The Dnipro River and city skyline in Kyiv, Ukraine, on Monday, June 27, 2022. The North Atlantic Treaty Organization (NATO) announced a plan to boost the size of its high-readiness force to 300,000 as it implements a fundamental shift in its deterrence plans after Russia's invasion of Ukraine. Photographer: Andrew Kravchenko/Bloomberg The IMF urged President Volodymyr Zelenskiy’s administration to boost tax revenue, restore the domestic bond market and limit monetary financing as part of its recommendations.
The four-month program “will provide an anchor for macroeconomic policies and catalyze donor support,” Gavin Gray, who led the IMF mission, said in a statement. “Strong policy implementation would help pave the way towards a full-fledged IMF-supported program.”
The accord will be discussed by the lender’s executive board in the next few weeks, the statement said.
Russia has destroyed parts of Ukraine’s industrial base, agriculture and basic infrastructure since its invasion began in February, triggering an economic contraction of some 30% this year. That deprived the government of revenue to finance basic needs, forcing Kyiv to rely on international aid and a program of bond sales.
Economic Forecast
The IMF expects Ukraine’s economy to stabilize next year, forecasting growth at 1% under a “baseline scenario,” it said, adding that inflation will likely remain elevated at around 25%.
The country has said it needs to fill a $3 billion monthly gap in its public finances next year. Prime Minister Denys Shmyhal said the government wants a new IMF loan program no later than in the first quarter of 2023.
Ukraine presents a special case for the IMF, since the war complicates its reliance on economic projections. It received $2.6 billion from the IMF this year in grants under rapid-financing programs. The country has to repay more than $3 billion to the lender next year.