance excluding grants (quantitative performance criterion). ### 2025 fiscal execution and risks - Revised general government overall deficit excluding grants (below-the-line): UAH 2,059 billion (23.2 percent of GDP). - Deficit financeability attributed to large-scale external support (including frontloaded support under the G7’s ERA initiative) and domestic debt issuance. - Domestic rollover rate for 2025: approximately 113 percent. - Domestic issuances in 2025 amounted to UAH138 billion. ### Expenditure policy and safeguards - Overarching priority: national defense; tight management of non-defense spending. - Budget preparation and consultation timeline: - By April: share first draft of the budget circular, assumptions, and a table showing state budget general fund expenditure ceilings for each key spending unit with IMF staff. - Consult IMF staff during preparation of the Budget Declaration ahead of Parliamentary submission in June. - Reassess procedures for forecasting core macroeconomic assumptions to align with IMF program assumptions; update macroeconomic frameworks as warranted. - Mitigating measures for expenditure shocks: - Revise spending categories only after consultation with IMF staff and identification of new financing or compensating fiscal measures. - Preparedness to increase taxes if shocks materialize; view increases in the main VAT rate as the most efficient contingency option. - Seek improved spending efficiency, including expenditure audits. - Avoid tax policy subsidies or measures that erode the tax base; refrain from introducing new categories of taxpayers into existing preferential regimes. - Public Investment Management (PIM) and financing: - All investment projects to be prioritized and selected through the established PIM framework, fit into the MTBF, and be consistent with restoring fiscal and debt sustainability. - Carefully evaluate financing mix and seek financing on highly concessional terms. - Advance financial market infrastructure reforms to mobilize private financing for recovery and reconstruction. ### Financing strategy - Identified financing gap over 2026–29: US$136.5 billion. - Firm financing commitments for next 12 months of the IMF-supported program: - Pledges over 2026Q1–2026Q4: US$47.6 billion in bilateral and multilateral budget support, including US$10.6 billion of remaining resources under the G7’s ERA initiative and support committed by the EU and other partners of US$36.9 billion. - Prospects from 2027Q1 onwards: partners have assured continued support for program financing. - Management of G7’s ERA disbursements: incorporate in budget; account in treasury reporting; disburse into the treasury single account; avoid earmarking or disbursements to other accounts without donor agreement. - Domestic government bond market role: - Essential source of budget finance; issuance calendar developed for 2026 consistent with the program. - Ready to step up issuances if expenditure shocks materialize to avoid arrears and monetary financing and maintain stability. - Benchmark bonds support banks meeting reserve requirements. ### Public debt and cash/liquidity management - Adopted Medium-Term Debt Strategy for 2026–28 covering debt structure, risk factors, debt management goals, and issuance strategy. - Strengthen debt management capacity via increased staffing and training. - Support development of the domestic debt market to maintain attractiveness of locally-issued instruments and diversify investors (including improving cross-border settlement). - Facilitate international capital market access in the medium term consistent with debt sustainability objectives to enable bond market role in reconstruction. ### Fiscal structural reforms and National Revenue Strategy (NRS) - Reform priorities to support sustainable growth and EU accession: - (i) raise revenues via the NRS to meet reconstruction and social spending needs while enhancing efficiency, fairness, and simplicity of the tax system; - (ii) strengthen the medium-term budget framework; - (iii) improve public investment and PFM frameworks; - (iv) reform and strengthen the pension system and social safety net; and - (v) enhance fiscal transparency and management of fiscal risks. - NRS implementation and reporting: - Publish a comprehensive status report each year in March to reflect reform progress and ensure accountability. ### Near-term tax reform measures (structural benchmarks and actions) - Parliament to adopt a package of tax measures (structural benchmark, end-March, 2026): - Taxing income earned through digital platforms. - Eliminating the tax exemption for imports through small-value postal packages. - Removing VAT exemptions from simplified regimes by making VAT registration mandatory, effective January 1, 2027, for simplified taxpayers with turnover exceeding the general VAT registration threshold. The threshold will be raised moderately but will not exceed UAH 4 million. - VAT strengthening: - Decree issued to level the playing field for VAT payers in competitive public procurement tenders (Prior Action); access of non-VAT payers to procurement system not restricted. - In 2026, with IMF-supported TA: (i) define approach to apply the IMF’s RA-gap methodology to Ukraine, and (ii) conduct a VAT policy analysis. - In 2027, conduct a quantitative analysis of the VAT gap using the Ukraine-specific approach, taking into account restrictions during Martial Law, if applicable. - Simplified Tax (ST) system reforms: - Prior Action: submit to Parliament legislation to amend the definition of “employment” in the Labor Code to reduce disguised employment; step up enforcement by the labor inspectorate; apply new employment rules to prevent tax evasion on personal income related to hidden employment. - In 2026: submit amendments to the Tax Code to exclude from the second group of Simplified Tax payers certain high-risk activities (e.g., IT services, consulting in accounting and audit, marketing, engineering, law) and introduce increased differentiated rates for such activities for the third group of taxpayers. - Digitalization and data integration (including new “obryi” system) to help address informal employment. - By end-2026, with IMF TA support: submit draft laws to limit company splitting to remain below preferential thresholds and to limit businesses returning to ST after transition to general taxation. ### Corporate income tax and anti-avoidance measures (structural benchmark timetable) - Submit to Parliament draft laws to amend the Tax Code (structural benchmark, end-June 2026) to: - Align transfer pricing rules with OECD standards, extend coverage to domestic transactions, and make compliance with the arm’s length principle mandatory for all businesses. - Implement requirements of the EU Anti-Tax Avoidance Directives (ATAD), currently partially implemented, namely Article 4 (interest limitation rule). - Abolish the tax exemption for income of foreign companies whose place of effective management is located in Ukraine. - By end-September 2026: - Develop and submit draft law to implement Article 5 (exit taxation), Article 6 (GAAR), and Articles 9, 9a, 9b (hybrid mismatches) of ATAD; establish restrictions on deducting expenses that lack a reasonable economic rationale (business purpose); eliminate legislative gaps affecting ATAD application. - Conduct assessment of adequacy and effectiveness of implemented ATAD rules, particularly Articles 7 and 8 (Controlled Foreign Company rule), identify shortcomings, and submit draft law to Parliament providing for implementation improvements. - By end-2026, in context of comprehensive reform of Joint Investment Institutions (JIIs): submit draft law to minimize direct and indirect tax revenue losses from the preferential taxation regime for JIIs and ensure neutral treatment of investments/investors. ### Additional tax policy work - Develop comprehensive post-war measures to reform taxation of carbon emissions. - Analyze and assess taxation of extractive industries. - Define principles of taxation of virtual assets aligned with EU rules and OECD Global Forum initiatives. - Quantify and disclose tax privileges: - Phase in new methodology to assess tax privileges, gradually apply to all relevant topics, targeting most significant tax expenditures first. - Conduct comprehensive inventory of tax expenditures for major taxes for publication alongside the 2027 annual budget documentation and regular calculations of tax expenditure costs. - State Tax Service (STS) to provide MOF access to comprehensive data after confidentiality measures; MOF to consult IMF staff on methodology assessing impact of new tax proposals. ### IT and implementation support for revenue and PFM reform - Updated IT strategy for the Public Finance Management System consolidates IT systems of STS and State Customs Service (SCS) at MOF level, managed by an independent administrator (OPF) using cloud technologies and moving toward service-oriented systems for online services. - Operational plan approved in September 2025 with near-term actions: - In 2026, ensure OPF has necessary resources to enhance capacity, including hiring additional IT specialists with competitive salaries. - By end-February 2026 (Step 1 under operational plan): designate OPF as manager of IT systems components used for developing new customs IT systems compatible with EU IT systems; document customs IT systems and relevant intellectual property rights. - Structural benchmark, end-December 2026: design a centralized data warehouse, including a robust data access policy. *Source: 1ukrea2026001-source-pdf - 11. We will ensure that fiscal policy under the program contributes to and achieves the restoration of fiscal and debt sustainability* ### 29. Near-term reform efforts at the STS focus on further building public trust in the STS, ### 29. Near-term reform efforts at the STS focus on further building public trust in the STS, ### STS tax administration reforms and compliance risk management - Objectives: - Build public trust in the STS, improve taxpayer services, enhance efficiency through digitalization, develop modern and automated compliance risk management (CRM) practices, and strengthen the effectiveness of tax audits. - Findings from surveys: - The 2024 Tax Compliance Cost Survey shows a need to reduce the cost of tax compliance for businesses, including by improving taxpayer services and addressing performance issues of the electronic taxpayer office. - Survey respondents show a still relatively low level of trust in the fairness of the STS. - CRM and automation timeline and actions: - Developed methodological documents to operationalize the automated tax risk management system. - Adopted an Overall Compliance Improvement Plan covering identification, assessment, and mitigation of major types of tax risks. - Launched a two-year pilot of the automated risk management system (ending July 31, 2026). - By end-August 2026, the STS will prepare information on the results from using the automated CRM system. - By end-2026, prepare and submit to the CMU a report on lessons learned from the pilot and, if needed, proposals for legislative amendments. - By June 2027, after effective implementation of automated CRM, enact Tax Code changes to address constraints limiting STS effectiveness, including: - (i) the requirement for the STS to publish its risk assessment algorithms; - (ii) the requirement to prove non-compliance before conducting tax audits; - (iii) the statutory time limit of 30 days to complete an audit; - (iv) the requirement to pre-announce tax audits through an annual list; - (v) the inability to collect tax debts until confirmed by a court, even in cases where the debt has been self-declared by a taxpayer. - Digitalization initiatives (specific dates and status): - Introduction of a track and trace system for excise tax administration, by November 1, 2026. - The e-audit program to automatically verify consistency of tax declarations with SAF-T data and other data, operational in late December 2025. - An IT solution to more effectively collect outstanding tax debts which are recoverable and undisputed (or have exhausted the appeals process), fully operationalized across the regions in 2025. - Access to bank account data: - Supported by IMF TA, review of other countries’ practices for tax authorities’ access to taxpayers’ bank account data. - Providing such access in Ukraine will require review by the Ministry of Finance in cooperation with the NBU and technical assistance of the IMF and other international partners, taking into account EU Directives and the issue of possible expansion of grounds for out-of-court access to information on amounts of funds transferred to taxpayers’ bank accounts as part of taxable transactions. ### Customs reforms and governance - Commitments and timeline: - Continue implementation of 2024 Customs Code changes, including key governance reforms. - Commission to select the new head of customs formed in September 2025 and has begun work. - Expect to appoint a new permanent head of customs by end-March 2026 (structural benchmark, end-March 2026). - Establish Key Performance Indicators (KPIs) for the head of customs by end-February 2026 in consultation with IMF staff. - KPI and oversight design: - KPIs will balance revenue collection with trade facilitation, good governance, and reform progress. - MOF will oversee selection, KPI-based performance evaluation, and policy guidance for the SCS head while allowing SCS operational independence. - Any vacancies for regional customs heads will be filled as soon as possible. ### Role of the Economic Security Bureau of Ukraine (ESBU) - Institutional developments: - A new head of the ESBU was appointed in 2025. - New ESBU head approved procedures of staff attestation and formed the attestation commission for vetting ESBU staff. - Prioritization of attestation for heads of division and territorial offices and their deputies. - ESBU budget increased to strengthen effectiveness and facilitate access to necessary economic data from tax and customs authorities. - Operational focus: - ESBU to leverage AML/CFT framework and financial intelligence tools, in coordination with relevant agencies, to detect tax evasion and smuggling of goods in significant amounts. ### Public Financial Management (Budget Declaration and fiscal planning) - Budget Declaration developments: - Continue reforms to establish the Budget Declaration as the key operational tool for medium-term fiscal policy planning. - The 2026–28 Budget Declaration published in mid-2025 showed methodological improvements, including plan indicators for the medium-term across all subsectors of the general government. - In 2025, MoF calculated baseline expenditures at the level of the state budget per the approved methodology and issued directives to key spending units; incorporated a “current policy” expenditure baseline. - Enhancements planned for 2027–2029 Budget Declaration: - Introduce baseline expenditure estimates as an element of planning for key spending units to align MoF and units’ baselines. - Include a “current policy” scenario quantifying the gap (fiscal space) between the deficit under current policies and the deficit in line with government fiscal objectives agreed with IMF staff. - Include an active policy scenario to specify impacts of new policies to achieve fiscal objectives. - Include estimates of payments needed to compensate SOEs for accrued costs of quasi-fiscal activities since the beginning of the war and realistic estimates for court-ordered retroactive pension payments. - Expanded fiscal risk reporting (see ¶34). ### SOE financial planning and fiscal risk management - SOE planning: - With IMF TA, review the first annual SOE financial planning cycle to better align SOE financial planning with annual budget processes. - Fiscal risk actions (timelines and commitments): - Update methodological guidance for assessing fiscal risks in key spending areas and contingent liabilities, including public investments (including PPPs), guarantees, local governments and SOEs, by end-2026, with IMF TA and input from MOE and other line ministries. - Integrate fiscal risk assessments into early stages of the budget cycle. - Improve fiscal risk reporting with IMF TA, including projections of fiscal variables (deficit, debt) under certain shock scenarios starting with the Budget Declaration for 2027–2029 and the Fiscal Risk Statement (FRS), and improve reporting of PPP fiscal risks in the FRS. - Implement MOF’s SOE financial oversight and fiscal risk management function into the SOE governance framework and align with secondary legislation. - Enhance identification, analysis, and reporting of Public Sector Obligations (PSOs) and quasi-fiscal activities to improve management, transparency, accountability and limit fiscal risks. - Refrain from imposing new PSOs and only introduce new ones after prior consultation with IMF staff, including separate and transparent accounting of PSO obligations. - CMU approved regulation for financial indicators in August 2024 (No. 984) to limit quasi-fiscal risks; will review financial indicators at latest in early 2027 before next SOE financial planning season in 2028 and make changes via CMU resolution if needed. ### Audit institutions and Accounting Chamber of Ukraine (ACU) - Strengthening independence and effectiveness: - Legislative amendments enacted in December 2024 reinforce independence and financial autonomy of the ACU and expand its oversight mandate. - Establish the Advisory Group of Experts (AGE) to vet candidates for the ACU Board and appoint its six members by end-April 2026. - Appoint all ACU board members from the pool of vetted candidates in accordance with the 2024 amendments by end-December 2026 (structural benchmark, end-December 2026). ### Public Investment Management (PIM) reforms and Strategic Public Projects (SPP) - Governance and frameworks: - Action Plan for Implementation of the PIM Roadmap for 2024–2028 designates MOF as gatekeeper for all stages of PIM. - Enhancements planned across strategic planning, integration into MTBF, project preparation/appraisal/selection/implementation, institutional capacity, and monitoring and evaluation. - Key milestones and timelines: - Adopt by end-March 2026: - (i) a policy framework (regulation and methodological guidance) for preparing sectoral strategies aligned with new PIM approaches; - (ii) a time-bound action plan for updating sectoral strategies (action plan structured until December 2026). - Implement the action plan and adopt sectoral strategies and sector-specific guidelines for project preparation and prioritization by end-December 2026. - Enact legal amendments by end-March 2026 to improve integration of PIM into medium-term budget planning and fiscal risk management covering: - (i) use and recording of multiannual budget commitments and contingent liabilities for public investment projects; - (ii) determination of contingent liabilities that may arise from PPPs; - (iii) management and disclosure of fiscal risks related to public investments; - (iv) public investment budgeting at the local level. - By end-August 2026, the Strategic Investment Council will approve the SPP update for the 2027 Budget; only projects prepared and appraised using PIM methodologies will be eligible for the SPP and for funding in the 2027 Budget. ### Pensions, disability, and mechanisms to support vulnerable groups - Pensions reform and constraints: - With IMF and World Bank support, developing a comprehensive pension reform covering all components to improve adequacy and fiscal sustainability, strengthen contributory principle, and address old-age poverty. - Reform proposal to the CMU will include analysis of long-term fiscal implications prepared in consultation with IMF staff. - Ensure that reform does not widen the deficit of the general government sector over the medium term through compensating revenue or expenditure measures if needed. - In the near term, take measures to limit additional benefits paid to certain categories of pensioners on top of the contributive part. - Offer a unified approach to annual increase of all pensions exclusively through the indexation mechanism and submit draft legislation to Parliament to discontinue the practice of linking annual increases in certain special pensions to increases in salaries. - Refrain from: (i) introducing new special pensions or privileges; (ii) passing any new legislation that would give rise to additional pension-related contingent liabilities not provided with financial resources; (iii) modifications leading to lowering of the legally defined retirement age. - Disability benefits: - Prepare legislation to establish a new mechanism for assessing individual functional capacity aligned with the International Classification of Functioning, Disability and Health (ICF). - Move from medical-diagnosis-based approach to assessment of daily functioning to improve fairness, transparency, and efficiency and promote rehabilitation and labor market inclusion. - Mechanisms to support vulnerable groups: - Work to enhance targeting and means testing of benefits; with World Bank support, prepare draft legislation to consolidate different types of social entitlements and explore integrating social assistance under a single unified package based on individual needs. - Increased income threshold for eligibility under the Guaranteed Minimum Income program. - Social standards: - Adopt legislation to decouple the subsistence minimum from technical calculations of public sector wages, fines, and administrative indicators. - Develop a new structural methodology for calculating the subsistence minimum and its components in line with EU approaches. - Review current linkages of social assistance programs to the subsistence minimum to ensure consistency with fiscal sustainability. ### External Debt Strategy and restructuring progress - Strategy context: - Strategy announced in March 2023 to restore debt sustainability on a forward-looking basis. - The August 2024 Eurobond exchange was a major step; exchange of outstanding GDP-linked warrants into a new series of Eurobonds recently concluded. - Treatment of remaining external commercial claims in the restructuring perimeter remains necessary to close financing gaps, reduce gross financing needs, and place debt on a sustainable path. - Ongoing negotiations and measures: - Commercial claims other than Eurobonds: - Discussions continue with a group of investors holding 45 percent of Ukrenergo’s state-guaranteed bonds in the restructuring perimeter, with proposed terms being those of the 2025 Agreement in Principle. - Entered negotiations with Cargill to restructure the loans on terms comparable to other commercial claims; aiming to reach an agreement as soon as possible. - A moratorium on government payments on all these instruments was introduced in August 2024 and remains in effect. - Continue to be aided by external financial and legal advisors and committed to a credible, transparent restructuring process. - Official bilateral debt: - Creditors in the Group of Creditors of Ukraine (GCU) remain committed to a two-step process involving an extension of the debt standstill, a new cutoff date, and a separate assurance to deliver a final debt treatment sufficient to restore debt sustainability before the final review of the IMF-supported program. - Will seek treatments on comparable terms with other official creditors, including guaranteed loans, and definitive restructuring of these claims. - Risks, contingent further treatment, and timelines: - Full implementation of the strategy is expected to deliver debt sustainability targets under the program’s baseline scenario. - Committed to further treatment of external commercial claims as needed to restore debt sustainability in line with program parameters. - If the scenario at the penultimate review (or once conditions of exceptionally high uncertainty abate if earlier) is worse than that on which the present restructuring is based, a further treatment of external commercial claims would be required alongside restructuring of official bilateral claims. - Any further treatment, if needed, would be expected once exceptionally high uncertainty abates, or at the latest by the penultimate review of the program. - Retain legal and financial advisors to assist and will share information regularly with creditors about potential further treatment, including possible outcomes and timelines. *Source: 1ukrea2026001-source-pdf - 29. Near-term reform efforts at the STS focus on further building public trust in the STS,* ### 41. To support our goal of safeguarding debt sustainability, we will continue to strictly ### Monetary and Exchange Rate Policies; NBU Independence and Governance; Financial Sector ### Monetary and Exchange Rate Policies (¶42–45) - Objective: safeguard price and external stability while building an adequate level of international reserves; guided by the Strategy for Easing FX Restrictions, Transitioning to Greater Flexibility of the Exchange Rate, and Returning to Inflation Targeting and the Monetary Policy Guidelines for the medium term (MPG). - FX liberalization approach: cautious, conditions-based roadmap to advance FX liberalization while ensuring external viability and avoiding excessive volatility. - Recent policy actions and stance: - cumulative rate hikes of 200 bps in Q1 2025; KPR remained at 15.5 percent through end-2025. - January MPC adopted a modest rate cut of 50 bps. - Monetary policy aims to return inflation to the 5 percent target over the policy horizon of three years. - Further easing conditional on evolution of inflation expectations, consistent evidence of a downward inflation trajectory, and weakening of inflationary risks. - Reserve and FX management: - Tightened Net International Reserves (NIR) targets (quantitative performance criterion). - Recalibrated FX intervention approach to enhance exchange rate role as shock absorber. - Continued accumulation of reserves and facilitation of greater exchange rate flexibility to strengthen external buffers and medium-term external viability. - FX controls monitoring and compliance measures: - Bank-level data analysis to identify circumvention of controls. - Potential controls to limit virtual asset transactions to preserve efficacy of CFMs (see ¶57). - Careful assessment, on a needs-basis, of existing and potential new cases for exceptions and extensions to import and export settlement deadlines. - Close monitoring of securities transactions and enforcement of capital controls by NSSMC, including cross-border transactions for international Ukrainian government bonds. - Commitment to a comprehensive stocktaking of FX measures implemented to date. - Continuous performance criterion commitments: - Not introducing or intensifying any exchange restrictions. - Not introducing or intensifying import restrictions for BoP reasons. - Not introducing or modifying multiple currency practices. - Not concluding bilateral payment agreements in violation of Article VIII of the Articles of Agreements. ### NBU Independence and Governance (¶46–47) - Principles to uphold, in line with the 2023 Safeguards Assessment: - Ensure financial autonomy: adherence to profit retention rules; distribution of NBU profits to the state budget in line with procedures under the NBU Law; refrain from using NBU profit for earmarked spending; direct this revenue to the General Fund of the State Budget. - Recognize costs incurred from liquidity absorption (interest expenses on NBU CDs) as necessary for macroeconomic stability. - Implement Safeguards Assessment recommendations: legislative amendments submitted to parliament to enhance NBU’s secured creditor status under bank resolution; continue work with IMF staff to improve Audit Committee execution and strengthen collective fitness of the NBU Council. - Fill vacant positions in the NBU Council by end-March 2026. - Transition and wartime measures: - Gradual unwinding of wartime measures as conditions allow to return to full-fledged inflation targeting with a floating exchange rate. - Monetary financing: commitment to avoiding monetary financing, including indirect forms; any use if external disbursements are delayed will be strictly limited under the agreed MOF–NBU framework in the Technical Memorandum of Understanding. - Wartime measures and liquidity management: phase out war-time measures when conditions permit to strengthen monetary policy toolkit and NBU credibility. - FX Liberalization: phase out FX controls implemented under Resolution No. 18 as conditions permit in the post-martial law period; develop necessary legal amendments for submission to Parliament, including related to the Currency Law and the NBU Law. ### Financial Sector: Stability, Supervision, and Reform (¶48–54) - Financial stability and crisis preparedness: - Restored pre-full scale invasion regulatory requirements and reinforced financial stability through micro- and macroprudential regulation. - Bank branches operational with “Power Banking” measures; online banking services fully available; non-cash payment system functioning normally; banking system capital and liquidity robust. - NBU and Deposit Guarantee Fund (DGF) addressing weak banks alongside court-based nationalizations and preparing contingency plans. - NBU actions: - Assessed key financial and operational risks and updated monitoring and emergency response frameworks. - Developed restructuring and capitalization plans following an NBU “bank resilience assessment.” - Reviewed DGF financial resources; emergency financial backstops will continue at least until the target reserve ratio has been reached. - Aligned counterparty eligibility frameworks in monetary policy operations with international best practice and coordination with lender-of-last-resort operations. - Resilience assessments and asset