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Ukraine, IMF Agree on $15.6B Loan 03/22 06:20
Ukraine and the International Monetary Fund have agreed on a $15.6 billion
loan package aimed at shoring up government finances severely strained by
Russia's invasion and at leveraging even more support by reassuring allies that
Ukraine is pursuing strong economic policies.
FRANKFURT, Germany (AP) -- Ukraine and the International Monetary Fund have
agreed on a $15.6 billion loan package aimed at shoring up government finances
severely strained by Russia's invasion and at leveraging even more support by
reassuring allies that Ukraine is pursuing strong economic policies.
Ukraine's finance ministry said Wednesday that the program will "help to
mobilize financing from Ukraine's international partners, as well as to
maintain macrofinancial stability and ensure the path to post-war
reconstruction after Ukrainian victory in the war against the aggressor."
The loan program will run for four years, with the first 12 to 18 months
focusing on helping Ukraine close its massive budget deficit and alleviating
pressure to finance spending through printing money at the central bank, the
IMF said in a statement Tuesday.
The remainder of the program will focus on supporting Ukraine's bid for
European Union membership and post-war reconstruction.
The IMF deal is expected to leverage even more money for Ukraine since it
provides evidence to potential donor governments, including in the Group of
Seven democracies and the European Union, that Ukraine's government is
following sound economic policies.
The agreement, which still needs approval from the IMF's executive board,
"is expected to help mobilize large-scale concessional financing from Ukraine's
international donors and partners over the duration of the program," Gavin
Gray, the IMF"s mission chief for Ukraine, said in a statement.
The Washington-based IMF said that the Ukrainian authorities demonstrated
their commitment to healthy economic policy and met all agreed upon goals
during a preliminary consultation. The loan program goes beyond previous IMF
practice by lending to a country that is at war, under new rules that permitted
assistance under circumstances of "exceptionally high uncertainty."
Ukraine massively increased military spending while the economy shrank by
around 30% in 2022, hitting tax revenues.
The result was a huge budget deficit that has been covered by outside
financing from the U.S., the European Union and other allies. The external help
has helped the country end its reliance on money printed by the central bank
and loaned to the government, an emergency step considered necessary early in
the war, but which could fuel inflation and destabilize the country's currency
if prolonged.
Before the war, Ukraine had made progress in reforming its banking system
and making government contracting more transparent. But Ukraine still ranked
122 out of 180 countries on Transparency International's corruption perceptions
index. Its pre-war economy was characterized by political involvement from
wealthy individuals known as oligarchs and by slow progress on improving the
legal system perceived as too open to political influence.
The IMF, however, said after the preliminary consultations that the
government has "made progress in reforms to strengthen governance,
anti-corruption and rule of law, and lay the foundations for post-war growth,
although the agenda of reforms in these areas remains significant."
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