IMF finalizes 7th review of EFF arrangement for Ukraine, enabling disbursement of $0.4 bln
MOSCOW. March 31 (Interfax) - The IMF Executive Board completed the 7th review of the Extended Fund Facility (EFF) arrangement for Ukraine last Friday, enabling a disbursement of about $0.4 billion (SDR 0.3 billion) to Ukraine, which will be channeled for budget support, Ukrainian media said, citing a statement on the IMF website.
"Ukraine's economy remains resilient, and performance remains strong under the EFF despite challenging conditions. The authorities met all end-December and continuous quantitative performance criteria, the prior action for this review, and the majority of structural benchmarks," the IMF said.
Therefore, disbursements under the arrangement made in March 2023 will total $10.1 billion to date out of $15.5 billion envisaged by the IMF.
A bill raising tobacco excise rates, which was adopted by the Verkhovna Rada on December 4, was signed into law as a precondition for the review, while the structural benchmark on the enactment of the law establishing a High Administrative Court was implemented with a delay, the IMF said.
"New benchmarks, including measures to improve public investment management, were established while the timelines of other benchmarks have been adjusted to accommodate capacity constraints," it said.
Economic growth in 2024 remained resilient but slowed in the second half of the year. The slowdown is expected to continue in 2025: the updated arrangement forecasts a GDP growth of 2%-3% this year, 4.5% next year and 4.8% in 2027.
The National Bank of Ukraine (NBU) has tightened monetary policy to respond to the rise in inflation, which remains mainly driven by food prices, while inflation expectations remain well anchored, the IMF said. In its words, reserves remain adequate, sustained by continued sizeable external support, and will grow $43.8 billion to $56.8 billion, versus a decline to $50.4 billion forecasted for next year.
"Overall, the outlook remains subject to exceptionally high uncertainty," the IMF said.
IMF Managing Director Kristalina Georgieva issued a statement following the Executive Board discussion on Ukraine. "The program remains fully financed, with a cumulative external financing envelope of $148.8 billion in the baseline scenario and $162.9 billion in the downside scenario, over the 4-year program period," she said.
"The authorities continue working to complete their debt restructuring strategy. They are currently focused on reaching agreement with the remaining holders of external commercial claims, including GDP grants. Reaching agreement consistent with the program's debt sustainability objectives is essential to reduce fiscal risks and create space for critical spending," Georgieva said.
The recent monetary policy tightening cycle is appropriate, and the NBU should stand ready for further action should inflation expectations deteriorate. Greater exchange rate flexibility will help strengthen economic resilience while safeguarding reserves, she said.
Sustained progress in anticorruption and governance reforms is needed, Georgieva said.
"Additional efforts are required, including appointment of the new head of the Economic Security Bureau, completing the audit of the National Anti-Corruption Bureau, strengthening AML/CFT frameworks, and amending the criminal procedure code," she said.
As reported, changes were made to the program updated following the 5th review at Ukraine's request: if earlier it provided for only two reviews for 2025 - in early March and late August with the disbursements of approximately $0.9 billion based on their results, now the schedule for this year includes four quarterly reviews, as in 2024.
During the 7th review, Ukraine asked the mission to change the payment structure, reducing the 8th tranche to $0.4 billion and disbursing the rest later. Before that, three disbursements due in 2025 were planned at $809.6 million, $539.8 million and $445.3 million, respectively.
Prime Minister Denis Shmygal confirmed the new IMF disbursement has been received by the Ukrainian state budget.
"We have received the funds after the7th review of the EFF arrangement. Thus, the overall support received from the IMF under this arrangement has exceeded $10 billion," Ukrainian media cited Shmygal's statement on a social network.