quality work: - Completed a resilience assessment including loan file reviews with external auditors and solvency stress tests under baseline and adverse scenarios. - Results informed restructuring and capitalization plans and efforts to close gaps in regulatory capital requirements and EU acquis harmonization. - Planned actions once conditions stabilize: - Complete a targeted asset quality review (AQR) in consultation with IFIs (Terms of Reference prepared in consultation with IMF staff by end-April 2026). - Carry out a subsequent bank viability assessment. - Prepare a concept note by end-April 2026 to inform relaxation of blanket prohibition on bank capital distributions and consider continued restrictions until AQR findings are fully reflected in banks’ regulatory ratios and financial statements. - Strengthening supervision and regulatory frameworks: - Refined supervisory risk-assessment methodology; expanded supervisory plan in December 2025 to include all material bank risks. - Develop supervisory methodology to determine Basel Pillar II increased capital adequacy and liquidity requirements by end-September 2026. - Mitigate critical third-party risk via new regulatory requirements (structural benchmark, end-June 2026): - Publish regulatory requirements to address third-party risk for banks (by end-March 2026) and for non-bank financial institutions (by end-May 2026). - Implement the framework by end-June 2026. - If needed, develop a draft law in consultation with IFIs for detection, containment, and mitigation of market-systemic critical third-party risk and submit it to Parliament. - Entities identified as critical third parties will be subject to NBU’s fit and proper rules. - State-Owned Banks (SOBs) strategy and actions: - Reduce state ownership in the banking sector; consult IMF staff on any decision that could increase state ownership. - Non-systemic banks under state ownership will not be recapitalized using fiscal resources and will be transferred to the DGF upon breach of prudential requirements (continuous structural benchmark). - Prepare sale of two systemic SOBs, Sense Bank and Ukrgazbank, starting with appointment of an internationally recognized financial advisor in consultation with IFIs by end-March 2026. - Ensure SOB supervisory boards remain fully operational; approve amended SOB Nomination Committee (NomCom) framework by CMU resolution (structural benchmark, end-February 2026) including: - strict confidentiality rules for NomCom participants; - nationality as a secondary factor between equally qualified candidates; - strengthened assessment procedures with pre-agreed interview questions and draft scores shared ahead of interviews; - annual performance assessment for SOB supervisory boards by the Ministry of Finance linked to reappointment; - Ministry of Finance to maintain a pool of high-scoring candidates from previous selections for future vacancies. - Approve updated general SOB strategy in consultation with IFIs (structural benchmark, end-June 2026) to inform individual-bank strategies for majority public ownership. - Commit that any future transfers of bank ownership, including following seizures during Martial Law, will follow the Law on Banks and Banking and require formal notification, review, and approval by the NBU. - Deposit Guarantee Fund (DGF) governance reforms: - Working group prepared draft law to adjust DGF governance arrangements including equal representation on the DGF Administrative Board, closing gaps relative to good practice, DGF accountability, internal controls, and procedures for appointment of the Managing Director. - Expect to submit DGF governance amendments to parliament in March 2026. - New appointment procedures to include engagement of an independent HR firm and introduction of a nomination committee comprising voting representatives and IFIs as observers. - Refrain from changes to allocation of roles and responsibilities of financial safety net stakeholders during Martial Law. - National Securities and Stock Markets Commission (NSSMC) governance and capital markets development: - NSSMC governance initiatives include fit and proper review of Chair and Commissioners and amendments to the Ethics Committee Regulation. - Functional audit of NSSMC, supported by IFIs, expected to be completed by end-June 2026. - Will introduce a two-tier governance structure with a majority-independent supervisory board; finalize a concept note by end-March 2026 outlining structure, composition and mandate of the supervisory board. - Implement governance changes through amendment of the NSSMC law (proposed structural benchmark, end-December 2026). - Financial and capital market infrastructure (FCMI) reform to attract private investment: - Follow the Financial Stability Council’s FCMI development roadmap to coordinate deal pipelines, reform market instruments, and align regulation with EU Regulatory Equivalence. - Key timeline and reforms: - Legislative proposals to align asset backed securities frameworks to be submitted to Parliament by end-March 2026. - Legislative proposal to enhance creditor protection to be developed by NBU in 2026. - Vertical integration of capital markets infrastructure: management of the State’s stake in the National Depositary of Ukraine (NDU) transferred from NSSMC to NBU in September 2025; ensure NBU holds majority stake in NDU; legislative proposals to provide legal basis submitted to Parliament by end-February 2026 and expected to be adopted by end-March 2026. - Implement a lending development strategy: FSC-approved strategy (July 2024) and NBU-prepared Mortgage Lending Strategy (June 2025). - Parliament to adopt a law by end-May 2026 to improve regulation and functioning of credit bureaus; enhanced supervision of credit bureaus through ownership and internal control requirements within six months of the law being signed by the President. - Submit amendments to align bank secrecy legal framework with Directive 2013/36/EC (CRD IV) by end-March 2026 to seek EBA’s assessment of confidentiality and professional secrecy regimes prior to pursuing official regulatory equivalence assessment. - Adoption of investment funds law (#13246) by end-October 2026 as part of reform of investment funds frameworks. - War risk insurance system: - Launched a mechanism for compensating war risks in December 2025. - Continuing work to determine optimal long-term model for war risk insurance. *Source: Excerpt from IMF country document (sections ¶41–54).* ### 55. We are reforming financial and credit market regulations to align with international ### We are reforming financial and credit market regulations to align with international good practice and improve asset price discovery ### Banking regulation and NPLs - NBU, with support from IFIs, has aligned banks’ regulatory capital structure, calculation of risk-weighted exposures, and leverage ratio calculations with EU rules. - The definition of minimum capital requirements and non-performing exposures have been aligned with EU standards. - NBU will: - take further steps to strengthen banks’ NPL workout capacity; - promote the secondary market for NPLs, in line with the NPL strategy approved by the FSC. - NBU will continue monitoring economic conditions and reinstate pre-war regulations when safe to do so based on: - (i) banks’ adherence to the new capital requirements aligned with EU standards; - (ii) the results of resilience assessments; and - (iii) the banking system’s role of lending to the economy and its involvement in the domestic debt market. - NBU has reinstated the normal regulatory deadlines for conducting fit and proper assessments. ### Real estate valuation, data, and house price index (HPI) - The State Property Fund, NBU and the Ministry of Justice have improved mechanisms for real estate transactions information collection and exchange. - Legislative changes to implement European (TEGOVA) and international valuation standards (IVS) will be made by end-June 2026 and followed by an implementation roadmap. - Legislative changes will expand the Unified Database to include real estate transactions that are not subject to taxation. - A house price index (HPI) methodology was implemented in 2025 with IMF assistance; the mechanism for publication of the HPI will be finalized by end-May 2026. - HPI data collection will account for the above-mentioned legislative changes. ### Payments market regulation and de-shadowing - Legislation is being advanced to join the Single European Payments Area. - NBU measures to counteract illegal use of the payment system include increased bank monitoring; legislative changes are being advanced to extend NBU powers to restrict PSPs that fail to comply. - NBU has improved PSP supervision by: - (i) developing an early warning and reporting system; - (ii) transitioning to risk-based supervision; and - (iii) strengthening supervisory and analytical capacity. - A “money-mule” register legislative proposal, prepared by NBU, will be adopted by parliament by end-April 2026 to facilitate PSPs’ information exchange on clients that bear high risks of illegal use of payment systems. - The NBU will finalize a draft legislative proposal in February 2026 to: - (i) align payment acquiring services with EU norms; - (ii) extend the NBU’s supervisory and regulatory powers to technology operators; and - (ii) clarify financial and payment licenses with clear ownership structure requirements for PSPs. ### Virtual assets - A law to regulate virtual assets has been prepared in consultation with IFIs to align with international best practice while considering economic development goals and mitigating risks to price stability, capital flows measures, the monetary transmission mechanism and tax revenues. - The law will ensure: - (i) regulators’ roles and responsibilities are clearly set out; - (ii) a level playing field for virtual asset service providers in licensing and market access; - (iii) potential controls to limit crypto transactions to preserve the efficacy of CFMs; and - (iv) alignment with the EU acquis. ### Non-bank financial institutions (NBFIs) and financial reporting - A legal framework for financial services, financial companies, insurance and credit unions, and payment market participants is being phased-in. - Measures include: - (i) transitioning to a risk-based approach for supervising NBFIs; - (ii) strengthening powers to revoke licenses and liquidate failed NBFIs; - (iii) strengthening ownership structures; and - (iv) improving disclosure requirements. - Legislation on investment funds has been submitted to parliament; NSSMC is moving forward with regulation of financial intermediaries to align capital requirements with the EU acquis. - Mandatory quality control requirements for audit companies applying to non-bank financial companies have been restored. - NSSMC will continue to provide access to financial reporting files submitted to the Financial Reporting Collection Center and will define main tasks for expanding its functional capabilities in consultation with key stakeholders. ### Asset recovery from failed banks - Commitment to continue efforts to recover value from assets of failed banks and to abstain from any interference with current asset recovery strategies of the largest bank nationalized in 2016 and of the DGF. - Plans will analyze, with banking industry involvement where necessary, whether hierarchy of claims related to assets of persons subject to sanctions and/or criminal investigations has any material impact on banking-sector soundness. ### Governance and Anti-Corruption — institutions and prevention - Independence and autonomy of NABU, SAPO and HACC will be safeguarded; no measures will be taken that undermine their independence, powers or resources. - Anti-corruption prevention will focus on high-risk critical sectors: tax, customs, public procurement, and energy. - NACP will issue regulations prioritizing and enhancing verification of asset declarations of senior officials in these high-risk sectors (structural benchmark, end-June 2026). - NACP will publish, on a bi-annual basis, key performance indicators on risk-based verification and lifestyle monitoring activities, starting end-March 2026 for the second half of 2025. - An independent external audit of the NACP will be launched to assess effectiveness in verifying accuracy of high-level officials’ asset declarations and managing its whistleblower function in 2024–2025. ### Forensic services, criminal procedure, and AML/CFT - A legal framework for independent, reliable, timely, and high-quality forensic services will be enacted to support NABU investigations, ensuring structural independence in line with European forensic science standards and ISO/IEC 17025. - Amendments to the Criminal Code and Criminal Procedure Code will be prepared to address systemic weaknesses hindering investigations and accountability for corruption. - NBU will strengthen AML/CFT supervisory activities to ensure enhanced due diligence for politically exposed persons is applied proportionate to risks and in line with FATF standards. - Amend Article 32 of the AML/CFT law and corresponding Article 73 of the Banking Law to ensure penalties for AML/CFT violations by entities regulated by the NBU are effective, dissuasive, and proportionate, in line with FATF standards. - Financial sanctions applicable to such entities will be clearly prescribed in the laws of Ukraine and the regulatory legal acts of the NBU by March 2027. ### Beneficial ownership, procurement transparency, and tax integrity - CMU resolution (January 2026) requires publication of ultimate beneficial ownership (UBO) information for companies receiving direct contracts or contracts concluded under a negotiated procedure for public procurement, and publication of UBO information of successful non-resident bidders. - Strengthen sanctions for beneficial ownership obligations by end-2026 through legislative amendments extending sanctionable UBO obligations under the FATF standards; raise maximum fines and expand measures including dissolution of a legal entity for material breaches of AML legislation. - With IMF capacity development support, complete an independent review of the State Financial Monitoring Service and prepare an action plan by end-March 2026. - By end-March 2027, deepen operational cooperation between the FIU, tax authorities and law enforcement to ensure timely use of financial intelligence for detecting tax crimes. ### SOE corporate governance reforms and transparency - Actions following the Energoatom case: - Adopted amendments to CMU resolutions 142, 143, and 777 in December 2025 to mandate supervisory board roles, standardize documentation, ensure at least two candidates for state representative vacancies, and require integrity checks and Nomination Committee evaluations. - Appointed a new supervisory board for Energoatom in line with CMU resolution 1804. - Will adopt amendments to the Energoatom charter to ensure