December 11, 2023
PRESS OFFICER: Meera Louis
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today concluded the 2023 Article IV Consultation and completed the Second Review of the EFF arrangement for Ukraine. The completion of the second review enables the authorities to immediately draw an amount of about US$900 million (SDR 663.9 million).
Ukraine’s 48-month EFF arrangement, with access of SDR 11.6 billion (equivalent to US$15.6 billion, or about 577 percent of quota), was approved on March 31, 2023, and forms part of a US$122 billion support package for Ukraine. The authorities’ IMF-supported program aims to anchor policies that sustain fiscal, external, price and financial stability at a time of exceptionally high war-related uncertainty, support the economic recovery, as well as enhance governance and strengthen institutions to promote long-term growth in the context of reconstruction and Ukraine’s path to EU accession.
The EFF continues to provide a strong anchor for the authorities’ economic program, and its implementation has been broadly on track despite the extremely challenging backdrop. All quantitative performance criteria for end-June and indicative targets for end-September were met. The majority of structural benchmarks for end-October were also met, with the others completed with some delay; this progress underscores the authorities’ continuing commitment to the overall reform agenda. In particular, the authorities have continued to advance their governance and anti-corruption agenda.
Despite Russia’s war in Ukraine, macroeconomic indicators have been stronger than expected, contributing to upward revision in the growth outlook. Economic resilience has resulted in better growth outturns, continued sharp disinflation, and a stable FX market, including following the National Bank of Ukraine’s exit from the exchange rate peg, backed by strong reserves. The baseline projection for real GDP growth in 2023 has been revised up to 4.5 percent. Growth is expected to somewhat soften in 2024 to 3–4 percent as the war continues. The outlook remains subject to significant risks related to the exceptionally high uncertainty stemming from the war, potential policy slippages, and delays or shortfalls in external financing.
Article IV discussions focused on foundational policies for strong, balanced, and green growth in the post-war era to support Ukraine’s EU accession. The focus was on the appropriate macroeconomic policy frameworks, including the restoration of pre-war monetary and exchange rate policy frameworks, governance reforms, steps to revitalize the banking sector, to mitigate climate change, to help Ukraine achieve a high sustained growth path and raise living standards.
Following the Executive Board discussion on Ukraine, Ms. Kristalina Georgieva, Managing Director of the IMF, issued the following statement[1]:
``Russia’s invasion of Ukraine continues to bring enormous social and economic costs to Ukraine. However, Ukraine’s economy has been resilient as a recovery takes hold, and macroeconomic and financial stability has been preserved, thanks to skillful policymaking by the Ukrainian authorities as well as substantial external support. Looking ahead, whereas the recovery is expected to continue, the outlook has significant risks stemming mainly from the exceptionally high war-related uncertainty. It is also critical that external financing on concessional terms continue on a timely and predictable basis and sustain the reform momentum.
``As the war prolongs, it continues to strain Ukraine’s public finances. Timely external disbursements as well as continued effort on the domestic market are key to meeting Ukraine’s financing needs and preserving macroeconomic and financial stability. In addition, decisive policy actions are needed to secure fiscal and debt sustainability. Revenue mobilization is a crucial pillar to help meet financing needs and support reconstruction and social spending. Fiscal priorities include launching the National Revenue Strategy, avoiding measures that erode the tax base, and progressing on reforms to further strengthen the frameworks for medium-term budget preparation, budget credibility, fiscal risks and transparency, and public investment management. A commercial debt treatment in line with program parameters will also help restore sustainability and create space for critical spending.
``As part of the National Bank of Ukraine’s conditions-based strategy, the recent successful transition to a managed exchange rate regime is an important step toward normalizing the monetary and exchange rate policy frameworks, alongside the gradual easing of emergency FX measures. Continued evidence of sustained disinflation and stability in the FX cash market could support further easing in monetary policy. Whereas the financial sector has been stable and operational, heightened vigilance is required, and efforts to strengthen bank diagnostics, supervision, governance, and contingency planning should continue.
