May 30, 2024

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Ukraine will secure the first IMF loan to a war-torn country

According to the International Monetary Fund (IMF), Ukraine and the IMF have agreed to provide $15.6 billion in funding.

In the upcoming weeks, it is anticipated that the first loan from the organization to a war-torn nation will be approved. Furthermore, it would represent one of the greatest financial aid packages Ukraine has received since Russia’s invasion. Loans to nations with “exceptionally high uncertainties” are now permitted by an IMF regulation amendment.

Russian aggression on Ukraine “continues to have a disastrous effect on the economy: activity dropped by 30% in 2022, a sizable portion of the capital stock has been damaged, and poverty levels have increased,” said IMF official Gavin Gray in a statement.

Strong financial assurances are needed from donors, including the G7 and EU, as the program has been created in accordance with the new fund’s policy on lending in the face of extraordinarily high uncertainty.

The IMF anticipates that Ukraine’s economy will either see a little decline or growth this year.

According to Ukrainian Prime Minister Denys Shmyhal, the money will enable his nation to “pay all necessary expenditures, preserve macroeconomic stability, and improve our relationship with other international partners.”

An ambitious and adequately conditioned IMF program is essential to support Ukraine’s reform efforts, according to US Treasury Secretary Janet Yellen, who paid a surprise visit to Ukraine last month.

The US is the largest stakeholder in the IMF and the major financial donor to Ukraine.

President Joseph Biden said earlier this year that the US would be providing Ukraine with military assistance worth about $500 million more. Moreover, Congress spent an additional $112 billion in 2022.

Tanks, drones, missiles, and other weapons systems, as well as education, transportation, and intelligence assistance, are all covered by military aid, which makes up more than half of American spending on Ukraine.

The IMF announced last week that the adjustment to its rules allowing assistance for nations with “exceptionally significant uncertainty” had been agreed by its executive board.

Without specifically addressing Ukraine, it stated that the measure extended to nations dealing with “external factors that are beyond the control of country authorities and the scope of their economic strategies.”