CEO nomination and dismissal decisions are taken by a simple majority of the supervisory board, after which a competitive merit-based CEO selection and a forensic audit by a reputable independent auditor will be launched with adequate funding secured. - By end-March 2026, will rescind CMU resolution 1441, restoring independent board evaluations. - Will fill supervisory boards for Naftogaz, Ukrhydroenergo, Ukrenergo, and GTSOU as announced in resolution 1258, and amend charters if needed before selecting new CEOs. - Broader SOE reforms: - Enact changes to the State Ownership Policy (SOP) and the Law “On Joint Stock Companies” (2465-IX) to mandate simple majority voting for supervisory board decisions (except approval of strategic development plan) and avoid veto/supermajority provisions by end-June 2026. - Continue comprehensive reform of SOE supervisory board nomination procedures with a roadmap and time-bound measures; roadmap to be approved by end-March 2026. - Ensure all SOE CEO nominations and dismissals are decided by a simple majority of supervisory boards, with charter amendments if needed. - Initiate comprehensive financial, compliance and performance audits for all non-defense SOEs listed in Resolution 777 as of November 2025 (“top SOEs”) by reputable independent auditors by end-June 2026, with adequate funding secured. - Continue implementing the SOP Action Plan including privatization framework, IFRS financial statement requirements (with transition period), SOE information disclosure, and SOE remuneration policy; publish a revised SOP by end-May 2026. - Transparency and accountability measures: - Resume publication of financial statements for top SOEs in accordance with IFRS standards by end-June 2026, with appropriate redactions and an extended publication lag of up to one year. - Introduce mandatory annual financial audits for top SOEs and publish audits starting with the 2025 financial audits by end-August 2026. - Start development of an annual SOE report by end-June 2026 and publish the report annually starting by end-September 2026 for the year 2025; expand coverage over time. - Ensure financial statements reflecting separation of PSO and non-PSO activities are published for all SOEs subject to PSOs by end-June 2027. ### SOE management model exploration - Exploring options for a centralized SOE management model in close consultation with international partners, defining roles of MOF, MOE, CMU, relevant ministries, and SPFU. - Ensure: - strong gatekeeper role of the MOF for SOE financial oversight; - dividends directed to the state budget and transparently reported; - any primary legislation for centralized management is consistent with NomCom Roadmap and SOP reforms; - centralized model includes clear legal mandate, adequate MOF oversight, safeguards against political interference, and rigorous reporting and accountability. - Emphasis that centralization should professionalize state ownership and proceed cautiously. ### Energy sector reforms and wartime mitigation - Immediate priority: mitigate adverse impact of the war on the energy sector; repair generating capacity and ensure sufficient electricity provision in the heating season and beyond. - Objectives include greater resilience via decentralized energy generation (including gas turbines), Green Transformation, and an independent energy regulator (see ¶73). - Affected companies rely on working capital for repairs; donor support is ongoing and additional donor support will be sought for repairs and decentralized generation including gas generation projects. - Expanded scope of the 5-7 -9 lending program and the BDF to support the energy sector; SOB energy support lending programs are being implemented, including for households. - In 2025, Ukraine imported more than 6 bcm of gas following large-scale attacks on infrastructure; significant imports are planned for 2026 to ensure adequate supply during the heating season. - Naftogaz has secured financing for gas imports from the EBRD, EIB, and bilateral donors; additional donor financing is being pursued. - Any State Budget transfers to energy companies for emergency war-related needs will be allocated through budget amendments, subject to availability of financing and only after consultation with IMF staff. *Source: IMF staff report excerpt (content unit).* ### 72. We are strongly committed to implementing an ambitious reform agenda to address ### 1ukrea2026001-source-pdf - 72. We are strongly committed to implementing an ambitious reform agenda to address ### Energy-sector reform commitments and timeline - Objective: restore sustainability of the energy sector and reduce quasi-fiscal liabilities through gradual increases in gas, electricity, and heating tariffs for households to cost-recovery levels while ensuring adequate and well-targeted support to protect vulnerable households. - Roadmap adoption: - By end-June 2026, based on a Ministry of Energy proposal and stakeholder input, the CMU will adopt a roadmap for gradual liberalization of gas and electricity markets, with a time-bound implementation plan for the post-martial law period. - The roadmap will be based on technical analysis of the financial condition of the sector, in coordination with the European Commission, and will describe steps to reform PSOs and preparatory steps to be implemented before the end of martial law. - Technical analysis and publication: - Structural benchmark: publish technical analysis quantifying the costs of QFA resulting from price caps and PSOs in electricity, gas and heating sectors, the incidence of existing subsidies, and reform scenarios to achieve gradual cost recovery while ensuring adequate social protection, building on the findings of IMF TA to the Ministry of Energy (structural benchmark, end-July 2026). - Tariff adjustments: - Following the roadmap, plan a gradual adjustment in electricity tariffs to support reconstruction and repairs while ensuring an adequate level of utility subsidies to protect vulnerable households; these increases could begin as early as needed, taking into consideration the evolution of the war. - To allow future adjustment of household gas, heat and hot water tariffs: prepare amendments to law 2479-IX to remove the moratorium on price increases, consistent with commitments under the Ukraine Facility Plan. After removal, gradually increase gas prices, accompanied by adequate adjustments in utility subsidies to protect vulnerable households. - District Heating Companies (DHCs): - Tackle arrears and debt of DHCs comprehensively once war-related budget pressures subside by developing a new tariff methodology that achieves cost recovery. - Explore mechanisms and legal amendments to ensure local heat and hot water tariffs gradually converge to, and later at least maintain, cost-recovery levels. - Commit to consult IMF staff on plans to clear arrears through direct or indirect budget support. ### Governance reforms in the energy sector - State-owned enterprise (SOE) supervisory boards and NEURC: - Restore rights of majority-independent supervisory boards by reversing recent charter changes mandating qualified majority voting for strategic decisions in energy SOEs. - Revised charter of GTSOU in January 2026 to ensure nominations and dismissals of management board members, including the CEO, are taken by a simple majority of the entire supervisory board. - By end-April 2026, revise the charters of Energoatom and Ukrhydroenergo accordingly. - NEURC law amendment: - Amend NEURC law by end-April 2026 and enact in a timely manner, taking into consideration Energy Community Secretariat recommendations to strengthen NEURC’s independence, regularly assess its governance and independence, and make nomination procedures more transparent. - The law will require that the Competition Commission be composed of six members with full voting power, three of whom are proposed by international partners, and will increase transparency of decisions. - Finalize and publish the first external assessment of NEURC’s governance and independence by end-November 2026. ### Program monitoring, reviews, and conditionality - Monitoring framework: - Program implementation monitored through quarterly reviews via quantitative performance criteria (QPCs), indicative targets, and structural benchmarks. - Authorities commit to provide IMF staff all data needed for program monitoring, including as detailed in the attached TMU. - Continuous performance criterion on the non-accumulation of external payments arrears and standard continuous PCs will apply. - Review schedule: - The First and Second Reviews are expected to take place on or after June 1, 2026 and September 1, 2026 respectively, based on QPCs for end-March 2026 and end-June 2026, respectively, and corresponding structural benchmarks. - Structural benchmarks and prior actions (selected): - A: Adopt 2026 Budget consistent with the program — Fiscal Prior Action — Met. - B: Issue a decree to level the playing field for VAT payers in public procurement tenders — Fiscal Prior Action — Met. - C: Submit to Parliament legislation to amend the definition of “employment” in the Labor Code — Fiscal Prior Action — Met. - Structural Benchmark No. 9: Publish a technical analysis quantifying the costs of current QFA in electricity, gas, and heating, the incidence of existing subsidies, and fiscally sustainable reform scenarios to achieve gradual cost recovery while ensuring adequate protection of vulnerable consumers, reflecting the findings of IMF TA to the Ministry of Energy — Energy — End-Jul 2026. ### Key program numeric parameters and reporting definitions (TMU highlights) - Review dates and document dates: - Technical Memorandum of Understanding dated February 13, 2026. - Authorities’ Letter of Intent dated February 13, 2026. - Official and reference exchange rates (kept fixed over the program period): - Official exchange rate of the Ukrainian hryvnia to the U.S. dollar: 42.2179 as of December 30, 2025. - Swiss Franc: 0.7889 Swiss Franc per U.S. dollar. - Euro: 0.8506 euro per U.S. Dollar. - Pound Sterling: 0.7406 pound per U.S. dollar. - Canadian Dollar: 1.3693 dollars per U.S. dollar. - Chinese Renminbi: 6.9905 yuan per U.S. dollar. - Japanese Yen: 156.3 yen per U.S. dollar. - Norwegian Krone: 10.0587 per dollar. - SDR accounting exchange rate: 0.729548 SDR per U.S. dollar. - Official gold holdings valued at 4389.45 dollars per fine ounce. - Definitions and scope: - General government comprises the central (state) government including the road fund, all local governments, all extra budgetary funds including the Pension and Unemployment Funds of Ukraine, and special accounts which provide resources to key spending units. - Debt definition follows 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). - GDP for program purposes is compiled per SNA 2008 and excludes territories that are or were in direct combat zones and temporarily occupied by Russia. - External financing definitions: - Budget support loans and grants: unearmarked financial support recorded under budget treasury codes 401200 (loans) and 42000000 (grants). - Project support loans and grants: earmarked financing for specific projects recorded in special fund expenditures. - Arrears definition: - Domestic arrears defined per Order of the Ministry of Finance No. 372 dated April 2, 2014: amounts due on the 30th day after the deadline for mandatory payment; where no deadline specified, the 30th day after confirmation of goods received, works done, or services rendered. - Budgetary arrears on social payments and wages: arrears of the consolidated budget on wages, pensions, and social benefits of the central or local governments, with the same 30-day timeframe. - Program review and reporting commitment: - Quantitative performance criteria and indicative targets are shown in Table 1 of the MEFP; definitions and adjustors are specified in the TMU. - Targets and projections for 2026 and 2027 are cumulative flows from January 1, 2026, and January 1, 2027, respectively. - Program exchange rates are used for evaluation of reserve levels and monetary aggregates and may differ from the actual market exchange rate. *Source: 1ukrea2026001-source-pdf - 72. We are strongly committed to implementing an ambitious reform agenda to address (excerpt).* ### 12. Net international reserves (NIR) of the NBU are defined as the dollar value of the difference ### 12. Net international reserves (NIR) of the NBU are defined as the dollar value of the difference between usable gross international reserve assets and reserve-related liabilities to nonresidents, evaluated at program exchange rates ### Definition of NIR - NIR = dollar value of (usable gross international reserve assets − reserve-related liabilities to nonresidents), evaluated at program exchange rates (see Table A for components and data sources). ### Usable gross international reserves: scope and exclusions - Comprise all readily available claims on nonresidents denominated in convertible foreign currencies, consistent with the Balance of Payments Manual (Sixth Edition) and the Special Data Dissemination Standard (SDDS) (Table 6.1, item A). - Excluded from usable reserves, inter alia: - a. Any assets denominated in foreign currencies held at, or which are claims on, domestic institutions (i.e., institutions headquartered domestically, but located either domestically or abroad, or institutions headquartered abroad, but located domestically). Also excluded are all foreign currency claims of the NBU on domestic banks, and NBU deposits held at the Interbank Foreign Currency Exchange Market and domestic banks for trading purposes. - b. Any precious metals or metal deposits, other than monetary gold and gold deposits, held by the NBU. - c. Any assets that correspond to claims of commercial banks in foreign currency on the NBU and any reserve assets that are (i) encumbered; or (ii) pledged as collateral (in so far as not already included in foreign liabilities, or excluded from reserve assets); or (iii) frozen. - d. Any reserve assets that are not readily available for intervention in the foreign exchange market, inter alia, because they are not fully under the control of the NBU or because of lack of quality or lack of liquidity that limits marketability at the book price. ### Reserve-related liabilities (for program purposes) - Comprise the following non-resident and resident categories: - All short-term liabilities of the NBU vis-à-vis nonresidents denominated in convertible foreign currencies with a remaining maturity of one year or less. - The stock of IMF credit outstanding. - The nominal value of all derivative positions (including swaps, options, forwards, and futures) of the NBU and general government, implying the sale of foreign currency or other reserve asset. (Note: This refers to the notional value of the commitments, not the market value.) - All foreign exchange liabilities of the NBU to resident entities (e.g., claims in foreign exchange of domestic banks, and NBU credits in foreign exchange from domestic market), which are not already excluded from reserve assets, but excluding foreign exchange liabilities to the general government, or related to deposit guarantees. ### Table A: Components of Net International Reserves (selected items and account codes) - 1. 