The International Monetary Fund (IMF) said on Tuesday that it reached a four-year agreement with the Ukrainian authorities on a loan package for about $15.6 billion to support the economic recovery of the country affected by the conflict.
The agreement, which still needs to be ratified by the IMF board, follows months of negotiations between IMF staff and Ukrainian authorities.
The Fund said the deal is expected to help unlock large-scale concessional financing for Ukraine from donors and international partners.
“A gradual economic recovery is expected in the coming quarters, as activity recovers from the severe damage to critical infrastructurealthough headwinds persist, including the risk of a further escalation in the conflict,” he said. Gavin Grayan IMF official, in a statement announcing the deal.
IMF staff currently expect the change in Ukraine’s real GDP for 2023 to be between -3% and +1%, Gray added.
“In addition to the terrible humanitarian cost, the Russian invasion of the Ukraine continues to have a devastating impact on the economy: activity contracted by 30 percent in 2022, a large part of the capital stock was destroyed and poverty levels increased. Acute macroeconomic challenges persist due to the magnitude of the shock and the expansion of the fiscal deficit. Nonetheless, the authorities have managed to maintain macroeconomic and financial stability, thanks to significant external support and skillful policymaking,” he added.
The general objectives of the authorities’ program are maintain economic and financial stability in circumstances of exceptionally high uncertainty, restore debt sustainability and support Ukraine’s recovery on the road to post-war EU membership.
In view of the exceptionally high uncertainty, the requested IMF-supported program envisions a two-phase approach:
-The first phase, currently planned for the first 12-18 months of the program, will build on the PMB to strengthen fiscal, external, price, and financial stability by boosting revenue mobilization, eliminating monetary financing, and targeting positive net financing. domestic debt markets, and contribute to long-term financial stability, including by preparing a more in-depth assessment of the health of the banking sector and continuing to promote central bank independence. New measures that could erode tax revenues will be avoided. The authorities are also committed to ongoing reforms to strengthen governance and anti-corruption frameworks, including through legislative changes.
-The second phase would shift the focus towards more expansive reforms to strengthen macroeconomic stability, support early recovery and reconstruction, and enhance resilience and higher growth in the long term, including in the context of Ukraine’s EU membership objectives. During the second phase, Ukraine would be expected to return to the prewar Policy Frameworks, including a flexible exchange rate and an inflation targeting regime. In addition, fiscal policies would focus on critical structural reforms to anchor revenues in the medium term by implementing a national revenue strategy, along with strengthening public financial management and introducing public investment management reforms. to support post-war reconstruction.
(With information from Reuters, AFP and the IMF)
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Source-www.infobae.com