March 22 (UPI) — The International Monetary Fund said it had reached a staff-level agreement to provide Ukraine with $15.6 billion, a much-needed loan to help the country continue to function in the midst of a war with Russia.
The IMF announced the deal, which must be approved by its executive board, on Tuesday after months of negotiations as well as discussions with Ukrainian officials in Warsaw from March 8 to 15.
“The staff-level agreement reflects the IMF’s continued commitment to supporting Ukraine and is expected to help mobilize large-scale concessional financing from Ukraine’s international donors and partners over the life of the program,” said IMF Team Leader Gavin Gray in statement.
The war in Ukraine, which began with the Russian invasion on February 24, 2022, has taken a significant toll on the European nation. Destroyed infrastructure with the Kyiv School of Economics grade at the end of January, the cost of damage reached nearly $138 billion.
The conflict also forced Kyiv’s economy to contract by 30% last year, with the IMF expecting real gross domestic product in 2023 to range from a 3% contraction to a 1% growth.
The first phase of the four-year program will focus on strengthening fiscal, external, price, and financial stability over the next 12 to 18 months, while the second phase will shift focus to what the IMF called in a statement “larger reforms to shore up macroeconomic stability, support recovery, and accelerate reconstruction, as well as greater resilience and faster growth in the long term.”
The Ministry of Finance of Ukraine explained that the second phase is expected to return to the pre-war policy framework, which includes a flexible exchange rate and an inflation targeting regime.
“The main goals of the authorities’ program are to maintain economic and financial stability in an environment of exceptionally high uncertainty, restore debt sustainability and support Ukraine’s recovery towards EU post-war accession,” Gary said.
This was stated by the Prime Minister of Ukraine Denys Shmyhal. statement on Telegram that they are “thankful” to the IMF for their support and are awaiting final approval.
“With a record budget deficit, this program will help us finance all critical spending, maintain macro-financial stability and strengthen our engagement with other international partners,” he said.
The Finance Ministry backed Shmygal’s assessment, adding that teams from the IMF, the government of Ukraine, and the National Bank of Kyiv had done “a colossal job” to reach an agreement.
The program will “significantly support the Ukrainian economy, financial system and ensure the mobilization of additional financial resources from donors, which is necessary for our successful fight against the aggressor,” Finance Minister Serhiy Marchenko said in a statement. statement.
US Treasury Secretary Janet Yellen also welcomed the deal on Tuesday.
“An ambitious and well-prepared IMF program is critical to support Ukraine’s reform efforts, including strengthening good governance and addressing the risks of corruption, as well as providing much-needed financial support,” Yellen said in a statement.
“It will also strengthen the economic assistance that the United States and our partners have provided to fund essential services such as schools, hospitals, and first responders, which offers vital support to the Ukrainian economy.”