Ukraine, IMF agree on $15.6B loan package

FRANKFURT, Germany — Ukraine and the International Monetary Fund have agreed on a $15.6 billion loan package aimed at shoring up government finances severely strained by Russia’s invasion and leveraging even more support by reassuring allies that Ukraine is pursuing strong economic policies and fighting corruption.

Ukraine’s Finance Ministry said Wednesday that the program will “help to mobilize financing from Ukraine’s international partners, as well as to maintain macrofinancial stability and ensure the path to postwar reconstruction after Ukrainian victory in the war against the aggressor.”

The loan program will run for four years, with the first 12 to 18 months focusing on helping Ukraine close its massive budget deficit and easing the pressure to print money to use for spending, the IMF said in a statement. Printing money to fund people’s pensions, state salaries and basic services can make things worse by fueling inflation and destabilizing the currency.

The remainder of the program will focus on supporting Ukraine’s bid for European Union membership and postwar reconstruction.

The IMF deal is expected to leverage even more money for Ukraine because it provides evidence to potential donor governments, including in the Group of Seven major democracies and the European Union, that Ukraine’s government is following sound economic policies.

The agreement, which still needs approval from the IMF’S executive board, “is expected to help mobilize large-scale concessional financing from Ukraine’s international donors and partners,” the IMF statement said.

The Washington-based IMF said Ukrainian authorities demonstrated their commitment to healthy economic policy and met all agreed-upon goals during a preliminary consultation. The loan program goes beyond previous IMF practice by lending to a country at war, under new rules that allowed assistance due to circumstances of “exceptionally high uncertainty.”