Washington, DC:
The Executive Board of the International Monetary Fund (IMF) approved today
a 48‑month extended arrangement under the Extended Fund Facility (EFF) with
an amount of SDR 11.6 billion (577 percent of quota or about US$15.6
billion). This arrangement is part of a US$115 billion total support
package for Ukraine. The Executive Board’s decision allows the immediate
disbursement of around SDR 2 billion (or US$2.7 billion).
The overarching goals of the authorities’ program are to sustain economic
and financial stability at a time of exceptionally high uncertainty,
restore debt sustainability on a forward-looking basis in both a baseline
and downside scenario, and promote reforms that support Ukraine’s recovery
on the path toward EU accession in the post-war period. The program,
together with financing assurances from the G7, EU and other donors, is
designed to solve Ukraine’s balance of payment problem and restore medium
term external viability. It is in line with the IMF's policy requirements
under the recently modified financing assurances policy (Press Release 23/78) on Upper Credit Tranche-quality financing for countries facing
exceptionally high uncertainty, with adequate safeguards for IMF lending.
In view of the exceptionally high uncertainty faced by Ukraine, its
IMF-supported program envisions a two-phased approach:
In the first phase of the program, envisaged during 2023-24, the focus will
be on (i) implementing a robust budget for 2023 and bolstering revenue
mobilization, including by avoiding new measures that might erode tax
revenues, (ii) sustaining steady disinflation and exchange rate stability,
including through maintaining adequate foreign exchange reserves, and (iii)
contributing to long-term financial stability, including by preparing a
deeper assessment of the banking sector health and further promoting
central bank independence. The authorities are also committed to
safeguarding and continuing reforms to strengthen governance and
anti-corruption frameworks, including through legislative changes. Social
spending will be safeguarded under the program.
The second phase of the program will shift focus to more ambitious
structural reforms to entrench macroeconomic stability, support the
recovery and early post-war reconstruction, and enhance resilience and
higher long-term growth, including in the context of Ukraine’s EU accession
goals. Ukraine would be expected to revert to pre-war policy frameworks,
principally a flexible exchange rate and inflation targeting, while
boosting productivity and competitiveness, strengthening institutions, and
tackling financial and energy sector vulnerabilities. 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.
Following the Executive Board discussion on Ukraine, Ms. Gita Gopinath,
First Deputy Managing Director, issued the following statement
[1]
:
“Russia’s invasion of Ukraine continues to have a devastating economic and
social impact. Activity contracted sharply last year, a large swathe of the
country’s capital stock has been destroyed, and poverty is on the rise. The
authorities have nevertheless managed to maintain overall macroeconomic and
financial stability, thanks to skillful policymaking and substantial
external support.
“The review of the 4-month Program Monitoring with Board Involvement (PMB)
was successfully completed. The authorities met all quantitative and
indicative targets and structural benchmarks. This established a strong
track record of policymaking despite the challenging circumstances.
“The 48-month extended arrangement under the Extended Fund Facility (EFF)
is built on a two-phased approach, starting with measures to anchor
macroeconomic and financial stability as well as to undertake critical
structural reforms as the war continues, followed by more ambitious
structural reforms to restore medium-term external viability, support
sustained growth and post-war reconstruction, and facilitate Ukraine’s path
to EU accession.
“Building on the PMB, robust policymaking remains essential. Near-term
priorities include (i) implementing a robust budget for 2023, while
avoiding new measures that erode tax revenues (ii) supporting steady
disinflation and exchange rate stability, including through maintaining
adequate FX reserves, (iii) preserving financial sector stability, and (iv)
carrying out essential governance and anti-corruption reforms. For the
medium-term, as conditions permit, the authorities plan to revert to
pre-war policy frameworks, principally a flexible exchange rate and
inflation targeting, while boosting productivity and competitiveness and
strengthening institutions.
“Risks to the EFF arrangement are exceptionally high. The success of the
program depends on the size, composition, and timing of external financing
on concessional terms to help close fiscal and external financing gaps and
restore debt sustainability on a forward-looking basis under the baseline
and downside scenarios. Moreover, the authorities’ track record of
undertaking ambitious policies when warranted, their readiness to undertake
contingency measures, and the frequent reviews in the first phase of the
program are risk mitigating factors.
