Ukraine and IMF Reach Staff-Level Agreement for 8th Tranche
The International Monetary Fund (IMF) staff and the Ukrainian authorities have reached a staff-level agreement (SLA) to disburse $500 million for the war-torn country.
Ukraine passed the eighth review of the four-year, $15.5 billion Extended Fund Facility (EFF) arrangement at the staff level – now the decision will need to be approved by the IMF Executive Board in coming weeks, according to the IMF.
If approved, total disbursements from the program will reach $10.6 billion.
The IMF mission, led by IMF Mission Chief for Ukraine Gavin Gray, held discussions with the Ukrainian authorities in Kyiv last week.
The mission met with Prime Minister Denys Shmyhal, Finance Minister Serhiy Marchenko, National Bank of Ukraine Governor Andriy Pyshnyy, other government ministers, public officials, and civil society, according to an IMF press release.
First IMF program in history for a country at war
The IMF’s Extended Fund Facility (EFF) program is the first IMF program in history granted to a country actively at war. This decision required the IMF to change its rules to allow lending to countries facing “exceptionally high uncertainty.”
The IMF program is also historic for Ukraine because it has now passed its eighth review – something never before accomplished in the country’s history.
The IMF wrote that Ukraine managed to meet all quantitative performance criteria and indicative targets by the end of March. Previously, independent Ukrainian economists had criticized Ukrainian authorities for not completing some benchmarks on time. Still, the IMF wrote that Ukraine’s performance towards its targets was satisfactory. “The structural reform agenda continues to make progress with two structural benchmarks met, another to be completed in the coming weeks, and strong commitments to advance other key reforms,” the IMF wrote.
Ukraine’s economic reforms highlighted by the IMF
The IMF also mentioned reform areas where Ukraine still needs to make progress:
Prepare the measures for shock absorption, since additional critical expenditure requirements remain a serious risk due to Russia’s full-scale invasion. Sustain efforts to mobilize domestic revenues over the medium term, given that external support alone will not be sufficient to finance the budget deficit. Mobilize domestic revenues, address tax evasion, and improve the investment climate. Reform tax policy, including improvements in tax administration and reforms to the state customs service (SCS) and state tax service (STS). Renegotiate the GDP warrants – assets from the 2015 debt restructuring legacy tied to Ukraine’s economic growth. Be prepared to react if inflation increases. Reduce inflation to 5%, the target set by the National Bank of Ukraine (NBU) (inflation reached 15.1% year over year in April). Maintain adequate central bank reserves and carefully allow foreign currency transactions under the foreign exchange (FX) liberalization. Select new CEOs for ‘Ukrenergo’ and the Gas Transmission System Operator in Ukraine (GTSO). Finalise the independent fit and proper review of Ukraine’s Stock Market Regulator, National Securities and Stock Market Commission (NSSMC), since the IMF requirements were not completed on time.
Source: Olena Hrazhdan