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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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