“The program has been appropriately designed to resolve Ukraine’s balance
of payments problem and restore medium-term external viability in both a
baseline and downside scenario and, thereby, together with other safeguards
satisfies the Fund policy requirements on financing assurances for
UCT-financing under exceptionally high uncertainty.
“In conjunction with Ukraine’s capacity and commitment to implement the
program as well as strong engagement of multiple stakeholders, including
International Financial Institutions and the private sector, the bulk of
Ukraine's official bilateral creditors and donors has announced, through
the statements of the relevant Executive Directors at the Fund, a two-step
debt treatment together with provision of adequate financing assurances on
debt relief and concessional financing during and after the program to
support debt sustainability both in a baseline and downside scenario.
“A significant group of Fund shareholders reaffirm their recognition of the
Fund's preferred creditor status in respect of the amounts currently
outstanding to the Fund by Ukraine, plus any purchases under the extended
arrangement. These shareholders comprise the G7 and the following
countries: Belgium, Lithuania, the Netherlands, Poland, Slovak Republic,
and Spain. They 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.’’
Annex
Russia’s invasion of Ukraine continues to have a devastating economic and
social impact. Active combat is concentrated in eastern and southern
Ukraine, while continued attacks on critical energy infrastructure had a
severe social toll over the winter. Civilian casualties continue to rise,
and over a third of the population has been displaced. The war has had a
profound impact on the economy: activity contracted by around 30 percent in
2022, a large swathe of the country’s capital stock has been destroyed, and
poverty is on the rise. The authorities have nevertheless managed to
maintain overall macroeconomic and financial stability, thanks to skillful
policymaking and substantial external support.
Following two purchases under the Rapid Financing Instrument (RFI) in March
and October 2022 (the latter under the Food Shock Window)—that provided
cumulative financing of 100 percent of quota (US$2.7 billion)—the
authorities requested a 4-month Program Monitoring with Board Involvement
in December 2022. The authorities have performed strongly under the PMB,
achieving all quantitative targets and structural benchmarks.
In light of the significant Balance of Payment needs arising from the large
exogenous shock of the war, the authorities have requested a 48-month
extended arrangement under the Extended Fund Facility (EFF).
Program Summary
The authorities’ program for 2023-27, supported by the EFF, aims to help
secure macroeconomic and financial stability, catalyze external financing,
and provide a framework for structural policies that could lay the
foundations for post-war recovery and reconstruction, including in the
context of EU accession. The program will comprise a two-phased approach:
the first phase focuses on securing macroeconomic stabilization and
undertaking critical structural reforms while the war is still ongoing; the
second phase once active combat has subsided sufficiently, will focus on
further entrenching macroeconomic policies and embarking on a more
expansive set of structural reforms to restore medium-term external
viability, support sustained growth, and facilitate Ukraine’s path to EU
accession. Ukraine is assessed to meet the five principal criteria for
eligibility for Fund UCT-quality financing under the Fund’s policy on UCT
lending under exceptionally high uncertainty.
Fiscal policy.
In the near term, fiscal policies will focus on ensuring adequate resources
for priority spending, maintaining a strong tax revenue base, and
preserving fiscal and debt sustainability. Measures that erode tax revenue
should be avoided. Over the medium term, to support early reconstruction
and social spending needs, efforts will focus on anchoring revenue
mobilization through a national revenue strategy and restoring the
medium-term budget framework to enhance budget credibility. The authorities
will also take steps to improve fiscal transparency and risk management and
strengthen public investment management.
Financing strategy and debt sustainability. The authorities’ program
would help restore debt sustainability on a forward-looking basis
through treatments of both official and external commercial debt,
coupled with continued external financing on concessional terms. On
official debt, the Group of Creditors for Ukraine (GCU) has committed
to a 2-step process involving a 3-year extension of the current debt
standstill set to expire at end-December 2023, followed by a final debt
treatment
before
the expiry of the proposed EFF arrangement. These debt treatments,
together with an increase in domestic financing and the elimination of
monetary financing, will help the authorities meet their financing
needs over the program period.
Monetary and exchange rate policies. A key priority is to support
steady disinflation and exchange rate stability, including through
maintaining an adequate level of FX reserves, while prudently managing
the wartime liquidity surplus. Once conditions permit, the authorities
should transition toward a more
flexible
exchange rate, ease emergency FX measures, and return to an inflation
targeting framework.
Financial sector. Policies will need to preserve financial stability
and prepare for the postwar recovery, including
contingency
planning, bank diagnostics, as well as tackling troubled banks and
non-performing assets.
Governance and growth. Further improving governance is critical to
Ukraine’s objectives of EU membership and achieving sustained growth.
Independent and effective anti-corruption institutions will help
mitigate corruption risks during Martial Law and promote public trust
and donor confidence in future
reconstruction
. Ambitious reforms will be required in the energy sector to enhance
competition, improve market mechanisms, and reduce large quasi-fiscal
risks. Deepening integration with the EU single market and steadfastly
implementing the EU accession requirements will be crucial to bring to
fruition long sought institutional and structural reforms.
Table 1. Ukraine: Selected Economic and Social Indicators, 2021-27
|
|
2021
|
2022
|
2023
|
2024
|
2025
|
2026
|
2027
|
|
|
|
|
|
|
|
|
|
|
|
Act.
|
Proj.
|
Proj.
|
Proj.
|
Proj.
|
Proj.
|
Proj.
|
|
|
|
|
|
|
|
|
|
|
Real economy (percent change, unless otherwise
indicated)
|
|
|
|
|
|
|
|
|
Nominal GDP (billions of Ukrainian hryvnias) 1/
|
5,460
|
4,900
|
6,050
|
7,365
|
8,685
|
9,700
|
10,592
|
|
Real GDP 1/
|
3.4
|
-30.3
|
[ -3 to +1 ]
|
3.2
|
6.5
|
5.0
|
4.0
|
|
Contributions:
|
|
|
|
|
|
|
|
|
Domestic demand
|
12.9
|
-28.9
|
1.2
|
4.7
|
5.4
|
4.5
|
3.1
|
|
Private consumption
|
5.2
|
-17.9
|
1.2
|
2.7
|
3.2
|
3.2
|
2.7
|
|
Public consumption
|
0.3
|
6.2
|
-0.2
|
-0.4
|
-1.7
|
-0.5
|
-0.1
|
|
Investment
|
7.4
|
-17.2
|
0.3
|
2.4
|
4.0
|
1.8
|
0.5
|
|
Net exports
|
-9.6
|
-1.4
|
-4.2
|
-1.5
|
1.1
|
0.5
|
0.9
|
|
GDP deflator
|
25.1
|
28.7
|
27.3
|
18.0
|
10.7
|
6.4
|
5.0
|
|
Unemployment rate (ILO definition; period average,
percent)
|
9.8
|
24.5
|
20.9
|
11.9
|
9.7
|
9.2
|
8.7
|
|
Consumer prices (period average)
|
9.4
|
20.2
|
21.1
|
15.5
|
10.0
|
6.9
|
5.5
|
|
Consumer prices (end of period)
|
10.0
|
26.6
|
20.0
|
12.5
|
8.0
|
6.0
|
5.0
|
|
Nominal wages (average)
|
20.8
|
-5.1
|
18.6
|
18.4
|
15.5
|
12.2
|
9.7
|
|
Real wages (average)
|
10.5
|
-21.1
|
-2.0
|
2.5
|
5.0
|
5.0
|
4.0
|
|
Savings (percent of GDP)
|
12.2
|
22.5
|
14.3
|
15.6
|
16.5
|
17.8
|
21.9
|
|
Private
|
12.4
|
36.5
|
31.8
|
29.6
|
21.8
|
18.5
|
20.3
|
|
Public
|
-0.2
|
-14.0
|
-17.5
|
-14.0
|
-5.3
|
-0.7
|
1.5
|
|
Investment (percent of GDP)
|
13.8
|
16.8
|
18.7
|
21.8
|
23.2
|
24.3
|
25.0
|
|
Private
|
10.0
|
14.2
|
15.8
|
17.9
|
18.7
|
19.9
|
20.1
|
|
