Downside scenario in EFF confirms IMF readiness to support Ukraine even in case of worst-case scenario – NBU governor

The downside scenario with a 10% fall in Ukraine's GDP this year and 2% next year, contained in the Extended Fund Facility (EFF), confirms the readiness of the International Monetary Fund (IMF) to support the country even in the worst case scenario, Governor of the National Bank of Ukraine Andriy Pyshnyy has said.

"Even in the presence and articulation of a downside scenario, even if the financial gap could amount to $140 billion, the program has been approved… They are ready to support us in any development of events," the governor of the NBU told Interfax-Ukraine.

Pyshnyy said this was a revolutionary program for the IMF since it would be implemented in a country where the full-scale war is going on. He said that the program is based on the IMF credit policy updated in March, which opens up opportunities for countries that are in an environment of uncertainty due to exogenous factors.

According to him, the existence of such a downside scenario gives the Fund "certain comfort," especially since in conditions of such high uncertainty, the possibility of protracting the war really cannot be ruled out.

The governor of the National Bank added that such a format testifies to the confirmation by other international partners of the Fund, primarily the G7 countries and the EU, of their readiness to remain with Ukraine even in such an unfavorable development of events. And also about their understanding that the volume of necessary financial support may increase compared to the baseline scenario, in which the total need for four years is estimated at $115 billion.

Deputy Governor of the NBU Serhiy Nikolaychuk, commenting to Interfax-Ukraine on the difference between the baseline scenario of the IMF and the scenario of the National Bank, said that the Fund traditionally takes a more conservative position.

Nikolaychuk said that the National Bank, in the presence of the program agreed with the IMF, retains all the possibilities for adjusting its own macroeconomic forecast and during its next update at the end of April, it is likely to improve the estimate of GDP growth this year from the 0.3% announced in January.

Pyshnyy also said that the Memorandum of Economic and Financial Policies, which forms the basis of the EFF, "does not seem difficult in terms of implementation."

"On the part of the National Bank, I do not see a single difficult political decision today that we could not provide both independently and in cooperation with colleagues," the governor of the NBU said.

Nikolaychuk added that the memorandums with the IMF on preliminary programs contained items that were much more difficult to implement from a political point of view.

As IMF mission chief for Ukraine Gavin Gray said after the approval of the EFF program, the winding down of the war in the middle of 2024, while the downside one – by the end of 2025.

In the baseline scenario, the dynamics of Ukraine's GDP this year are defined from -3% to +1% and growth next year by 3.2%. However, the IMF has already said that, given the best results in the fourth quarter of last year and the first quarter of this year, the Fund is inclined to believe that GDP growth in 2023 may be at the upper end of this range.

Source: www.en.interfax.com.ua