IMF approves Ukraine monitoring program to help spur donor financing

1:16 pm Tuesday, December 20th, 2022

By Kieran Murray, Marc Jones and Olena Harmash

WASHINGTON/KYIV (Reuters) -The International Monetary Fund has approved a four-month program for Ukraine aimed at maintaining economic stability following Russia’s invasion of the country, and helping promote donor financing.

It said the so-called Program Monitoring with Board involvement (PMB) was approved by the IMF’s management on Dec. 9 and discussed by its executive board on Monday, adding that it will help Ukraine implement prudent policies and “catalyze” external financing.

“Large and predictable external financial support will be critical for the success of the authorities’ strategy, and frontloaded disbursements would help address strains in early 2023,” IMF First Deputy Managing Director Gita Gopinath said in a statement.

Gavin Gray, the IMF’s mission chief for Ukraine, said the IMF estimates the country will need between $40 billion and $57 billion in external financing in 2023.

The IMF is not providing any additional funding itself at this stage but hopes it will be able to do so at some point next year and that the PMB will encourage Western donor nations to pledge more support in the meantime.

“Strong implementation of the PMB should help pave the way toward a possible full-fledged IMF-supported program,” Gopinath said.

Mission chief Gray explained that the first main review of Kyiv’s progress would happen at the end of January and focus on five key areas, including strengthening of tax revenues, reviving the country’s domestic debt market and financial sector reforms.

At the same time, the PMB seeks to promote transparency and maintain the independence of the National Bank of Ukraine and, more broadly, tackle corruption.

“The objective is to build a track record,” Gray said, describing it as laying the groundwork for more financial support.

The estimate of $40 billion to $57 billion of external financing needs for next year includes $3 billion Kyiv owes to the IMF itself.

That money is mostly clustered in March and September. Kyiv is expected to be able to pay it, but with the war raging more intensely again, significant uncertainty remains about how big a fully-fledged IMF program will need to be.

Ukrainian President Volodymyr Zelenskiy has said he will continue to press for at least $20 billion, as well as $2 billion in aid to rebuild power infrastructure, and up to $5 billion in credit to buy gas and coal.

Referring to the prospect that the situation in Ukraine could get more difficult next year, Gray said, “If you look at what has happened in the last couple of weeks, that might seem like a fairly obvious statement, but the question is how to quantify that.”

“The message is basically that the needs (of Ukraine) are large and they could be even larger, and everyone involved needs to be aware of that and needs to be ready to respond.”

(Reporting by Kieran Murray in Washington, Marc Jones in London and Olena Harmash in Kyiv; Editing by Eric Beech, Shri Navaratnam and Paul Simao)