Ukraine, International Monetary Fund agree on USD 15.6 billion loan package

Ukraine and the International Monetary Fund have agreed on a USD 156 billion loan package aimed at shoring up government finances severely strained by Russias invasion and leveraging even more support by reassuring allies that Ukraine is pursuing strong economic policies and fighting corruptionUkraines finance ministry said on Wednesday that the programme will help to mobilise financing from Ukraines international partners as well as to maintain macrofinancial stability and ensure the path to postwar reconstruction after Ukrainian victory in the war against the aggressorThe loan programme 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 on TuesdayPrinting money to fund peoples pensions state salaries and basic services can make things worse by fuelling inflation and destabilising the currency The remainder of the programme will focus on supporting Ukraines bid for European Union membership and postwar reconstructionThe 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 Ukraines government is following sound economic policiesThe agreement which still needs approval from the IMFs executive board is expected to help mobilise largescale concessional financing from Ukraines international donors and partners over the duration of the programme Gavin Gray the IMFs mission chief for Ukraine said in a statementThe Washingtonbased IMF said Ukrainian authorities demonstrated their commitment to healthy economic policy and met all agreedupon goals during a preliminary consultation The loan programme goes beyond previous IMF practice by lending to a country at war under new rules that allowed assistance due to circumstances of exceptionally high uncertaintyUkraine massively increased military spending while the economy shrank by around 30 per cent in 2022 hitting tax revenueAlso read Ukrainian President Zelenskyy claims missiles drones hit civilian buildingsThe result was a huge budget deficit that has been covered by outside financing from the US the EU and other allies The aid has helped the country end its excessive reliance on money printed by the central bank and loaned to the government an emergency step considered necessary early in the war but that could fuel inflation and send the currency plunging if prolongedBefore the war Ukraine had made progress in reforming its banking system and making government contracts more transparent But it still ranked 122 out of 180 countries on Transparency Internationals corruption perceptions indexIts prewar economy was characterised by political involvement from wealthy individuals known as oligarchs and by slow progress on improving the legal system perceived as too open to political influenceThe IMF however said that after the preliminary consultations the government has made progress in reforms to strengthen governance anticorruption and rule of law and lay the foundations for postwar growth although the agenda of reforms in these areas remains significantSeveral senior officials including deputy ministers and governors of frontline regions were fired in January after allegations of corruption some related to military spending embarassed the government President Volodymyr Zelenskyy was elected in 2019 on an antiestablishment anticorruption platformThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever