IMF Executive Board Completes the Fifth Review of the Extended Fund Facility Arrangement for Ukraine
IMF News, October 18, 2024
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- IMF Executive Board Completes the Fifth Review of the Extended Fund Facility Arrangement for Ukraine
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- Published: October 18, 2024
Review outcome and financing
- The Executive Board completed the Fifth Review of the EFF arrangement for Ukraine, enabling a disbursement of about US$1.1 billion (SDR 834.9 million) to Ukraine, which will be channeled for budget support.
- This disbursement brings total disbursements under the IMF-supported program to US$8.7 billion.
- Ukraine’s 48-month EFF arrangement has access of SDR 11.6 billion (equivalent to US$15.5 billion, or about 577 percent of quota) and forms part of a US$151.4 billion support package for Ukraine.
- The program is described as fully financed with a cumulative external financing envelope of US$151 billion in the baseline and US$187 billion in the downside over the 4-year program period, including new commitments from the Extraordinary Revenue Acceleration Loans for Ukraine (ERA) initiative.
Program performance and reforms
- All end-June quantitative performance criteria and indicative targets were met.
- The authorities implemented prior action for the review and completed four structural benchmarks relating to:
- tax privileges,
- public companies affected by the war,
- customs reform,
- public investment management.
- Two structural benchmarks have been reset to allow more time for completion of the reform.
- All but one structural benchmark through end-September were completed; the missed structural benchmark has been reset to accommodate delays in the appointment process partly beyond the control of the authorities.
- The prior action for the review was implemented.
Macroeconomic outlook and risks
- The economy was more resilient than expected in the first half of 2024, with continued growth, moderate inflation, and adequate reserves bolstered by continued sizeable external support.
- The outlook for the remainder of 2024 and 2025 has worsened since the Fourth Review, largely due to sustained Russian attacks on Ukrainian energy infrastructure and uncertainty about the war; overall, the outlook remains subject to exceptionally high uncertainty.
- Preparedness is necessary to enable appropriate policy action should risks materialize.
Managing Director’s summary of key messages
- Russia’s war in Ukraine continues to bring a devastating social and economic toll on Ukraine.
- Macroeconomic and financial stability is being preserved through skillful policymaking by the Ukrainian authorities and substantial external support.
- Ukraine’s performance and commitment under the program continues to be strong.
- Ukraine’s financing needs remain large, driven by the continuing war. Timely and predictable external support—on terms consistent with debt sustainability—is essential to closing financing gaps and safeguarding stability.
- Decisive domestic revenue mobilization is critical to meet elevated spending needs, respond to shocks, and restore fiscal sustainability; this will require further tax policy measures and efforts to improve compliance and combat evasion, as envisioned under the National Revenue Strategy.
- Further strengthening of medium-term budgeting, fiscal risk frameworks and transparency, and public investment management should advance in support of these goals.
- The Eurobond exchange in August was an important milestone in the authorities’ strategy to restore debt sustainability; efforts to conclude remaining steps in line with the authorities’ strategy and the program’s debt sustainability objectives should continue.
- Continued exchange rate flexibility under the managed exchange rate regime will help strengthen resilience to external shocks. The recent uptick in inflation suggests limited room for further easing in the near term, though inflation remains well-anchored, and the FX cash market continues to show stability.
- A state-dependent and gradual approach to the easing of FX controls remains essential to safeguard FX reserves. Efforts to avoid monetary financing should continue.
- The financial sector remains stable; efforts should continue to strengthen bank resolution and supervision, governance, and contingency planning.
- Continuing reform momentum in anticorruption and governance, including ensuring effectiveness of anticorruption institutions and strengthening governance in the energy sector, is essential to contain fiscal risks, secure donor confidence and enhance growth, and support Ukraine’s path to EU accession.
Key economic and social indicators (selected; 2021–27 as reported)
- Nominal GDP (billions of Ukrainian hryvnias) 1/: 2021: 5,451; 2022: 5,239; 2023: 6,538; 2024: 7,542; 2025: 8,542; 2026: 9,715; 2027: 10,761.
- Real GDP (percent change) 1/: 2021: 3.4; 2022: -28.8; 2023: 5.3; 2024: 3.0; 2025: 2.5-3.5; 2026: 4.5; 2027: (no value listed).
- Contributions to real GDP (percent):
- Domestic demand: 2021: 12.9; 2022: -22.9; 2023: 13.9; 2024: 6.3; 2025: 5.1; 2026: 4.6; 2027: 4.3.
- Private consumption: 2021: 4.7; 2022: -16.8; 2023: 5.5; 2024: 3.1; 2025: 3.2; 2026: 3.8; 2027: 3.5.
- Public consumption: 2021: 0.1; 2022: 12.5; 2023: 2.6; 2024: -0.1; 2025: -1.0; 2026: -2.5; 2027: -2.0.
- Investment: 2021: 8.1; 2022: -18.6; 2023: 5.8; 2024: 3.3; 2025: 2.9; 2026: 2.7; 2027: (no value listed).
- Net exports: 2021: -9.5; 2022: -5.9; 2023: -8.6; 2024: -3.3; 2025: -2.6; 2026: 0.7; 2027: 0.2.
- GDP deflator (percent change): 2021: 24.8; 2022: 34.9; 2023: 18.5; 2024: 12.0; 2025: 10.5; 2026: 8.0; 2027: 6.0.
