The International Monetary Fund (IMF) has reached an agreement with Ukraine on funding worth $15.6bn. The IMF’s first loan to a country at war is expected to be approved in the coming weeks. It is also one of the largest financing packages Ukraine has received since Russia’s invasion. The IMF recently changed a rule to allow loans to countries facing “exceptionally high uncertainty.” The program has been designed in line with the new fund’s policy on lending under exceptionally high uncertainty, and strong financing assurances are expected from donors, including the G7 and EU.
Russia’s invasion of Ukraine continues to have a devastating impact on the economy, with activity contracting by 30 percent in 2022, a large share of the capital stock destroyed, and poverty levels climbing. The IMF expects Ukraine’s economy to record a slight contraction or growth this year. Prime Minister Denys Shmyhal said the funding would help the country “finance all critical expenditure and ensure macroeconomic stability and strengthen our interaction with other international partners.”
US Treasury Secretary Janet Yellen, who made a surprise visit to Ukraine last month, said: “An ambitious and appropriately conditioned IMF programme is critical to underpin Ukraine’s reform efforts.” The US is the IMF’s largest shareholder and the biggest contributor to Ukraine in terms of money spent.
Earlier this year, President Joe Biden announced nearly half a billion more dollars of US military aid to Ukraine. This was on top of the $112bn spent by Congress in 2022 alone. Military aid, which accounts for more than half of US spending on Ukraine, pays for drones, tanks, missiles, and other munitions systems, as well as training, logistics, and intelligence support.