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 codes (examples): 1100, 1107; 1011, 1017; 1201, 1202, 2746, minus 4746; 1211; 1212; IMF, Finance Department; 1300, 1305, 1307, 1308, minus 1306. - 2. 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 customers; Use of IMF credit. - NBU Balance Sheet and Memorandum Accounts codes (examples): 3201; 3210; 3211; 3401, 8805; 3230, 3232, 3233, 8815; IMF, Finance Department. - Note: Definitions correspond to the system of accounts in existence on October 31, 2022; adjustments will be made to reflect accounting classification changes during the program as needed. ### Adjustors to NIR targets - NIR targets will be adjusted downward by the full amount of the cumulative shortfall in external budget support financing disbursements (defined in paragraph 7) relative to the baseline projection (Table B). - NIR targets will be adjusted downward by the full amount of the cumulative shortfall in net issuance (gross issuance minus redemption and interest payments) of central government’s domestic foreign exchange securities relative to the amounts expected under the baseline (Table C). - Swap-related symmetric adjustors: - If the NBU converts any non-reserve currency provided under a central bank swap agreement into a reserve currency through an outright sale, NIR targets will be adjusted upward by the amount converted into a reserve currency at the time of conversion; NIR targets will be adjusted downward by the amount of reserve currency (both the principal and interest due) when the NBU repays the non-reserve currency provided under a central bank swap agreement. - If the NBU draws any reserve currency provided under a central bank swap agreement with maturity of over 1 year, NIR targets will be adjusted upward by the amount used with maturity over 1 year; NIR targets will be adjusted downward when the NBU repays these amounts. ### Table B: Gross Disbursements from IFIs and Official Sources (Cumulative in USD millions, at program exchange rates) - Header notes: Flows in USD million, cumulative from January 1, 2026 for 2026 and from January 1, 2027 for 2027, 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. Project support is in the form of loans. Includes the UK's ERA contribution. - Selected cumulative figures (columns correspond to test dates shown in source): - Total official support: 13,088 28,917 38,450 49,713 10,291 - Budget support: 12,696 28,022 36,952 46,931 9,886 - Loans: 11,792 26,946 35,423 45,065 9,768 - Grants: 903 1,076 1,528 1,867 118 - Project support: 2/392 895 1,498 2,782 405 - Footnote: 1/ Flows in USD million, cumulative from January 1, 2026 for 2026 and from January 1, 2027 for 2027, calculated at program exchange rates. ### Table C: Issuance of Central Government Domestic FX Securities (Cumulative in USD millions, at program exchange rates) - Header notes: Flows in USD million, cumulative from January 1, 2026 for 2026 and from January 1, 2027 for 2027, calculated at program exchange rates. - Selected cumulative figures (columns correspond to test dates shown in source): - Net issuance of central government domestic FX securities: -23 -34 -54 -54 -23 - Gross issuance: 450 864 1,298 1,298 450 - Repayment: 473 898 1,351 1,351 473 - Redemption: 450 864 1,298 1,298 450 - Interest: 23 34 54 54 23 ### Interaction with other program targets and adjustors (high-level) - General government direct borrowing from the NBU (ceiling, indicative target) defined as cumulative change in stock of outstanding claims on general government held by the NBU, measured at face value and adjusted for exchange rate valuation effects using program exchange rates (paragraphs 15–17). - Adjustors to the ceiling apply if: (i) shortfall in external financing (Table B); and (ii) primary issuances on government bonds during the 3-month period prior to request exceed percentage thresholds of actual redemptions over same period (Table D / paragraph 17). If conditions hold, ceiling adjusts upward by the smaller of (a) amount of shortfall in external financing adjusted for additional primary issuances; or (b) cap equivalent to gross borrowing of UAH50 billion every quarter. - Automatic upward adjustor applies if a 15-business-day interval for payments (per MOF–NBU Memorandum of Understanding) falls past the relevant test date: ceiling on general government direct borrowing from NBU is adjusted upward by the amount of the payment (paragraph 18). ### Floors and balances linked to NIR and fiscal adjustors - Floor on overall cash balance of general government excluding budget support grants (indicative target) measured cumulatively from January 1 each year; positive = surplus, negative = deficit. Composition detailed (paragraphs 19–21): includes net external financing; net domestic bond sales; minus change in government deposits at NBU and commercial banks; plus change in direct credit from NBU and commercial banks; plus other items (privatization, proceeds from seizures, proceeds from sales of confiscated Russian assets and bank account balances, net domestic borrowing by the Agency for the Restoration and Development of the Infrastructure of Ukraine); plus change in sub-accounts 3551 and 3559 for pre-payments. - For measurement of items in paragraph 20, exchange rates in paragraph 3 are used for specific items (net external financing except municipal disbursements and amortizations; net domestic bond sales; change in government deposits at NBU and commercial banks). Other items use current exchange rates. - Floor on Non-Defense Cash Primary Balance of the General Government excluding budget support grants (quantitative performance criterion) defined as Overall Balance excluding grants less interest payments less defense spending of the state budget general fund; measured cumulatively from January 1 each year (paragraph 22). - Adjustors for balances (Parts C and D): - Upward adjustment by full amount of any increase above projected stock of budgetary arrears in state budget and social funds (excluding arrears in territories in direct combat or temporarily occupied). - Automatic downward adjustor if cumulative proceeds from external budget support loans (in hryvnia evaluated at program exchange rates) fall short of program projections: floor adjusted downward by full amount of shortfall (consistent with adjustors in section B). - Automatic downward adjustor equal to full amount of government bonds issued for purposes of bank recapitalization and DGF financing, up to a cumulative maximum to be set in future reviews. Amount included in targets is zero. - Automatic upward adjustment equal to full amount of profits transferred by the NBU in excess of UAH 146.0 billion for all test dates in 2026. ### Other related quantitative definitions and mechanics - Tax revenues floor (excluding SSC) measured cumulatively from January 1 each year: sum of revenues under budget treasury codes 10000000 and 24140000; Single Social Contribution excluded (paragraph 23). - Table D (Adjustors for ceiling on general government direct borrowing from the NBU) provides projected redemptions (in UAH billions) and adjustment caps by test date; sample figures (Memo: Projected redemptions, as of January 14, 2026 and adjustment caps): - For test dates (Dec 31 2025; Mar 31 2026; Jun 30 2026; Sep 30 2026; Dec 31 2026): Adjustment cap amounts shown include 139 100 100; 100 100; 43.5; 47.5 43.7 50.0; 46.6; 123.9 103.6 109.1; 144.4 167.4 (presented in source table format). *Source: Technical Memorandum of Understanding, components and adjustors for Net International Reserves and related fiscal and monetary targets as specified in the source PDF.* ### 24. Social spending of general government is defined as the spending on social programs ### 24. Social spending of general government is defined as the spending on social programs ### Definition of social spending - Social spending of general government: spending on social programs through the General Fund and Special Funds and covers categories reflected in budget treasury code 2700. - Includes social insurance and social assistance programs on budget (including but not limited to social assistance to low-income families, housing utility subsidies, child support, support to internally displaced persons, etc.), and transfers to the Pension Fund. - Indicative Target: set in hryvnias on a cumulative basis starting January 1st of each calendar year. ### Ceiling on the General Government Domestic Arrears (Indicative Target) - Ceiling derived from definition in paragraph 11 of this TMU (excluding arrears of local governments) and reporting format set in paragraph 81 of this TMU. - Target is cumulative starting January 1st of each calendar year and covers arrears of the state budget (general and special funds) and social funds (as defined in paragraph 11). - Stock of arrears measured in that way will not exceed the stock of arrears at end December 2022. - Arrears computation excludes arrears accrued in territories that are or were in direct combat zones and temporarily occupied by Russia as of the applicable test date. ### Ceiling on Non-Accumulation of New External Debt Payments Arrears by the General Government (Continuous Performance Criterion) - Definition: arrears are external debt obligations of the general government not paid when due in accordance with relevant contractual terms (taking into account any contractual grace periods). - Excludes arrears on external financial obligations of the government subject to rescheduling. - For this PC, “external” is defined as debt payments to non-residents. ### Ceiling on Publicly Guaranteed Debt (Quantitative Performance Criterion) - Definition: ceiling applies to amount of guarantees issued by the central (state) government once the underlying debt is disbursed. - Ceiling for 2026 test dates: UAH 65.0 billion for all test dates in 2026. - Compliance: ceiling is compliant with the limit of 3 percent of current year revenues of the state budget general fund as defined in the Budget Code. - Coverage: applies to cumulative year-to-date amount of guarantees issued by the central (state) government from January 1, 2026 including guarantees to priority sectors. - Program exchange rates apply to all non-UAH denominated debt. - Excludes guarantees for NBU borrowings from IMF. - Automatic upward adjustor: for guarantees signed for selected projects financed by multilateral and bilateral donors (e.g., WB, EIB, EBRD, KfW). - In 2026, the adjustor will be consistent with total public investment projects approved for funding in the 2026 annual budget law. - Projects subject to the adjustor in 2026 will be discussed in subsequent program reviews, including as regards the annual budget law and debt sustainability objectives. ### Other Continuous Performance Criteria - During the period of the EFF, Ukraine will not: - (i) impose or intensify restrictions on the making of payments and transfers for current international transactions; - (ii) introduce or modify multiple currency practices; - (iii) conclude bilateral payments agreements that are inconsistent with Article VIII; - (iv) impose or intensify import restrictions for balance of payments reasons. ### Official Exchange Rate — Determination - Historical fixed rate: UAH/USD 36.5686 as set by the NBU, effective 9am on July 21, 2022, until October 3, 2023. - Since October 3, 2023: NBU transitioned to a regime of managed flexibility. - From October 3, 2023: NBU sets official hryvnia/US dollar exchange rate daily at the weighted average rate determined based on interbank market transactions using a two-stage cut-off system for transactions with extreme parameters. - Transactions used to calculate the official exchange rate: all tod, tom, and spot (T+2) USD purchase/sale transactions with a volume of USD 100,000 to USD 5 million inclusive between banks and between banks and the NBU, reported via trade information systems before 3 p.m. on the same day. - Official exchange rates for other currencies: determined by the NBU on the basis of the official exchange rate against USD and cross rates of the relevant foreign currencies. - Publication and effect: official exchange rates published daily on the NBU’s website no later than 3:30 pm of the day of the calculation and take effect the next business day. ### Reporting Requirements — National Bank of Ukraine (NBU) - Monthly sectoral balance sheets for the NBU and other depository corporations (banks) according to standardized reporting forms (SRFs): provided no later than the 25th day of the following month (except SRFs for end of reporting year, provided no later than the 41st day after the reporting year). - Weekly: daily operational data on the stock of net and gross international reserves, at both actual and program exchange rates; full breakdown of NBU accounts included in net international reserves; any additional information needed for IMF monitoring. - Monthly (no later than the 21st of the following month): balance data on the stock of net and gross international reserves and flows affecting net international reserves. - Monthly (no later than the 25th of the following month): data on the currency composition of reserve assets and liabilities. - Daily: information on total foreign exchange sales (including total from nonresidents and sales by clients in the interbank market, as well as any obligatory sales, if any) and approved foreign exchange demand in the interbank market, including Naftogaz foreign exchange purchases. - Daily: information on official foreign exchange interventions and intervention quotations in the breakdown agreed with IMF staff; results of any foreign exchange auctions. - Weekly: information as agreed with IMF staff on indicators of FX interventions approved by the NBU Board and related computations. - Immediate notification: any updates to FX interventions methodology documentation and any decisions that define these indicators. - 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.” - Daily publication on NBU website: daily holdings of domestic government securities, information on primary auctions and secondary market sales. - Provide to IMF: - daily holdings of government securities broken down by type of holders at primary market prices at the rate fixed on the day of auction; - information on domestic government securities sales, from the beginning of the year at the official rate as of the date of placement, and domestic government securities in circulation, by principal debt outstanding at the official exchange rate as of the date of placement; - reports on each government securities auction; - data on