Ukraine to need $32 bln in additional funding if crisis persists until end of 2025 - IMF

MOSCOW. Oct 22 (Interfax) - The International Monetary Fund (IMF)'s Extended Fund Facility (EFF) for Ukraine updated in its fifth review is based on the baseline scenario of the crisis ending at the end of 2025, which will require $32 billion in additional financing, which will be covered by $33.1 billion under the proposed G7 initiative Extraordinary Revenue Acceleration Loans for Ukraine (ERA) for using revenues from immobilized Russian assets.

Ukrainian media reported that according to the materials of the updated program published on the IMF's website, out of this $33 billion, $19.1 billion will be needed next year, $9.2 billion in 2026 and $4.9 billion in 2027.

The total official financing needs after $36.1 billion this year are estimated at $35.7 billion next year, $19.1 billion in 2026 and $5.4 billion in 2027, of which the European Union will provide $13.7 billion, $7.9 billion and $0.6 billion, respectively, under the Ukraine Facility, compared to $17.5 billion this year.

The IMF will additionally provide $2.7 billion in 2025, $1.9 billion in 2026 and $1.1 billion in 2027, compared to $5.3 billion this year.

Based on the scenario presented, this would increase Ukraine's international reserves from $42.6 billion at the end of this year to $44.9 billion next year and $49.1 billion in 2026.

The revised negative scenario assumes the end of the crisis in mid-2026, and it will require all $50 billion in the state budget under the ERA initiative. The scenario raises the estimate of required funds from other external partners from $42.6 billion this year to $43.2 billion next year, $35.6 billion in 2026 and $10.6 billion in 2027, with the same IMF financing.

After international reserves fall from $38.9 billion to $33 billion in Q4 of this year, it is expected to raise them to $35 billion next year and $40.5 billion in 2026.

The negative scenario assumes a 2.5% decline in Ukraine's GDP next year after a 1% growth this year, its stabilization in 2027 and a 4% increase only in 2027, while the baseline scenario sees a 2.5%-3.5% rise next year, compared with 3% this year, before accelerating to 5.3% in 2026 and slowing to 4.5% in 2027.

"This review focuses on updating the program scenarios and adapting macroeconomic policies to reflect a longer [crisis] and major developments on external financing," it said.

The IMF assesses the residual strategic risk of a continued crisis beyond the reviewed assumptions as high, though below the level of risk at the time of the fourth review in June this year, when the Fund decided to keep the scenarios unchanged.

Other scenario risks include energy supply and the duration and rhythm of international support, reform fatigue due to the need to continue deeper structural reforms in the coming years, and limited program design capacity to absorb additional shocks as the crisis drags on.

The IMF also said that the mobilization has exacerbated labor shortages, 10.3 million people remain displaced, either internally or as refugees, and the uncertain security situation has limited production and investment as a whole.

The Fund said that the ERA initiative is structured in such a way as not to place an additional debt burden on Ukraine. The IMF estimates that the immobilized Russian assets and the income on them will be sufficient for this purpose.

Ukraine said in the materials that it has already received $57.9 billion in foreign support since the launch of the program in March 2023, of which $24.6 billion from the beginning of this year to September 17, and it expects to receive an additional $16.8 billion by the end of the year.

The firm funding commitments for the next 12 months of the EFF arrangement and through September 2025 have been received in the amount of $36.4 billion (excluding IMF funding), including $11.7 billion under the ERA initiative, it said.

Moscow has reiterated many times that it views a freeze on Russian assets and the possible use of revenues arising from them as a breach of international law and "blatant theft" that will not go without an appropriate response.