IMF approves $10.2b loan for Ukraine, with $1.9b to go immediately

WASHINGTON – The International Monetary Fund (IMF) executive board on Feb 26 approved an US$8.1 billion (S$10.2 billion) four-year loan for Ukraine, with US$1.5 billion to be disbursed immediately to help keep the government running as its war against Russia’s invasion drags into a fifth year.

The IMF said the new Extended Fund Facility arrangement for Ukraine will help anchor a US$136.5 billion international support package for the war-torn country, which this week

marked the fourth anniversary of Russia’s invasion

.

The new loan replaces a US$15.5 billion programme that was approved in 2023 and will help Kyiv to maintain economic stability and keep public spending flowing, the IMF said.

Ukrainian Prime Minister Yulia Svyrydenko hailed the IMF loan as part of a broader financial framework that would cover an estimated budget shortfall of US$136.5 billion over four years, including a €90 billion (S$134.28 billion) loan from the European Union.

“It is very important for us that in the fifth year of the full-scale war, against the backdrop of systematic attacks on the energy sector, Ukraine has guaranteed international financial support from partners and the resources for the stable functioning of the state,” she wrote on Telegram.

The World Bank, European Union, United Nations and the Ukrainian government this week issued a new report that put the cost of rebuilding Ukraine at US$588 billion over the next decade.

IMF managing director Kristalina Georgieva said the loan will resolve Ukraine’s balance of payments problem and restore medium-term external viability while boosting prospects for reconstruction and growth after the war ends and helping to facilitate Ukraine’s steps to join the European Union.

“Ukraine and its people have weathered a long and devastating war for over four years with remarkable resilience,” she said, lauding efforts by the Ukrainian authorities to maintain overall macroeconomic and financial stability, boost domestic revenues and advance some critical reforms.

She said officials are committed to “tackling longstanding bottlenecks to growth”, including through continued efforts to combat corruption, address tax avoidance and evasion, reform energy markets and strengthen financial market infrastructure.

The programme will be promptly recalibrated in the case of successful peace negotiations, she said in a statement.

Growth slow, but inflation halved

Ms Georgieva, who paid a surprise visit to Ukraine in January, said the war had taken a toll on economic and social conditions, despite efforts by authorities to stabilise the economy, contain inflation and restructure private sector debt.

The new loan aimed to deepen structural reforms, she said.

That meant growth was slowing and the economic outlook remained “subject to exceptionally high uncertainty,” she said.

The IMF now projects that Ukraine’s economy will grow by 1.8 per cent to 2.5 per cent in 2026, after growth of an estimated 1.8 per cent to 2.2 per cent in 2025.

Inflation was expected to be around 6.1 per cent in 2026, half the 12.7 per cent rate recorded in 2025, the IMF said.

Ukraine’s estimated financing gap of US$52 billion in 2026 would be filled through disbursements under the newly approved IMF programme, European Union arrangements, funds from the Group of Seven advanced economies and bilateral support, the IMF said.

Ms Georgieva said a large number of IMF members, including the US, Germany, Canada, Britain and Japan, had reaffirmed their recognition of the IMF’s preferred creditor status in respect to the money it owed the Fund, and agreed to “adequate financial support” to ensure Ukraine could repay its debts to the IMF.

Other countries backing Ukraine were Austria, Belgium, Denmark, Estonia, Finland, France, Greece, Iceland, Ireland, Italy, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain and Sweden, she said.

The Group of Creditors of Ukraine, which holds the majority of Ukraine’s official bilateral debt, also agreed to extend the current debt standstill and complete a definitive debt treatment after the resolution of the current state of “exceptionally high uncertainty,” the IMF said in its statement.

Ms Georgieva said the risks to the loan were exceptionally high and the programme’s success would depend on continued international support, as well as the authorities’ “steadfast determination” to implement ambitious structural reforms.

A staff report noted that progress on reforms had been mixed under the previous programme, with Kyiv completing some important milestones, but missing two end-December benchmarks related to public investment management and valuation standards.

Ukraine’s progress on the programme will be reviewed quarterly, with nine reviews planned over the next four years. REUTERS