Washington, DC:
At the request of the Ukrainian authorities, an International Monetary Fund
(IMF) team led by Mr. Gavin Gray held discussions in Warsaw with Ukrainian
officials, during March 8-15, 2023, on a 4-year economic program that,
subject to approval by the Executive Board, would be supported by the IMF
under the Extended Fund Facility (EFF).
Mr. Gavin Gray issued the following statement today:
“I am pleased to announce that the IMF team has reached staff-level
agreement with the Ukrainian authorities on a 4-year IMF-supported program,
with access requested of SDR 11.6 billion (about US$15.6 billion), or 577
percent of Ukraine’s quota. This agreement is subject to approval by the
IMF Executive Board, with Board consideration expected in the coming weeks.
“The staff-level agreement reflects the IMF’s continued commitment to
support Ukraine and is expected to help mobilize large-scale concessional
financing from Ukraine’s international donors and partners over the
duration of the program.
“In addition to the horrific humanitarian toll, Russia’s invasion of
Ukraine continues to have a devastating impact on the economy: activity
contracted by 30 percent in 2022, a large share of the capital stock has
been destroyed, and poverty levels have climbed. Acute macroeconomic
challenges persist due to the scale of the shock and the expansion of the
fiscal deficit. The authorities have nevertheless managed to maintain
macroeconomic and financial stability, thanks to substantial external
support and skillful policymaking. The authorities’ commitment to good
economic management was also evidenced by the strong performance under the
Program Monitoring with Board Involvement (PMB) (Press Release 23/46).
“A gradual economic recovery is expected over the coming quarters, as
activity recovers from the severe damage to critical infrastructure,
although headwinds persist, including the risk of further escalation in the
conflict. Developing a single baseline outlook scenario under exceptionally
high uncertainty is exceedingly challenging, as a range of outcomes are
plausible. On that basis, staff currently sees real GDP growth for 2023
ranging from -3 to +1 percent.
“The overarching goals of the authorities’ program are to sustain economic
and financial stability in circumstances of exceptionally high uncertainty,
restore debt sustainability, and support Ukraine’s recovery on the path
toward EU accession in the post-war period. The program has been designed
in line with the new Fund's policy on lending under exceptionally high
uncertainty, and strong financing assurances are expected from donors,
including the G7 and EU. In view of the exceptionally high uncertainty, the
requested IMF-supported program envisions a two-phased approach:
- The first phase, currently envisioned during the first 12-18 months of
the program, will build on the PMB, to strengthen fiscal, external, price
and financial stability by (i) bolstering revenue mobilization, (ii)
eliminating monetary financing and aiming at net positive financing from
domestic debt markets, and (iii) contributing to long-term financial
stability, including by preparing a deeper assessment of the banking sector
health and continuing to promote central bank independence. New measures
that might erode tax revenues will be avoided. The authorities are also
committed to continuing reforms to strengthen governance and
anti-corruption frameworks, including through legislative changes.
- The second phase would shift focus to more expansive reforms to entrench
macroeconomic stability, support recovery and early reconstruction, and
enhance resilience and higher long-term growth, including in the context of
Ukraine’s EU accession goals. During the second phase, Ukraine would be
expected to revert to pre-war policy frameworks, including a flexible
exchange rate and inflation targeting regime. In addition, fiscal policies
would focus on critical structural reforms to anchor medium-term revenues
through the implementation of a national revenue strategy, together with
strengthening public finance management and introducing public investment
management reforms to support post-war reconstruction. Enhancing
competition in the vital energy sector, while reducing quasi-fiscal
liabilities would complement the post-war reform efforts.
“The mission met with NBU Governor Pyshnyy and Finance Minister Marchenko,
and other senior public officials, and would like to thank the authorities
for the open and constructive discussions and the close collaboration that have brought us to today’s
staff-level agreement.”