``Steadfast reform momentum to anti-corruption and governance frameworks will be essential to mitigate corruption risks and promote public trust and donor confidence. Decisive structural reforms, in public investment management, governance, and the business environment, can also begin to lay the groundwork for achieving strong, balanced, and green growth in the reconstruction phase and support Ukraine’s path to EU accession. An integrated strategy for reconstruction will also help to mitigate fiscal risks and increase the efficiency of spending. Appropriate policy and reform choices can help support the return of migrants, investment flows and productivity growth needed to support a sustained high growth path in the years ahead. ‘’
Table 1. Ukraine: Selected Economic and Social Indicators, 2021-27
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2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
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|
Act. |
Act. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
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Real economy (percent change, unless otherwise indicated) |
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Nominal GDP (billions of Ukrainian hryvnias) 1/ |
5,451 |
5,191 |
6,434 |
7,640 |
8,858 |
9,818 |
10,773 |
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|
Real GDP 1/ |
3.4 |
-29.1 |
4.5 |
[3 to 4] |
6.5 |
5.0 |
4.5 |
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Contributions: |
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Domestic demand |
12.9 |
-23.7 |
8.3 |
4.1 |
5.6 |
4.3 |
3.8 |
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Private consumption |
4.7 |
-16.6 |
2.7 |
2.9 |
3.1 |
2.9 |
3.0 |
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Public consumption |
0.1 |
6.9 |
2.6 |
-1.1 |
-1.9 |
-0.6 |
-0.1 |
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Investment |
8.1 |
-13.9 |
3.0 |
2.3 |
4.4 |
1.9 |
0.9 |
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Net exports |
-9.5 |
-5.4 |
-3.8 |
-0.6 |
0.9 |
0.7 |
0.7 |
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GDP deflator |
24.8 |
34.3 |
18.6 |
14.7 |
8.9 |
5.6 |
5.0 |
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Unemployment rate (ILO definition; period average, percent) |
9.8 |
24.5 |
19.1 |
13.9 |
13.1 |
11.4 |
10.4 |
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Consumer prices (period average) |
9.4 |
20.2 |
13.0 |
7.7 |
7.8 |
6.0 |
5.2 |
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Consumer prices (end of period) |
10.0 |
26.6 |
6.0 |
9.5 |
6.5 |
5.5 |
5.0 |
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Nominal wages (average) |
20.8 |
1.0 |
20.1 |
16.8 |
16.1 |
13.3 |
10.5 |
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Real wages (average) |
10.5 |
-16.0 |
6.3 |
8.5 |
7.7 |
7.0 |
5.0 |
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Savings (percent of GDP) |
12.5 |
17.6 |
11.9 |
11.0 |
10.4 |
13.9 |
16.5 |
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Private |
12.7 |
30.8 |
27.3 |
24.4 |
14.1 |
14.6 |
15.4 |
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Public |
-0.2 |
-13.2 |
-15.4 |
-13.4 |
-3.6 |
-0.6 |
1.2 |
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Investment (percent of GDP) |
14.5 |
12.6 |
16.5 |
18.0 |
19.4 |
20.9 |
21.8 |
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Private |
10.7 |
10.1 |
13.4 |
15.7 |
14.9 |
16.4 |
16.8 |
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Public |
3.8 |
2.5 |
3.1 |
2.3 |
4.5 |
4.5 |
5.0 |
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General Government (percent of GDP) |
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Fiscal balance 2/ |
-4.0 |
-15.7 |
-18.6 |
-15.7 |
-8.1 |
-5.1 |
-3.8 |
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Fiscal balance, excl. grants 2/ |
-4.0 |
-25.0 |
-27.1 |
-20.4 |
-10.2 |
-6.1 |
-4.8 |
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External financing (net) |
2.4 |
10.8 |
17.0 |
13.7 |
7.6 |
2.3 |
2.8 |
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Domestic financing (net), of which: |
1.6 |
5.1 |
1.5 |
2.1 |
0.5 |
2.8 |
1.0 |
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NBU |
-0.3 |
7.4 |
-0.2 |
-0.2 |
-0.1 |
-0.1 |
-0.1 |
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Commercial banks |
1.5 |
-1.5 |
2.0 |
2.2 |
0.6 |
2.9 |
1.0 |
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Public and publicly-guaranteed debt |
50.5 |
78.5 |
87.1 |
96.7 |
98.5 |
98.2 |
97.0 |
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Money and credit (end of period, percent change) |
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Base money |
11.2 |
19.6 |
22.6 |
17.7 |
12.9 |
9.5 |
9.1 |
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Broad money |
12.0 |
20.8 |
22.8 |
18.2 |
9.8 |
9.5 |
10.6 |
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Credit to nongovernment |
8.4 |
-3.1 |
-7.5 |
9.5 |
17.2 |
16.1 |
15.5 |
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Balance of payments (percent of GDP) |
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Current account balance |
-1.9 |
5.0 |
-4.6 |
-7.1 |
-9.0 |
-7.0 |
-5.2 |
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Foreign direct investment |
3.8 |
0.1 |
1.9 |
1.2 |
2.5 |
4.8 |
5.0 |
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Gross reserves (end of period, billions of U.S. dollars) |
30.9 |
28.5 |
39.5 |
40.9 |
41.0 |
41.6 |
45.9 |
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Months of next year's imports of goods and services |
4.5 |
3.8 |
5.1 |
5.3 |
5.1 |
5.0 |
5.2 |
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Percent of short-term debt (remaining maturity) |
67.5 |
66.1 |
85.4 |
94.1 |
86.9 |
89.0 |
92.6 |
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Percent of the IMF composite metric (float) |
98.9 |
92.9 |
109.7 |
99.0 |
94.2 |
90.4 |
96.4 |
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|
Goods terms of trade (percent change) |
-8.4 |
-11.6 |
4.3 |
-0.5 |
1.4 |
1.9 |
1.4 |
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Exchange rate |
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Hryvnia per U.S. dollar (end of period) |
27.3 |
36.6 |
… |
… |
… |
… |
… |
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Hryvnia per U.S. dollar (period average) |
27.3 |
32.3 |
… |
… |
… |
… |
… |
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Real effective rate (deflator-based, percent change) |
10.4 |
27.6 |
… |
… |
… |
… |
… |
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Memorandum items: |
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Per capita GDP / Population (2017): US$2,640 / 44.8 million |
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Literacy / Poverty rate (2022 est 3/): 100 percent / 25 percent |
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Sources: Ukrainian authorities; World Bank, World Development Indicators; and IMF staff estimates. |
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1/ GDP is compiled as per SNA 2008 and excludes territories that are or were in direct combat zones and temporarily occupied by Russia (consistent with the TMU). |
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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.