Public
|
3.8
|
2.7
|
2.9
|
3.9
|
4.4
|
4.4
|
4.9
|
|
|
|
|
|
|
|
|
|
|
General Government (percent of GDP)
|
|
|
|
|
|
|
|
|
Fiscal balance 2/
|
-3.9
|
-16.7
|
-20.4
|
-17.9
|
-9.8
|
-5.2
|
-3.4
|
|
Fiscal balance, excl. grants 2/
|
-4.0
|
-26.5
|
-28.2
|
-21.7
|
-12.1
|
-6.5
|
-4.6
|
|
External financing (net)
|
2.4
|
11.4
|
19.8
|
17.7
|
9.5
|
4.6
|
3.3
|
|
Domestic financing (net), of which:
|
1.5
|
5.4
|
0.6
|
0.2
|
0.3
|
0.6
|
0.1
|
|
NBU
|
-0.3
|
7.8
|
-0.2
|
-0.2
|
-0.2
|
-0.1
|
-0.1
|
|
Commercial banks
|
1.5
|
-1.6
|
1.1
|
0.3
|
0.4
|
0.6
|
0.2
|
|
Public and publicly-guaranteed debt
|
50.4
|
81.7
|
98.3
|
105.0
|
104.1
|
102.0
|
100.2
|
|
|
|
|
|
|
|
|
|
|
Money and credit (end of period, percent change)
|
|
|
|
|
|
|
|
|
Base money
|
11.2
|
19.6
|
23.4
|
15.6
|
9.5
|
7.5
|
6.0
|
|
Broad money
|
12.0
|
20.8
|
20.5
|
18.5
|
15.0
|
15.0
|
12.1
|
|
Credit to nongovernment
|
8.4
|
-3.1
|
2.5
|
15.4
|
14.8
|
13.4
|
12.4
|
|
|
|
|
|
|
|
|
|
|
Balance of payments (percent of GDP)
|
|
|
|
|
|
|
|
|
Current account balance
|
-1.6
|
5.7
|
-4.4
|
-6.2
|
-6.7
|
-6.5
|
-3.2
|
|
Foreign direct investment
|
3.8
|
0.4
|
0.4
|
0.4
|
2.4
|
4.7
|
4.8
|
|
Gross reserves (end of period, billions of U.S.
dollars)
|
30.9
|
28.5
|
29.6
|
32.4
|
35.6
|
38.8
|
44.6
|
|
Months of next year's imports of goods and services
|
4.6
|
3.9
|
4.0
|
4.2
|
4.3
|
4.5
|
5.0
|
|
Percent of short-term debt (remaining maturity)
|
67.5
|
66.1
|
62.3
|
75.4
|
75.7
|
83.5
|
90.9
|
|
Percent of the IMF composite metric (float)
|
98.8
|
91.6
|
82.2
|
78.0
|
80.4
|
81.8
|
90.8
|
|
Goods terms of trade (percent change)
|
-8.4
|
-11.5
|
3.8
|
0.3
|
1.7
|
2.1
|
0.7
|
|
|
|
|
|
|
|
|
|
|
Exchange rate
|
|
|
|
|
|
|
|
|
Hryvnia per U.S. dollar (end of period)
|
27.3
|
36.6
|
…
|
…
|
…
|
…
|
…
|
|
Hryvnia per U.S. dollar (period average)
|
27.3
|
32.3
|
…
|
…
|
…
|
…
|
…
|
|
Real effective rate (deflator-based, percent change)
|
12.0
|
22.9
|
…
|
…
|
…
|
…
|
…
|
|
|
|
|
|
|
|
|
|
|
Memorandum items:
|
|
|
|
|
|
|
|
|
Per capita GDP / Population (2017): US$2,640 / 44.8
million
|
|
|
|
|
|
|
|
|
Literacy / Poverty rate (2022 est 3/): 100 percent / 25
percent
|
|
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|
|
|
|
|
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|
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|
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1/ Data based on SNA 2008, exclude Crimea and
Sevastopol.
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|
|
2/ The general government includes the central and
local governments and the social funds.
|
|
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3/ Based on World Bank estimates.
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[1]
At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country's authorities. An
explanation of any qualifiers used in summing up can be found here:
http://www.IMF.org/external/np/sec/misc/qualifiers.htm
.