31 May 2023 11:08

IMF plans to focus on post-crisis reforms in second review of EFF program

MOSCOW. May 31 (Interfax) - The external conditions for the four-year Extended Fund Facility (EFF) opened by the International Monetary Fund (IMF) for Ukraine in late March of this year have little changed, but in its second review of the program, the IMF will focus on reforms of its second, post-crisis, stage, IMF mission head Gavin Gray said.

In its next review, the IMF plans to assess more thoroughly the types of reforms and policies that the fund will discuss in the next second half of the program, Ukrainian media said, citing Gray's remarks made at a press conference on Tuesday after the IMF and Ukraine reached a staff-level agreement (SLA) on the first review under the EFF arrangement.

In particular, the IMF will consider in greater detail what policies could help support Ukraine's EU membership ambitions, he said.

The program is flexible and can change to take account, among other factors, of the disbursement to Ukraine of international financial for emergency recovery, Gray said. Of $14.1 billion announced by the Ukrainian government for this year, the IMF has so far counted in $3 billion already earmarked by the country's budget, he said.

The IMF considered it highly important to ensure the IMF program's compliance with additional spending on reconstruction, he said. Thus, if new projects emerge and if these projects are funded with the use of grants or low-interest loans and if, consequently, it is possible to maintain debt sustainability, then they may be included in the budget, he said.

The program is flexible in a sense that if there are new projects and if they meet certain financing terms, they may be integrated into the program, he said.

Barriers to Ukraine's recovery are not only financial resources but also the ability of the country and its institutions to make use of them while formulating and implementing projects, he said.

Institutions in these sectors are being strengthened, and this is also the objective of the program's points aimed at improving the management of state investments, Gray said.

As reported, the IMF Executive Board on March 31 approved a four-year EFF of SDR 11.6 billion or about $15.6 billion, and disbursed the first tranche of $2.7 billion in early April. The program is split into two key stages - the crisis stage and the post-crisis part.

After the program was endorsed, Gray said that the crisis is expected to wind down in mid-2024 under the baseline scenario, and in late 2025 under the worst-case scenario.

After the disbursement of the first tranche, the program's schedule envisions providing three more tranches SDR 664 million or $893 million each, in mid-June and October of this year and in late February 2024 following the first, second and third reviews, which will evaluate Ukraine's progress in fulfilling its commitments with deadlines at the end of April, June and December, 2023, respectively.