Ukraine was believed in a loan – Newspaper Kommersant No. 56 (7501) dated 04/03/2023

Having refrained from assessing the prospects for the Ukrainian economy since February 2022, the IMF actually gave them last week, justifying the decision to approve a four-year loan for Ukraine in the amount of $15.6 billion. The loan program consists of two stages. At first, the country’s authorities will have to pay special attention to increasing tax revenues, maintaining exchange rate stability, strengthening the independence of the Central Bank and strengthening the fight against corruption (including amending legislation). The second stage is associated with “more ambitious structural reforms”: Kiev, as expected by the IMF, will not only return to the pre-war framework of fiscal and monetary policy (mainly a flexible exchange rate and inflation targeting), but also increase the competitiveness and productivity of economic sectors and address the vulnerabilities of the financial and energy sectors.

The duration of the stages and the amount of funds that will fall on each of them, as follows from the IMF statement, will depend on the political situation, that is, on how the military conflict between Russia and Ukraine develops. It should be noted that the loan approved by the fund was the largest in a year and the first “aid package” of such a volume approved by the IMF for a country involved in a military conflict. Prior to this, funds were allocated to Ukraine within the framework of “accelerated funding and emergency assistance” – the program under which the country will receive a new tranche involves a fundamentally different procedure for allocating and spending funds.

To make sure that the Ukrainian authorities are ready for systemic reforms, the fund conducted a four-month monitoring in the country within the framework of PMB (Program Monitoring with Board involvement), the results of which were satisfied. As the IMF expects, global support, combined with the willingness of the Ukrainian authorities to listen to recommendations, will lead to a restructuring of the country’s economic model according to the EU standards (the result of the interaction between the fund and the country’s authorities, as expected by both sides, should be European integration). In this regard, the data presented by the IMF (see chart) look more like a plan than a forecast that will come true if the trends identified by the fund during monitoring continue and the military conflict does not move into a more active phase.

Christina Borovikova