IMF approves release of third EFF tranche of about $880 mln for Ukraine
MOSCOW. Dec 12 (Interfax) - The International Monetary Fund's (IMF) board on Monday concluded the second review of the Extended Fund Facility (EFF) for Ukraine and approved the allocation of a third tranche in the amount of SDR664 million (about $880 million at the current exchange rate).
Ukraine has made significant progress in fulfilling its obligations under the EFF, meeting all quantitative performance criteria to the end of June and indicative targets through the end of September, as well as most structural benchmarks through the end of October, Ukrainian media reported, citing an IMF press release. Among other things, the authorities continue to advance a program to fight corruption.
The Ukrainian economy continues to show resilience, although the outlook remains subject to exceptionally high uncertainty, the IMF said. Continued strong ownership and reform momentum, including domestic revenue mobilization combined with timely and predictable external financing, are necessary to safeguard macroeconomic stability, enhance institutional reforms and support reconstruction efforts, the Fund said.
Ukraine's macroeconomic indicators have been stronger than expected, contributing to upward revision in the growth outlook, the IMF said. The baseline projection for real GDP growth in 2023 has been revised up to 4.5%. Growth is expected to slow to 3%-4% in 2024, but then accelerate to 6.5% in 2025.
IMF Managing Director Kristalina Georgieva, said decisive policy actions are needed to secure fiscal and debt sustainability.
Revenue mobilization is a crucial pillar to help meet financing needs and support reconstruction and social spending. Fiscal priorities include launching the National Revenue Strategy and avoiding measures that erode the tax base, Georgieva said, adding that a commercial debt treatment in line with program parameters will also help restore sustainability.
She said the transition to a managed exchange rate regime is an important step toward normalizing the monetary and exchange rate policy frameworks, alongside the gradual easing of emergency FX measures.
She also said the financial sector has been stable and operational, and efforts to strengthen bank diagnostics, supervision, governance, and contingency planning should continue.
An integrated strategy for reconstruction will also help to mitigate fiscal risks and increase the efficiency of spending, Georgieva said. Appropriate policy and reform choices can help support the return of migrants, investment flows and productivity growth, she said.
According to the IMF press release, Ukraine's fiscal deficit excluding grants is expected to narrow from 25% of GDP in 2022 and 27.1% of GDP in 2023 to 20.4% of GDP in 2024 and 10.2% of GDP in 2025.
The IMF estimates net external financing will decrease from 17% of GDP this year to 13.7% of GDP next year and 7.6% of GDP in 2025, and grants from 8.5% of GDP to 4.7% of GDP and 2.1% of GDP.
It expects net domestic financing to grow from 1.5% of GDP this year to 2.1% of GDP next year, with a subsequent reduction to 0.5% of GDP in 2025, including financing by banks from 2% of GDP this year to 2.2% of GDP next year, decreasing to 0.5% of GDP in 2025.
Public and publicly guaranteed debt will grow from 78.5% of GDP to 87.1% of GDP this year, to 96.7% of GDP next year, and to 98.5% of GDP in 2025, after which it will begin to decline.
"Now we will work on preparations for the third review in the spring. Stay tuned - this week is very important for us and our future," IMF deputy executive director Vladyslav Rashkovan said on social media.
The IMF reported on November 13 that a staff-level agreement (SLA) was reached on an updated set of economic and financial policies for the second review of the EFF.
The four-year EFF for Ukraine was approved on March 31, 2023 and the first tranche of $2.7 billion was released in early April and the second tranche of $890 million was released in early July.