- Unemployment rate (ILO definition; period average, percent): 2021: 9.8; 2022: 24.5; 2023: 19.1; 2024: 14.2; 2025: 12.7; 2026: 10.4; 2027: 9.4.
- Consumer prices (period average): 2021: 20.2; 2022: 9.0; 2023: 7.7; 2024: 5.0.
- Consumer prices (end of period): 2021: 10.0; 2022: 26.6; 2023: 7.5; 2024: 6.6.
- Nominal wages (average): 2021: 20.8; 2022: 1.0; 2023: 20.1; 2024: 16.6; 2025: 17.1; 2026: 14.1; 2027: 10.6.
- Real wages (average): 2021: -16.0; 2022: 6.4; 2023: 10.2; 2024: (no value listed).
- Savings (percent of GDP): 2021: 9.7; 2022: 9.2; 2023: 5.2; 2024: 16.4.
- Private: 2021: 30.2; 2022: 24.6; 2023: 25.5; 2024: 15.7; 2025: 14.0.
- Public: 2021: -0.2; 2022: -13.1; 2023: -14.8; 2024: -16.3; 2025: -15.0; 2026: -5.1; 2027: 2.5.
- Investment (percent of GDP): 2021: 14.5; 2022: 12.1; 2023: 15.1; 2024: 17.3; 2025: 19.5; 2026: 21.0; 2027: 22.3.
- General Government (percent of GDP):
- Fiscal balance 2/: 2021: -4.0; 2022: -15.6; 2023: -19.6; 2024: -18.7; 2025: -19.2; 2026: -2.7.
- Fiscal balance, excl. grants 2/: 2021: -24.8; 2022: -26.1; 2023: -24.5; 2024: -20.0; 2025: -9.8; 2026: -3.8.
- External financing (net): 2021: 10.8; 2022: 16.5; 2023: 15.2; 2024: 18.2; 2025: 8.8.
- Domestic financing (net), of which: 2021: 1.6; 2022: 0.8; 2023: -0.6.
- NBU: 2021: -0.3; 2022: 7.3.
- Commercial banks: 2021: 1.5; 2022: -1.5.
- Public and publicly-guaranteed debt: 2021: 50.5; 2022: 77.7; 2023: 82.3; 2024: 95.6; 2025: 106.6; 2026: 107.6; 2027: 102.6.
- Money and credit (end of period, percent change):
- Base money: 2021: 11.2; 2022: 19.6; 2023: 23.3; 2024: 16.7; 2025: 13.2; 2026: 12.4.
- Broad money: 2021: 23.0; 2022: 13.3; 2023: 11.9; 2024: 10.1.
- Credit to nongovernment: 2021: 8.4; 2022: -3.1; 2023: -0.5; 2024: 21.5; 2025: 18.7.
- Balance of payments (percent of GDP):
- Current account balance: 2021: -1.9; 2022: -5.4; 2023: -8.1; 2024: -14.3; 2025: -10.5.
- Foreign direct investment: 2021: 2.0; 2022: 2.1; 2023: 4.9.
- Gross reserves (end of period, billions of U.S. dollars): 2021: 30.9; 2022: 28.5; 2023: 40.5; 2024: 42.6; 2025: 44.9; 2026: 49.1; 2027: 52.4.
- Months of next year's imports of goods and services: 2021: 5.4; 2022: 5.7.
- Percent of short-term debt (remaining maturity): 2021: 67.5; 2022: 64.3; 2023: 89.5; 2024: 106.2; 2025: 106.3; 2026: 118.3; 2027: 124.5.
- Percent of the IMF composite metric (float): 2021: 104.4; 2022: 103.6; 2023: 124.3; 2024: 113.5; 2025: 104.7; 2026: 104.0; 2027: 106.9.
- Goods exports (annual volume change in percent): 2021: 35.1; 2022: -43.7; 2023: -15.4; 2024: 6.2.
- Goods imports (annual volume change in percent): 2021: 17.0; 2022: -24.1; 2023: 7.0; 2024: 9.5.
- Goods terms of trade (percent change): 2021: -8.4; 2022: -11.6; 2023: 3.6; 2024: 0.3; 2025: -1.8; 2026: 1.2; 2027: 1.4.
- Exchange rate:
- Hryvnia per U.S. dollar (end of period): 2021: 27.3; 2022: 36.6; 2023: 38.0; 2024: …
- Hryvnia per U.S. dollar (period average): 2021: 32.3.
- Real effective rate (deflator-based, percent change): 2021: 27.5.
Policy recommendations and priorities
- Ensure timely and predictable external support on terms consistent with debt sustainability to close financing gaps and safeguard stability.
- Pursue decisive domestic revenue mobilization, including further tax policy measures and efforts to improve compliance and combat evasion under the National Revenue Strategy.
- Strengthen medium-term budgeting, fiscal risk frameworks and transparency, and public investment management.
- Continue steps to restore debt sustainability, including completing remaining elements of the Eurobond exchange strategy.
- Maintain exchange rate flexibility under the managed exchange rate regime and follow a state-dependent and gradual easing of FX controls to safeguard FX reserves.
- Continue to avoid monetary financing.
- Strengthen bank resolution and supervision, governance, and contingency planning in the financial sector.
- Continue anticorruption and governance reforms, ensuring effectiveness of anticorruption institutions and strengthening governance in the energy sector to contain fiscal risks, secure donor confidence, and enhance growth.
International Monetary Fund. Press Release No. 24/381, October 18, 2024.
