EFF downside scenario for Ukraine shows IMF willingness to support it even if events develop negatively - NBU governor

MOSCOW. April 5 (Interfax) - A downside scenario in which Ukraine's GDP might decline by 10% in 2023 and by 2% in 2024 envisioned in the International Monetary Fund's Extended Fund Facility (EFF) shows that the IMF is willing to support the country even if the events develop negatively, National Bank of Ukraine (NBU) Governor Andrei Pyshny said.

"Even in the event of a downside scenario, with the financial gap reaching $140 billion, the program has been endorsed," Pyshny said in a commentary for Ukrainian media. "They're ready to support us no matter how the events unfold," he said.

Pyshny described the program as a revolutionary one for the IMF, as it is based on a financing policy the fund updated in March to open up opportunities for countries under uncertainty due to exogenous factors.

This format shows that the IMF's international partners, primarily the G7 and European Union countries, are willing to stand by Ukraine even in the event of the worst-case scenario and that they understand that the volume of essential financial support might increase compared to the baseline scenario, which estimates Ukraine's overall needs for the next four years at $115 billion, he said.

NBU Deputy Governor Sergei Nikolaichuk said in commenting for Ukrainian media on the difference between the IMF's baseline scenario and the NBU's scenario that the IMF routinely assumes a more conservative position.

Having the program agreed upon with the IMF, the NBU has every chance to adjust its own macroeconomic forecast and is likely to improve its outlook of 2023 GDP growth during its next update at the end of April from the 0.3% announced in January, Nikolaichuk said.

Pyshny said the economic and financial policy memorandum laid in the foundation of the EFF "does not look difficult from the standpoint of its implementation."

"For the National Bank's part, I don't see any difficult political decisions that we could not made both on our own and in cooperation with our partners," he said.

Nikolaichuk added that the IMF's memorandums in preliminary programs contained clauses that were much harder to implement politically.

Chief of the IMF mission to Ukraine Gavin Gray said earlier at a press briefing after the EFF endorsement was announced that the baseline scenario envisioned that the crisis should wind down by mid-2024, and the downside scenario presumes that it would be more intensive and would last through the end of 2025.

As reported earlier, the baseline scenario presumed that Ukraine's real GDP growth in 2023 might range between -3% and +1%. However, the IMF has said that, taking into account the better results of Q4 2022 and Q1 2023, it was inclined to expect that Ukraine's GDP in 2023 might be close to the upper value of this range.