the purchase and redemption of domestic government bonds from the Ministry of Finance in the NBU’s portfolio; - monthly report on government securities holdings, in the format agreed with IMF staff, broken down by currencies and by holders—non-resident investors, resident non-bank, and resident banks (the latter broken down by bank group: State Participation, Foreign Banking, and Private Capital). - Daily: information on transactions (volumes and yields) on the secondary market treasury bills (including over-the-counter transactions and breakout for any NBU transactions). - Financial statements: provide to the IMF its financial statements (income and expenses, balances on the general reserves and the calculations of the profit distribution to the budget) for the current and, if available, projections for the following two years, as approved by the NBU’s Board; IMF to be notified immediately of any update. - Daily and monthly: data on NBU financing operations (including swaps or refinancing) of the banks of Ukraine, and on operations of mopping up (absorption) of liquidity from the banking system (including through the CDs issuance) in formats and timeliness agreed with IMF staff. - Monthly: information on collateral pledged to the NBU for loans (by bank and loan type as well as by collateral type, haircut, and currency). - Monthly: bank-by-bank information on NBU refinancing, broken down by operations (with indications of their settlement and maturity dates), and collateral pools broken down by asset types and securities (with values before and after haircuts). - Monthly reporting of NBU loans and collateral will separately identify which banks are under temporary administration or liquidation. - Monthly (but not later than 30 days after the expiration of the reporting month; end-of-year data by the 41st day): core FSIs for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group, as defined in the IMF Compilation Guide. - Daily and monthly (monthly not later than the 25th day after the termination of the report month; end-of-year by the 41st day): depository corporations surveys, including any additional information needed to monitor monetary policy and banking sector developments, in particular: - domestic claims, including 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; - information on balances of the funds of the government held at the NBU, including balances of 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. - Monthly: projections for external payments falling due in the next 12 months. - Quarterly (within 80 days following the end of the quarter): data on actual settlement of external obligations, reflecting separately principal and interest payments and actual outturns for both the public and private sectors. - Quarterly: stock of short- and long-term external debt for both public and private sectors. - Continuous: information on the stock of external arrears. - Daily: data on foreign exchange export proceeds and foreign exchange sales; data on import transactions for goods and services; data on amounts of foreign exchange transferred from abroad to the benefit of physical persons—residents and nonresidents—to be paid in cash without opening an account; data on foreign exchange wires from Ukraine abroad for current foreign exchange nontrade transactions on the basis of the orders of physical persons; data on sales and purchases of foreign exchange cash by individuals (incl. through banks, exchange offices, and UkrPoshta). - Weekly: data on volumes of noncash foreign exchange purchases on behalf of banks’ clients and banks broken down by reasons. - Monthly: data on certain transfers of non-cash FX from Ukraine to the benefit of non-residents. - Monthly: aggregated data on the number and amounts of e-limits granted to legal entities and physical individuals and on the transfer and purpose of foreign exchange outside Ukraine within the e-limits. - Monthly: data on foreign assets and liabilities of the overall banking system (excl. the NBU); data on banks’ open foreign exchange positions by main groups of banks; aggregated deposits broken down by households and legal entities, maturity, and by national and foreign currency; aggregated loans broken down by households and legal entities and by national and foreign currency. - Monthly: data on deposits and credits on the aggregated basis for the overall banking system (excl. the NBU) without deposits and credits of banks in liquidation starting from the beginning of 2014 and broken down by households and legal entities, as well as by national and foreign currency. - Weekly: data on foreign assets and foreign liabilities (broken down by domestic and foreign currency) for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group. - Monthly: foreign assets for individual banks in State Participation Group, Foreign Banking Group and Private Capital Group broken down by type (cash and deposits, government securities, nongovernment securities, loans, other) and foreign liabilities by type, holder, and remaining maturity (less than one month, one to three months, three to 12 months and over 12 months). For foreign credit lines from banks and for securities, provide rollover rates. - Monthly: bank-by-bank data for the largest 35 banks on the liquidity ratio and amounts of cash and cash equivalents, available funds in NBU accounts (excl. reserve requirements), correspondent accounts with well-known international banks (excl. encumbered accounts), and deposits from customers. - Daily: bank-by-bank data for State Participation Group, Foreign Banking Group, and Private Capital Group banks — total assets and liabilities; loans and claims (by households, legal entities, and banks); and foreign exchange net open position, reported by domestic and foreign currency. Deposits data reported by households and legal entities and by maturity (current accounts, saving accounts, and time deposits). - Aggregate banking sector and groups: provide data on deposits and credits excluding banks in liquidation since 2014. - Daily: aggregated data on main currency flows, including government foreign receipts and payments by currencies as well as interbank market operations by currencies; daily information on exchange market transactions including the exchange rate. - Monthly: information on reserve requirements at the individual bank level, including the breakdown between the reserve requirements fulfilled by reserves and that by government securities. - Monthly: bank-by-bank for State Participation Group, Foreign Banking Group and Private Capital Group banks the 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). - Weekly: average interest rate on interbank borrowings (by domestic and foreign currency, and by maturity—overnight, 1–7 days, and over one week). - Monthly, in agreed format: data for the entire banking sector, and on an aggregated and bank-by-bank basis for State Participation Group, Foreign Banking Group and Private Capital Group banks — risk weighted assets and other risk exposures; 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; and 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. - Monthly, in agreed format: data for the entire banking sector and on a bank-by-bank basis for State Participation Group, Foreign Banking Group and Private Capital Group banks the 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 categories); provisions on loans and claims (by borrower categories); large exposures (loans equal to or greater than 10 percent of equity), refinanced loans, and restructured loans (by households, legal entities, and banks); the 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). *Source: 1ukrea2026001-source-pdf - 24. Social spending of general government is defined as the spending on social programs* ### 52. The NBU will provide the IMF, on a monthly basis, in an agreed format, bank-by-bank for ### Reporting and Data Provision Requirements (paragraphs 52–93) ### A. National Bank of Ukraine (NBU) — Banking sector reporting - Monthly, bank-by-bank (in an agreed format) for State Participation Group, Foreign Banking Group and Private Capital Group banks: - Amount of deposits of related parties (by domestic and foreign currencies, and households and legal entities). - Deposits of related parties pledged as (cash cover) collateral (by domestic and foreign currencies, and households and legal entities). - Other liabilities to related parties (by domestic and foreign currencies). - Related-party loans (by households, legal entities, and banks). - Counterparty names and amounts of the largest 20 loans to related parties. - Collateral for loans and claims on related parties (by type of collateral, legal entities, households, and banks in domestic and foreign currencies, as well as by borrower classification categories). - Provisions on loans and claims on related parties (by households, legal entities, and banks in domestic and foreign currencies, as well as by borrower classification categories). (Paragraph 52) - Monthly, aggregate and bank-by-bank and by region: - Data on loans and provisions (by households and legal entities, domestic and foreign currencies, and by debtor classification categories), and by asset class (e.g. corporate, and retail.). - Deposits (by households and legal entities, and domestic and foreign currencies). - Due from banks (by domestic and foreign currencies). (Paragraph 53) - Quarterly, for the entire banking sector and bank-by-bank for banks in the State Participation Group, Foreign Banking Group and Private Capital Group: - Nonperforming loans (NPLs), including migration from NPLs to performing loans (PLs); migration from PLs to NPLs. - The form of NPL repayments (cash, loan sales, collateral sales, etc.); write-offs; and other factors (e.g., exchange differences and revaluations). - Comparison with banks’ respective timebound plans for reducing NPLs once these are approved. (Paragraph 54) - Monthly, for the entire banking sector and bank-by-bank by bank groups (State Participation Group, Foreign Banking Group and Private Capital Group): - Cumulative income statements, including: - Total revenues; interest revenues (from loans to households, loans to legal entities, interbank loans, placements with the NBU, securities); revenues from fees and commissions. - Total expenses; interest expenses (on deposits to legal entities, deposits to households, interbank borrowing, borrowing from NBU, securities issued); fees and commissions paid; salaries and other staff compensation; other operational expenses. - Net earnings before loan loss provisions; loan loss provisions; net earnings after loan loss provisions; taxes paid; and net earnings. (Paragraph 55) - Upon request: - Banks’ net expected outflow of cash for a 30-day period. (Paragraph 56) - Monthly, bank-by-bank: - Amounts by which regulatory capital has been increased for State Participation Group, Foreign Banking Group and identified Private Capital Group banks, disclosing the instrument or transactions (e.g., capital injection, conversion of subordinated debt to equity, etc.). (Paragraph 57) - Monthly, for the entire banking sector and bank-by-bank by bank groups (State Participation Group, Foreign Banking Group and Private Capital Group): - Data on liquid assets in local currency and all currencies, including holdings of cash, correspondent accounts with banks, domestic government debt securities (including benchmark domestic government debt securities), funds held at the NBU in correspondent accounts, NBU’s certificates of deposit (including NBU’s limited three-month certificates of deposit), amount of reserve requirements (required reserve ratio), the average value of the liquidity coverage ratio LCRall currencies, LCRfc. (Paragraph 58) - Monthly: - Inform IMF of any regulatory and supervisory measures against banks violating NBU regulations on capital adequacy, liquidity ratio, large exposures, and related or connected lending, as well as decisions on declaring a bank as problem or insolvent, including banks whose license has been revoked without declaring the bank insolvent. (Paragraph 59) - Quarterly, detailed balance of payments data in electronic format: - Continued provision within 80 days after the end of the quarter. (Paragraph 60) - As events occur: - 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. (Paragraph 61) - As changes occur: - Inform IMF staff of any changes to reserve requirements for other depository corporations. (Paragraph 62) - Communicate (electronically) any changes in accounting and valuation principles applicable to balance sheet data and notify staff before introducing any changes to the Charts of Accounts and reporting forms of both the NBU and the commercial banks. (Paragraph 63) - Internal controls and external audit deliverables: - NBU Internal Audit Department will provide an assurance report to the Fund, no later than six weeks after each test date, confirming that (i) the monetary data are in accordance with program definitions and have been verified and reconciled to accounting records; and (ii) that there have been no changes to the chart of accounts or valuation methods that would impact the data reporting. (Paragraph 64) - NBU will provide the IMF with a copy of the annual management letter from the external auditor within six weeks of completion of each audit; in effect for the duration of the arrangement and for as long as credit remains outstanding. (Paragraph 65) - Monthly, to IMF and Ministry of Finance: - Data on the monthly coupons and principal to be paid for the period till the end of current and next year (in hryvnia and foreign currency, separately) on the outstanding stock of government securities held by NBU and the public (broken down by resident banks, resident non-bank; and non-resident investors). Data on resident banks to be broken down by bank group (State Participation, Foreign Banking, and Private Capital) and include ISIN-level. - Annually, information on hryvnia-denominated securities that are indexed (i.e., to inflation; USD), broken down by the type of the owner. (Paragraph 66) - Monthly, detailed information on the government’s deposits at the NBU and at commercial banks: - Breakdown of currency consistent with paragraph 20 and in an agreed format. (Paragraph 67) ### B. Deposit Guarantee Fund (DGF) - Monthly, data on the total number and volume of household deposits broken down in groups by deposit size: - Reported bank-by-bank for the largest 35 banks and on aggregate for the remaining banks. (Paragraph 68) - Monthly, bank-by-bank for all banks: - Amount of insured deposits and total household deposits, reported by domestic and foreign currency in an agreed format. (Paragraph 69) - Monthly, bank-by-bank for banks under liquidation and under provisional administration: - Total insured deposits and remaining insured deposits to be paid by the DGF, reported by domestic and foreign currency in an agreed format. (Paragraph 70) - Monthly: - Financial position of the DGF and financing arrangements including financing contracted from MoF, including information about the cash balance, bond holdings, credit lines, and loans, reported in an agreed format. (Paragraph 71) - Monthly, one-year forecast: - Amount and type of financial resources that the DGF expects to receive from MoF, NBU and other entities; amount DGF expects to pay out to insured depositors in banks in liquidation; amount of asset recoveries expected by DGF; reported in an agreed format. (Paragraph 72) ### C. Ministry of Finance (MoF) — Fiscal and debt reporting - Monthly consolidated balances (end-month) of other non-general government entities, including SOEs, holding accounts at the Treasury: - Provided no later than 25 days after the end of the month. (Paragraph 73) - Treasury daily and periodic operational reporting: - Continue providing reports on daily operational budget execution indicators, daily inflow of borrowed funds (by currency of issuance) to the state budget and expenditures related to debt service (interest payments and principals) including data on government foreign exchange deposits, in a format agreed with IMF staff. - 10-day and monthly basis data on the execution of the state, local, and consolidated budgets on the revenue side and data on revenues from the social security contributions, including by oblast breakdown. - Monthly data on funds deposited with the Single Treasury Account, 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. (Paragraph 74) - Monthly and quarterly treasury reports in electronic form: - Monthly and quarterly treasury reports, including on accounts payable by budget institutions no later than 25 and 35 days after the end of the period, respectively. - Final fiscal accounts at the end of each fiscal year, no later than March of the following year. - Reports provide expenditure data by programs and key spending units, as well as based on standard functional and economic classifications. - Quarterly reports contain standard information on budget expenses to cover called government guarantees. (Paragraph 75) - Public wage bill and program expenditure reporting: - Report data on the public wage bill (excluding SOEs) in line with the template agreed with IMF staff, including all payment categories, including defense wages. - Provide quarterly Treasury reports on expenditure under the medical guarantee program by economic classification. (Paragraph 76) - Quarterly reporting on municipal borrowing: - Report information on municipal borrowing and amortization of debt in format agreed with IMF staff. (Paragraph 77) - Bond redemptions and placements: - Together with NBU, monthly information about redemptions of domestic bonds and bills in favor of residents (banks, non-banks) and non-residents. - Together with NBU, weekly information on face value of government bonds redeemed and face value of government bonds placed during the week. (Paragraph 78) - Monthly cash balance and budget execution: - Report to IMF no later than 15 days after the end of the month the cash balance of the general government, with details on budget execution data for privatization receipts of the state and local governments; disbursements of external credits (including budget support and project loans including on lending) to the consolidated budget and amortization of external debt by the consolidated budget; net domestic borrowing of the general government, including net T-bill issuance, issuance of other government debt instruments, and change in government deposits. (Paragraph 79) - Quarterly project financing data: - In electronic form on a quarterly basis, no later than 25 days after the end of the quarter, an updated list of project financing credits (distinguishing grant and loan financing) to be disbursed to the special fund of the State Budget of Ukraine (project-by-project basis), as well aggregated cash expenditures for such projects through the most recent month. (Paragraph 80) - Monthly stock of budgetary arrears: - Provide data on the stock of all budgetary arrears on a monthly basis, 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 will report monthly data on accounts payable for state and local budgets (economic classification of expenditures). - Pension Fund will provide monthly reports on net unpaid pensions to individuals who resided or continue to reside in territories that are or were in direct combat zones and temporarily occupied by Russia. The provided information will include defense and law-enforcement. (Paragraph 81) - Quarterly decomposition of own revenues of budgetary institutions: - Provide decomposition of own revenues (budget treasury code 25000000) into proceeds from fees for services provided by budget institutions (budget treasury code 25010000) and other sources (budget treasury code 25020000) no later than 25 days after the end of the quarter. (Paragraph 82) - Monthly external debt and guarantees reporting: - Monthly, no later than 25 days after the end of each month, provide amounts and terms of all external debt contracted or guaranteed by the central government, including external and domestic credit to key budgetary spending units as well as nongovernment units that is guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients). - Monthly information, no later than 25 days after the end of each month, on balances of sub-accounts 3551 and 3559. - Monthly information, no later than 25 days after the end of each month, on the utilization of ERA financing. - Semi-annual information, no later than 25 days after receiving information from the European Commission, on the 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. (Paragraph 83) - Quarterly debt stock and disbursement forecasts: - In electronic form on a quarterly basis, no later than 25 days after the end of the quarter, provide (a) data on the outstanding stock of domestic and external debt of the state and local budgets (including general and special funds); (b) the monthly forecasts of planned and actual external debt disbursement, amortization, and interest payments (including general and special funds), broken down in detail by creditor categories and currency as agreed with Fund staff. - Report accumulation of any budgetary arrears on external and domestic debt service. (Paragraph 84) - Semi-annual bond-by-bond (loan-by-loan) data: - Provide disaggregated bond-by-bond (loan-by-loan) data regarding the debt stock, associated payments, and disbursements no later than 25 days after the end of Q2 and Q4. (Paragraph 85) - Monthly reporting on government-guaranteed credit: - Provide data on external and domestic credit to key budgetary spending units as well as nongovernment units that is guaranteed by the government (amount of sovereign guarantees extended by executive resolutions and actually effectuated; total amount of outstanding guarantees and list of their recipients) on a monthly basis no later than 25 days after the end of the month. (Paragraph 86) - Quarterly reporting for social and extra-budgetary funds: - Provide data on the approved budgets and quarterly operational data (daily for the Pension Fund only) on the revenue, expenditures, arrears, and balance sheets of the Pension Fund, Employment Fund, and any other extra budgetary funds managed at the state level no later than 50 days after the end of each quarter (each month in case of the Pension Fund). - Any within-year amendments to the budgets of these funds will be reported within a week after their approval. - Annual financial statement including final fiscal accounts of those funds at the end of each fiscal year no later than April of the following year. (Paragraph 87) - Monthly, recapitalization costs reporting: - Provide, no later than 15 days after the end of each month, monthly data on the budgetary costs associated with the recapitalization of banks and SOEs, including upfront impact on cash balance and costs associated with payment of interests, including respective changes as a result of supplementary budgets. - Provide quarterly performance reports for the Fund for Entrepreneurship Development. The registry of fiscal risks would become available to IMF staff on semi-annually or, if available, on a sooner basis. (Paragraph 88) - Quarterly, listing of tax exemptions (STS & SCS): - STS and State Customs Service will provide a listing of all tax exemptions granted, specifying the beneficiary, duration, and estimated subsequent revenue loss for the current fiscal year, no later than two months after the end of the quarter. Revenues foregone include losses from the simplified tax regime by groups of beneficiaries. (Paragraph 89) - Monthly, VAT refunds reporting (STS): - Provide monthly information, no later than 25 days after the end of the month, in the 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; and (vii) stock of VAT refund arrears (unsettled VAT refund claims submitted to the STS more than 74 days before the end of period). (Paragraph 90) - Monthly tax revenue and arrears reports (STS): - 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. (Paragraph 91) - Quarterly tax appeals data (STS): - Provide on a quarterly basis but no later than 25 days after the end of each quarter information on the number of tax appeals and the associated disputed amounts received by the STS in each reporting period, the number of internally resolved appeals indicating the number resolved in favor of the controlling body, in favor of taxpayer and partial satisfaction. (Paragraph 92) - Monthly information on 5-7 -9 program loans: - Provide on a monthly basis information about the number and amount of loans under the 5-7 -9 program as well as a breakdown by sectors of loans. (Paragraph 93) *https://www.imf.org/-/media/files/publications/cr/2026/english/1ukrea2026001-source-pdf.pdf* ### 94. For each month, no later than the 25th of the following month, Naftogaz Group and the ### 1ukrea2026001-source-pdf - 94. For each month, no later than the 25th of the following month, Naftogaz Group and the ### Reporting requirements for energy and SOE financials (paragraphs 94–96) - Naftogaz Group and the GTSO: - For each month, no later than the 25th of the following month, will each provide IMF staff with information in electronic form (in an agreed format) on their cash flows. - The report from Naftogaz Group will also provide information on volumes and prices of gas purchases and sales (purchase of domestic and imported gas, sales to households, heating utilities, budget institutions, and industries), and the main revenue, expenditure, and financing items. - On a monthly basis, Naftogaz will provide to IMF staff updated information on the company’s financial liabilities, with a schedule of loan-by-loan interest and principal payments. - Ministry of Economy (quarterly, no later than 80 days after quarter-end): - Consolidated information from the financial statements of the 10 largest SOEs, including data on: - (a) gross profit/losses; - (b) net financial results; - (c) subsidies received from the budget; - (d) guarantees granted from the budget; - (e) stock of debt, broken down by domestic and foreign; - (f) taxes and dividends paid; - (g) wage arrears; and - (h) other payment arrears. - Agency for the Restoration and Development of the Infrastructure of Ukraine: - Will provide monthly reports on the execution of budgetary programs associated with road construction and maintenance, including borrowing (disbursements, interests, and amortization) in line with the format agreed with IMF staff. ### State Statistics Service revisions (paragraph 97) - If any revisions of gross domestic product occur, the State Statistics Service will 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. - Authorities are encouraged to make such revisions publicly available, following best practices under the SDDS. ### Ministry of Social Policy reporting (paragraph 98) - 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. - Data presentation: - Presented in an agreed excel format. - For each program, including IDPs, the data will show: - (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. ### Supplementary information: Capacity to Repay (CtR) assurances and statement by Ukrainian authorities - CtR assurances: - Staff received confirmation that Ireland and Iceland have also provided capacity to repay (CtR) assurances. - The Irish and Icelandic authorities informed staff of their decisions to join the significant group of creditors/donors providing assurances about Ukraine's CtR on February 17 and 18, respectively. - The full list of countries now comprises: Austria, Belgium, Canada, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Japan, Iceland, Ireland, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Kingdom, and the United States. - Date noted: February 25, 2026. - Statement by Mr. Vladyslav Rashkovan, Alternate Executive Director for Ukraine (February 26, 2026): - Expresses appreciation for the comprehensive staff report, Peer-Reviewed Assessment annex, and constructive engagement. - Notes that the 2023 EFF program played a pivotal role, with eight reviews completed on time and most conditionality met between March 2023 and June 2025. - Emphasizes continued war-related disruptions: intensified attacks on critical energy infrastructure and civilian objects causing massive local blackouts and heating and water supply disruptions. - Authorities assess insufficient time under the current EFF to restore debt sustainability and external viability given persistent exogenous shocks, and have requested a new four-year EFF to provide additional time to achieve objectives and address balance of payments needs. - Authorities assert that all five criteria under the IMF’s policy for Lending Under Exceptionally High Uncertainty (EHU) continue to apply for Ukraine and that the EHU framework should be maintained. - Reaffirms commitment to program objectives: anchoring macroeconomic stability, restoring fiscal and debt sustainability, ensuring price stability, safeguarding financial stability, guarding against external imbalances, strengthening fiscal and financial sector institutions, improving governance, and pursuing EU accession. ### Macro outlook, war impacts, and reconstruction needs (selected findings) - War and labor: - Labor force participation is slowly increasing, but overall employment remains well below pre-invasion levels, with more than a quarter of Ukraine’s population still displaced, either internally or abroad. - Projections point to continued increases in real wages in 2025–2027. - Authorities plan Labor Code amendments to reduce opportunities for disguised employment. - Energy sector attacks and responses: - Naftogaz reported a record of 229 attacks on its facilities in 2025 alone — more than in the previous three years combined. - These attacks caused a substantial increase in gas imports to compensate for loss of domestic production. - Priority measures: installing more distributed generation (gas turbines, renewables, and mobile generators), reinforcing critical substations, expanding cross-border electricity links, securing financing for emergency gas purchases, and accelerating repairs and emergency replacements. - Growth and damage estimates: - Real GDP expanded by 1.8 percent y/y in 2025, according to preliminary data published by the State Statistics Service of Ukraine, marking a slowdown from 3.2 percent y/y growth in 2024. - Growth projections: 2.8 percent in 2027 and 3.7 percent in 2028. - RDNA5 estimates (as of December 31, 2025): - Total war-related damage: US$195.1 billion, about 10.8 percent higher than last year. - Socioeconomic losses: US$666.7 billion, a 13.2 percent increase since RDNA4. - Recovery and reconstruction needs: US$587.7 billion over a 10-year horizon, equivalent to nearly three times Ukraine’s 2025 GDP. - Inflation and monetary policy: - Both consumer and core inflation slowed to 8 percent y/y by December 2025. - The deceleration in inflation began in June 2025 and continued through December 2025. - Drivers of lower inflation: higher harvests and moderation in labor market pressures. - The National Bank of Ukraine (NBU) kept inflation and exchange rate expectations in check throughout 2025. *Source: Extracted from the provided IMF supplementary information and related sections.