03 June 2024, Monday, 11:38 573

Ukraine and IMF reach a staff-level agreement on 4th revision of EFF

Editor: Roman Vaniyan

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The mission of the International Monetary Fund (IMF) regarding the fourth revision of the Extended Fund Facility (EFF) program with Ukraine, which worked in Warsaw from May 27 to 31, has completed its work.

This follows from a statement by the National Bank, the Ukrainian News agency reports.

The representatives of the IMF and the Ukrainian authorities reached an agreement at the staff level (Staff-Level Agreement, SLA).

The relevant agreement must be approved by the IMF's board of directors, which will consider it in the coming weeks.

After that, Ukraine will have access to financing in the amount of SDR 1,669.82 million (about USD 2.2 billion in equivalent).

Agreements were also reached on an updated set of economic and financial policy measures aimed at supporting macroeconomic stability and promoting economic reforms to be implemented in the future.

The IMF expects that in the second half of 2024, the recovery of economic activity will slow down due to russia's large-scale attacks on the energy sector of Ukraine, and inflation will rise moderately.

The financial sector remains stable and liquid, and the pace of reform is significant despite the war.

Future priorities include strengthening banking regulation, supervision, lending, and capital markets infrastructure.

Considerable attention will be paid to increasing the level of financial inclusion, especially in de-occupied territories and in regions close to active hostilities.

Its low level is a restraining factor for economic activity, so the National Bank will focus on diagnostic work with the involvement of experts from the IMF and the World Bank in order to develop effective measures.

Provided stable inflation expectations and the attractiveness of hryvnia instruments are maintained, the National Bank will be able to continue easing monetary policy.

At the same time, a flexible exchange rate as a means of adapting the economy and currency market to internal and external shocks will contribute to maintaining their stability.

Further balanced and gradual easing of currency restrictions in accordance with the strategy should support the recovery of the economy without creating risks for macro-financial stability.

The IMF noted that budget financing needs in 2024 remain very high.

The implementation of the budget must consider financial constraints and the need to restore fiscal and debt sustainability.

In order to ensure fiscal sustainability, Ukraine needs to accelerate the implementation of tax reforms and revenue administration provided for in the National Revenue Strategy.

The priorities for the near term are strengthening tax and customs administration, as well as strengthening public trust through anti-corruption reforms and measures to properly protect taxpayers' data.

It is noted that the 2025 budget will require measures to mobilize domestic revenues, given the still high expenditure needs.

As the Ukrainian News agency earlier reported, on March 31, 2023, the Board of Executive Directors of the International Monetary Fund approved a four-year program of expanded financing for Ukraine.

The program is implemented in two stages (war and post-war). It provides access to credit funds from the IMF in the amount of 11.6 billion SDRs (equivalent to USD 15.6 billion).

Tranches under the program are provided based on the results of the views.

In 2023, Ukraine received three tranches from the IMF for a total amount of SDR 3.3 billion (USD 4.5 billion).

This year, Ukraine has already received one tranche from the IMF in the amount of SDR 663.9 million (about USD 880 million equivalent).

In total, in 2024, the government can receive four tranches from the IMF with a total volume of SDR 4 billion (USD 5.4 billion equivalent).