Ukraine, IMF reach staff level agreement on new $15.6 bln program, board decision expected
MOSCOW. March 22 (Interfax) - The Ukrainian authorities and International Monetary Fund staff have reached a staff-level agreement on a set of macroeconomic and financial policies that would be supported by a new 48-month Extended Fund Facility Arrangement with requested access of SDR 11.6 billion or about 15.6 billion, the IMF said in a statement.
The program will consist of two phases. The first phase, currently envisioned during the first 12-18 months of the program, would strengthen fiscal, external, price and financial stability by bolstering revenue mobilization, eliminating monetary financing and aiming at net positive financing from domestic debt markets, and contributing to long-term financial stability, including by preparing a deeper assessment of the banking sector health and continuing to promote central bank independence. New measures that might erode tax revenues will be avoided. The authorities are also committed to continuing reforms to strengthen governance and anti-corruption frameworks, including through legislative changes.
The second phase would shift focus to more expansive reforms to entrench macroeconomic stability, support recovery and early reconstruction, and enhance resilience and higher long-term growth, including in the context of Ukraine's EU accession goals. During the second phase, Ukraine would be expected to revert to previous policy frameworks, including a flexible exchange rate and inflation targeting regime. In addition, fiscal policies would focus on critical structural reforms.
At the request of the Ukrainian authorities, an IMF team held discussions in Warsaw with Ukrainian officials from March 8-15 on a four-year economic program.
"The IMF team has reached staff-level agreement with the Ukrainian authorities on a four-year IMF-supported program. This agreement is subject to approval by the IMF Executive Board, with Board consideration expected in the coming weeks," the IMF said.
It said the Ukrainian authorities had managed to maintain macroeconomic and financial stability, thanks to substantial external support and skillful policymaking. A gradual economic recovery is expected over the coming quarters, as activity recovers from the damage to critical infrastructure, although headwinds persist, the IMF said.
Developing a single baseline outlook scenario under exceptionally high uncertainty is exceedingly challenging, as a range of outcomes are plausible, it said. On that basis, staff currently sees real GDP growth for 2023 ranging from -3% to +1%.
The program has been designed in line with the new Fund's policy on lending under exceptionally high uncertainty, and strong financing assurances are expected from donors, including the G7 and EU, it said.