IMF board approves $15.6 bln loan package for Ukraine

KYIV: The International Monetary Fund said on Friday its executive board approved a four-year $15.6 billion loan program for Ukraine, part of a broader $115 billion international support package to help the country meet urgent funding needs as it battles Russia's 13-month-old invasion. The decision clears the way for an immediate disbursement of about $2.7 billion to Kyiv, the Fund said in a statement.

The Extended Fund Facility (EFF) loan is the first major financing program approved by the IMF for a country involved in a large-scale war. Ukraine's previous $5-billion IMF program expired last year. "Russia’s invasion of Ukraine continues to have a devastating economic and social impact," IMF First Deputy Managing Director Gita Gopinath said in a statement.

Despite this, Ukrainian authorities "have nevertheless managed to maintain overall macroeconomic and financial stability, thanks to skillful policymaking and substantial external support," she added. The decision formalizes an IMF staff-level agreement reached with Ukraine on March 21 that takes into consideration Ukraine's path to accession to the European Union after the war.

Ukrainian President Volodymyr Zelenskiy welcomed the new funding. "It is an important help in our fight against Russian aggression," he said on Twitter. "Together we support the Ukrainian economy. And we are moving forward to victory!"

The agreement is expected to help unleash large-scale financing for Ukraine from international donors and partners, including the World Bank and other lenders. An IMF official said the $115 billion package includes the IMF loan, $80 billion in pledges for grants and loans from other countries and $20 billion worth of debt relief commitments.

The IMF said that multiple stakeholders, including international financial institutions, private sector firms, most of Ukraine's official bilateral creditors and donors are supporting a two-step debt treatment process for Ukraine that includes adequate financing assurances on debt relief and concessional financing during and after the program.

"Risks to the EFF arrangement are exceptionally high," Gopinath said. "The success of the program depends on the size, composition, and timing of external financing on concessional terms to help close fiscal and external financing gaps and restore debt sustainability on a forward-looking basis."