Ukraine, impacted by the armed conflict in its territory with Russia, has financing needs of almost US$20,000 million by 2023 to increase its reserves and meet its budget, according to the Bloomberg agency, and intends to reach a program with the IMF before the end of the first quarter of next year.
What the agreement stipulates
The agreement between kyiv and the IMF will allow part of this financing to be released, if the Government complies with certain conditions.
Among other requests, the body led by Kristalina Georgieva asked Ukraine to increase tax collection resuming pre-war administrative practices, restoring the domestic bond market, and limiting monetary financing.
“The BMP will provide an anchor for macroeconomic policies and catalyze grant assistance. Strong policy implementation will pave the way for a full IMF program,” said Gavin Gray, who led the IMF mission and met last week. virtually with the government of Volodymyr Zelenskiy between November 11 and yesterday.
The agreement announced today will be discussed in the coming weeks by the Board of Governors of the IMF, according to the statement.
Due to the destruction of industries, agricultural establishments and basic infrastructure by Russia and the displacement of the population, Ukraine will register an economic contraction of at least 33% this year, that is, it lost a third of its economy.
This forced the country to resort to international assistance and a war bond program in order to finance its basic needs.
For next year the IMF projects that the Ukrainian economy will stabilize, and its base scenario projects growth of 1% and inflation that will remain high at an average of 25% per year.
However, the changing conditions of the war complicate projections for the Fund, which are a key element in developing a credit program.
So far this year, Ukraine has already received $2.6 billion from the IMF in quick financing programs, and will have to pay more than $3 billion next year.
“The invasion of Russia continues to cause a devastating economic and social impact in Ukraine, and the main economic challenge facing the authorities is to ensure adequate resources for basic functions of the State while preserving macroscopic stability,” the agency diagnosed.
Regarding monetary policy, Gray pointed out that “the authorities continue to monitor developments, manage liquidity and balance the exchange market with the objective of protecting prices; and ensuring adequate levels of reserves, committing to maintain the independence of the National Bank of Ukraine”.
On the other hand, according to the IMF, Ukraine is “appropriately prepared” to reverse “emergency measures and capital flows to banks” that were applied in the first months of the war.
“Greater efforts are needed to cement good governance practices in state companies and banks. The preservation of independent and competent anti-corruption institutions is essential,” added the head of the Fund’s mission.
Source: Ambito
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