IMF completes seventh review of EFF program for Ukraine, releases eighth tranche of $0.4 billion

The IMF Board of Directors today completed the seventh review of the Extended Arrangement Program under the Extended Fund Facility (EFF) for Ukraine, making available about US$0.4 billion (SDR 0.3 billion) in budget support, the IMF website reported.

“Ukraine's economy has demonstrated resilience and performance indicators under the EFF program remain strong despite challenging conditions. The authorities have met all quantitative performance criteria at end-December and on an ongoing basis, the prior actions for this review, and most structural benchmarks,” the IMF said.

As it did after the sixth review in December, the Fund emphasized that sustained reforms, progress in domestic revenue mobilization, and full and timely disbursement of external assistance throughout the program are needed to maintain macroeconomic stability, restore fiscal and debt sustainability, and improve governance.

Total disbursements under the IMF-supported program will amount to $10.1 billion. Ukraine’s 48-month EFF agreement, with access of SDR 11.6 billion (equivalent to approximately $15.5 billion or 577 percent of quota), was approved on March 31, 2023.

The IMF reported that the previous action to pass a law raising excise taxes on tobacco products was met, while the structural target to pass a law establishing the Supreme Administrative Court was delayed.

“New benchmarks have been set, including measures to improve public investment management, and the timing of other benchmarks has been adjusted to reflect capacity constraints,” the IMF added.

The fund said economic growth would remain robust in 2024 but slow in the second half of the year. The slowdown is expected to continue in 2025 due to an increasingly tight labor market, the impact of attacks on energy infrastructure, and lingering uncertainty over the course of the war. The updated program projects GDP growth of 2-3% this year, 4.5% next year, and 4.8% in 2027.

The National Bank of Ukraine (NBU) has tightened monetary policy in response to rising inflation, which remains largely linked to food prices, while inflation expectations remain well anchored. Reserves remain adequate, supported by continued strong external support. Reserves will rise to $56.8 billion this year from $43.8 billion, falling to $50.4 billion next year.

“Overall, the outlook remains subject to exceptionally high uncertainty,” the IMF noted.

Following the discussion of the situation in Ukraine at the Executive Board meeting, IMF Managing Director Kristalina Georgieva said contingency planning is key to taking the right policy responses when risks arise.

“The program remains fully funded, with a total external financing package of $148.8 billion in the baseline scenario and $162.9 billion in the downside scenario over the four-year program period, including the full use of about $50 billion from the G7 Emergency Revenue Facility (ERA) for Ukraine,” Georgieva explained.

She added that the 2025 budget remains the fiscal anchor and accelerated implementation of this strategy, including modernising tax and customs services, reducing tax evasion and harmonising legislation with EU standards, is needed to meet priority spending needs.

“The authorities continue to work to finalize their debt restructuring strategy. They are currently focused on reaching an agreement with the remaining holders of external commercial claims, including GDP guarantees. Reaching an agreement consistent with the debt sustainability objectives of the program is important to reduce fiscal risks and create space for critical spending,” she said.

She also said the recent monetary tightening cycle was justified and the NBU should be prepared to take further action if inflation expectations worsen. Greater exchange rate flexibility would help strengthen economic resilience while protecting reserves.

“While the financial sector remains stable, vigilance is needed due to increased risks. The institutional weaknesses of the securities market regulator need to be addressed. In the long term,