* ### 2025. However, inflation expectations of most respondent groups remained elevated. ### 1ukrea2026001-source-pdf - 2025. However, inflation expectations of most respondent groups remained elevated. ### Inflation outlook and monetary policy - Headline inflation slowed to 7.4 percent y/y in January 2026; core inflation slowed to 7.0 percent y/y in January 2026. - Inflation is expected to moderate in 2026, declining in the coming months, primarily reflecting the remaining effects of higher harvests in 2025. - Massive damages in the energy sector will put pressure on prices through both market and administrative mechanisms, causing moderate acceleration of inflation in the second half of the year to 7.5 percent by year-end 2026. - NBU forecasts: - Inflation to slow to 6 percent in 2027. - Inflation to reach the central bank’s target of 5 percent in 2028. - Factors supporting disinflation: normalization of labor market conditions, lower imported inflation, gradual increases in harvests, the NBU’s monetary policy measures, and recovery of the energy sector (while businesses’ large expenses on energy independence will continue to put pressure on prices for some time). - Monetary policy action: - In January 2026, the NBU Board cut the key policy rate by 0.5 pp, to 15 percent, starting an interest rate easing cycle. - Monetary conditions will remain sufficiently tight to maintain FX market sustainability and bring inflation back toward its 5 percent target over the policy horizon. - The NBU will respond flexibly to changes in the distribution of risks: - Baseline scenario foresees a gradual reduction in the KPR over the forecast horizon. - If risks to price dynamics increase, the NBU will refrain from easing further and will take additional measures if required. - If inflationary risks weaken, faster cuts in the KPR than foreseen by the revised macroeconomic forecast will be signaled. ### Exchange rate policy and reserves - Managed exchange rate flexibility regime allows adjustments to shocks while keeping expectations anchored; the NBU does not target or defend a specific exchange rate level at the expense of international reserves. - International reserves have increased substantially since the onset of the war, exceeding US$ 57 billion by late December 2025. - To address the war-related structural FX deficit of the private sector, the NBU channels foreign currency from the public sector (received mostly as international aid) into the economy: - “Structural” FX interventions are operationally distinct from smoothing interventions and are smaller in volume than official financing inflows and government FX sales to the NBU. - Smoothing FX interventions have remained moderate in both frequency and scale. - Market developments in 2025: - The share of FX market transactions conducted without the NBU averaged 53 percent in 2025, compared with 29 percent in October 2023. - Public demand for foreign currency remains subdued, and the spread between official and cash exchange rates is minimal. - Policy stance: maintain adequate FX reserves throughout the program; gradual, conditions-based easing of FX controls in line with the FX liberalization roadmap. ### Financial sector resilience and reforms - Ukraine’s financial sector remains stable and contributes to economic recovery despite extreme wartime challenges. - Banks: - Steady growth in banks’ loan portfolios and active investment in internal infrastructure indicate a growing role as financial intermediaries. - Net loan portfolio in hryvnia reached pre-invasion levels in a little more than two years and has continued to increase since then. - Lending has grown at a rate of over 30 percent y/y in recent years. - Penetration of corporate loans relative to GDP increased for the first time since the start of the full-scale invasion, aided by the Lending Development Strategy launched in 2024. - Regulatory alignment and progress: - Objective to align regulatory and supervisory frameworks with EU standards. - Banking equivalence rate reached an estimated 78 percent as of January (this year), up from around 50 percent in 2022. - Progress in non-bank financial market following the “split” reform; significant advances in the insurance market (removal of undercapitalized firms and entities with opaque ownership; updated legislation for key products). - Authorities aim to complete most approximation to the acquis in the financial sector by end-2027, with support from the new EFF arrangement. - Capital markets development: - Authorities support the new EFF program’s focus on capital markets development and Annex VI policies to strengthen NSSMC governance. - FSC approved an updated Strategy of Ukrainian Financial Sector Development to fulfill 2023 EFF obligations. - Draft concept note (May 2025) to close gaps in market instruments and infrastructure to support reconstruction and recovery through inward private investment. - Memorandum of Cooperation signed to establish vertically integrated capital markets infrastructure (trading, clearing, settlement, depository record-keeping); legislative amendments developed and draft law forwarded to the Cabinet of Ministers for submission to Parliament. - Target model for capital market infrastructure: - Creation of a vertically integrated holding entity including a stock exchange, a majority stake in the CCP (Settlement Center), and 25 percent of the CSD (National Depository of Ukraine). - Detailed action plan and roadmap to optimize NDU ownership approved by the FSC. - Management of the State’s stake in the National Depository of Ukraine’s authorized capital transferred from the NSSMC to the NBU by Cabinet of Ministers decree. ### Budget and fiscal policies - 2026 Budget was adopted in December 2025, aligned with program parameters, and served as a prior action for the new IMF arrangement. - Prior actions achieved to de-shadow the economy and boost competition: - Decree to level the playing field for VAT payers in competitive public procurement tenders. - Draft of a new Labor Code submitted to Parliament to amend, among other things, the definition of “employment” to reduce disguised employment opportunities. - Planned tax measures to mobilize additional revenues in 2026 and beyond include: - Taxing income earned through digital platforms. - Eliminating the tax exemption for imports through small-value postal packages. - Removing VAT exemptions from simplified regimes by making VAT registration mandatory, effective January 1, 2027, for simplified taxpayers with turnover exceeding the general VAT registration threshold, which will be raised moderately but will not exceed UAH 4 million. - Revenue mobilization and administration: - Tax collections have continued to exceed expectations. - National Revenue Strategy (NRS) reforms remain high priority; monitoring NRS implementation plans to ensure accountability in a comprehensive reporting framework. - Compliance review of Ukrainian tax legislation with EU directives starts in June 2025 and will determine steps for revenue mobilization measures in 2027–2028. - Customs reforms underway: selection process for a new Head of the State Customs Service (SCS) is on track and a set of KPIs has been prepared. - International budget support: - Since the start of Russia’s full-scale invasion, Ukraine received US$166 billion in budget support from international partners (as of December 31, 2025). - Under the 2023 EFF program, disbursements from all donors reached US$125 billion. - Under the G7’s US$50 billion Extraordinary Revenue Acceleration (ERA) Loans initiative, Ukraine has received US$39 billion, including EUR 18.115 billion from the European Union. - Authorities stress that full, timely, and predictable disbursements on terms consistent with debt sustainability are critical to safeguarding macroeconomic stability and uninterrupted program implementation. - Debt and public investment management: - Authorities’ goal: restore debt sustainability and ensure full program financing, including in a downside scenario. - August 2024 Eurobond exchange was a major step toward restoring debt sustainability. - Exchange of outstanding GDP-linked warrants into a new series of Eurobonds was recently concluded. - Treatment of remaining external commercial claims is in progress to help close financing gaps, reduce gross financing needs, and place debt on a sustainable path. - Planned legal amendments to improve integration of PIM into medium-term budget planning and fiscal risk management. - 2024–2028 Public Investment Management Reform Roadmap and Action Plan cover full project lifecycle; by August 2026 the Strategic Investment Council will approve the SPP update for the 2027 Budget. ### Structural reforms, governance, and anti-corruption - Governance and anti-corruption reforms are central to program objectives: mobilizing revenues, curbing the shadow economy, and leveling the playing field for investment and competition. - Commitments on anti-corruption institutions: - Authorities committed to refraining from measures that would diminish the independence, powers, or resources of NABU, SAPO, or the High Anti-Corruption Court (HACC). - Advance a legal framework for independent, reliable, timely, and high-quality forensic services for investigations under NABU’s authority, developed in consultation with relevant institutions and stakeholders. - Preventive anti-corruption measures: - Strengthen risk-based approaches and transparency. - Advance measures to enhance asset declaration verification and lifestyle monitoring via new NACP regulations establishing a risk-based verification system prioritizing senior officials in identified high-risk areas (such as customs and energy). - Commit to an independent external audit of the NACP to assess effectiveness and propose options to address shortcomings. - Strengthen public sector accountability through continued reforms of the Accounting Chamber of Ukraine (ACU), including steps to fill ACU board vacancies in line with the strengthened legal framework. - AML/CFT framework: - Continue strengthening AML/CFT in a risk-based manner to support procurement oversight, tax compliance, and integrity safeguards. - Due diligence related to politically exposed persons should remain proportionate and consistent with FATF standards. - Advance reforms to strengthen the beneficial ownership framework to enhance procurement transparency and detect conflicts of interest. - Leverage AML tools to address tax crimes and improve compliance; prepare an action plan to address gaps identified in a recent IMF TA-supported review of the Financial Intelligence Unit framework. - State-owned enterprises (SOEs) and energy sector reforms: - Strengthen SOE governance, transparency, and contain quasi-fiscal activities as macro-critical priorities. - Commitments include strengthening supervisory boards and selection procedures, implementing the State Ownership Policy action plan, resuming transparent publication of financial statements and annual audits for largest SOEs, and strengthening public reporting on SOE performance and fiscal risks (including financial flows between the state and SOEs and operation of public service obligations). - Energy sector reform focus: - Restore SOE sustainability, reduce quasi-fiscal pressures, and enable reconstruction investment while protecting vulnerable households. - Undertake and publish technical analysis quantifying costs of quasi-fiscal activities from price caps and PSOs across electricity, gas, and heating; assess incidence of existing subsidies; outline reform scenarios for gradual cost recovery with appropriate social protection. - Advance a roadmap to liberalize energy markets and strengthen independence of the energy regulator (NEURC), including improvements in nomination procedures and regular independent assessments to reduce political interference. ### Concluding remarks and program financing assurances - Ukraine assessed to meet eligibility criteria for UCT-quality financing under the Fund’s policy on UCT lending under exceptionally high uncertainty. - Adequate safeguards provided in line with relevant IMF policies: - Firm financing assurances for the first 12 months of the program. - Specific and credible assurances for financing thereafter to restore debt sustainability in the baseline. - Credible assurances for the downside scenario have been provided. - Official creditors committed to a two-step creditor strategy, extending a debt service standstill on comparative terms. - A group of countries provided adequate assurance of Ukraine’s capacity to repay the Fund given exceptionally high uncertainty and tail risks. - Belgium, Luxembourg, and the Netherlands, among others, affirmed recognition of the Fund’s preferred creditor status for amounts currently outstanding and any purchases under the proposed extended arrangement, and undertook to provide adequate financial support to secure Ukraine’s ability to service obligations to the Fund. - Authorities’ view: a new EFF arrangement can accommodate a longer war, resolve Ukraine’s BoP problem, and restore medium-term external viability under both baseline and downside scenarios. - Authorities request the Board’s approval of the new IMF-supported program and agree with the publication of the report; reiterate commitment to sustained policy dialogue with the IMF, including support for EU accession objectives. *Source: 1ukrea2026001-source-pdf - 2025. However, inflation expectations of most respondent groups remained elevated.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1ukrea2026001-source-pdf.pdf_