IMF makes 'very good progress' in talks with Ukraine about new funding

War-torn country's economy shrank by 30% last year

Ukraine's President Volodymyr Zelenskyy and IMF Managing Director Kristalina Georgieva in Kyiv last month. Reuters

The International Monetary Fund has made “very good progress” in talks with Ukraine regarding possible funding for the war-torn country.

An IMF team led by Gavin Gray held discussions with Ukrainian authorities in Warsaw, Poland, from March 8 on their request for a lending programme. The talks ended on Wednesday.

“The discussions between IMF staff and the Ukrainian authorities were productive and very good progress has been made towards agreement on a set of policies that could underpin a fund-supported programme,” Vahram Stepanyan, the fund's resident representative to Ukraine, said on Wednesday evening.

“Building on this progress, staff and the authorities expect to conclude the discussions in the coming days.”

Ukraine, whose economy shrank by 30 per cent last year, said it hoped to secure $15 billion in financing from the Washington-based lender.

Ukraine's economy is expected to gradually recover this year despite the impact of the Russian war, but it will need support from the international community for its financing needs, Kristalina Georgieva, managing director of the IMF, said last month.

In October, the IMF approved the release of $1.3 billion in emergency funding for Ukraine, to help the country meet its “urgent” economic requirements.

Ukraine could receive as much as $40 billion in official financial support in 2023 if the war is prolonged, mostly from the US and the EU, according to the IMF.

Damage to the country's infrastructure was estimated at $138 billion as of December 2022, equal to 70 per cent of gross domestic product in 2021, according to the Kyiv School of Economics.

Last month, Moody's Investors Service downgraded Ukraine's ratings deeper into junk, or non-investment grade, territory as a result of the mounting pressure on its finances.

Moody's forecasts financing needs of about 20 per cent of GDP in 2023, which are expected to be mainly covered through donor support and the remaining by issuances on the domestic market.