The International Monetary Fund (IMF) announced on Friday that it had reached an agreement with the Ukrainian government on the fourth review of the aid program currently in place to support the country at war, thus opening the door to the payment of 2.2 billion additional dollars. The agreement must now receive the green light from the Fund’s board of directors, which should meet “in the coming weeks”, the institution said in its press release.
A major international aid plan of 122 billion dollars
This is the fourth tranche of the $15.6 billion aid program adopted in March 2023, as part of a major international aid plan totaling $122 billion. The previous revision is recent since it was carried out just two months ago, and had already enabled a disbursement of 880 million dollars. This time again, the Fund underlines “the performance (which) remains solid within the framework of the program despite the challenge represented by the conflict” in progress, since the invasion of eastern Ukraine by Russia, in February 2022 .
“The skilful development of policies, the adaptability of households and businesses as well as the significant external financial assistance have helped to maintain macroeconomic and financial stability”, welcomed the IMF, which also underlines “growth, better than anticipated in 2023 and sustained activity in the first quarter of 2024. After a sharp recession recorded in 2022 as a result of the Russian invasion, the Ukrainian economy returned to green last year and should experience growth of 3.2% this year, according to recent forecasts from the IMF.
The institution also congratulated the Ukrainian authorities for “the progress made in restructuring the external debt resulting from trade”, a step considered “necessary to create budgetary space for the most priority expenditures and to bring back the debt at a sustainable level. The IMF also advises better mobilization of tax revenues in order to counterbalance the high levels of necessary expenditure, and calls for the acceleration of planned reforms concerning tax administration in particular, as well as on the front of the fight against financial crimes.
The Fund nevertheless warns that the persistence of the conflict will have economic consequences, expecting in particular a slowdown in activity “due to recent large-scale attacks on the energy sector” while inflation could rise “moderately” , due to a “decrease in confidence”.