Monday, May 29, 2023

Ukraine, IMF agree on $15.6 billion loan package

FRANKFURT, Germany — Ukraine and the International Monetary Fund have agreed on a $15.6 billion loan package geared toward shoring up executive price range critically strained via Russia’s invasion and at leveraging much more improve via reassuring allies that Ukraine is pursuing sturdy financial insurance policies.

Ukraine’s finance ministry stated Wednesday that this system 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 4 years, with the primary 12 to 18 months focusing on serving to Ukraine shut its huge funds deficit and assuaging power to finance spending thru printing cash on the central financial institution, the IMF stated in a commentary Tuesday.

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The rest of this system will focal point on supporting Ukraine’s bid for European Union club and post-war reconstruction.

The IMF deal is predicted to leverage much more cash for Ukraine because it supplies proof to attainable donor governments, together with within the Group of Seven democracies and the European Union, that Ukraine’s executive is following sound financial insurance policies.

The settlement, which nonetheless wishes approval from the IMF’s government 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.

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The 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 “extremely 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.

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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 growth in reforms to improve governance, anti-corruption and rule of regulation, and lay the rules for post-war enlargement, despite the fact that the time table of reforms in those spaces stays vital.”


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