IMF weighs US$16bn aid to Ukraine
The package is expected to prompt more financial support from public and private creditors, with aid hoped to begin in April, sources said
The IMF is exploring a multi-year aid package for Ukraine worth as much as US$16 billion to help cover the country’s needs and provide a catalyst for more international funding while Kyiv tries to repel Russian forces, people familiar with the matter said.
Whether the program is implemented hinges on a range of conditions, including an endorsement from G7 nations, and Ukraine’s donors and creditors ensuring the sustainability of the country’s debt, the people said on the condition of anonymity.
The plan would also require changes to IMF lending rules so the fund could assist the war-torn country, and the government in Kyiv would need to commit to a series of policies, on top of successfully completing a four-month non-cash IMF program approved last year, they said.
If approved, the three to four-year program — worth up to US$16 billion — would assume a disbursement of US$5 billion to US$7 billion in the first year, the people said.
There is hope the plan can be agreed on by the end of March, with the first tranche coming as early as April in a best-case scenario, they said.
The plan is also expected to help propel more financial support for the country from public and private creditors, they added.
The IMF “remains closely engaged” with Ukraine, the fund said in a statement in response to questions from Bloomberg News, adding that cooperation “could pave the way toward a fully fledged program,” without elaborating on details such as the potential size of a loan
The Ukrainian Ministry of Finance declined to comment.
In a separate statement on Thursday, the ministry expressed hopes for a “fully fledged” program with the fund, which would include financing.
If the plan does not receive support from enough IMF member countries, the fund could back Ukraine with a US$1.3 billion Rapid Financing Instrument program, two of the people said.
The IMF last month estimated Ukraine’s external funding needs to be at least US$39.5 billion this year, while Ukrainian Minister of Finance Serhiy Marchenko said on Jan. 10 that the government’s monthly budget shortfall would amount to US$3.5 billion this year, which totals about US$42 billion.
However, the country likely needs about US$8 billion more this year for critical infrastructure damaged by recent Russian attacks, one of the people said.
The EU has committed to providing Ukraine with 18 billion euros (US$19.58 billion) in financial assistance this year, and the US is expected to contribute about US$10 billion, while Ukraine anticipates other creditors could also send varying amounts.
Under the current program with the IMF, Kyiv has committed to boosting tax revenue, significantly reducing the central bank’s support of its war-battered budget and further improving corporate governance at state-run companies.
When the war ends, Ukraine would require greater financial support for its reconstruction. Recent Russian attacks targeted civilian infrastructure, particularly power grids, in a bombing campaign that wrought damage across the country, leaving millions of people and businesses without reliable supplies of electricity, heat and water.
Economic recovery could be slow. Ukraine’s economy is expected to grow 0.3 percent after a 30.3 percent decline last year, the country’s central bank said on Thursday.
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