Ukraine extracts the first loan from the International Monetary Fund for a country at war

The International Monetary Fund (IMF) says it has reached an agreement with Ukraine on financing worth $15.6 billion (£12.8 billion).

The organization’s first loan to a country at war is expected to be approved in the coming weeks.

It would also be one of the largest funding packages Ukraine has received since the Russian invasion.

The International Monetary Fund recently changed a rule to allow loans to countries facing “exceptionally high uncertainty”.

“The Russian invasion of Ukraine continues to have a devastating impact on the economy: activity shrank by 30 percent in 2022, much capital was destroyed, and poverty levels soared,” said Gavin Gray, an IMF official. he said in a statement.

“The program has been designed in line with the new Fund’s policy on lending under exceptionally high uncertainty, and strong funding guarantees are expected from donors, including the Group of Seven and the European Union.”

Gray also said the agreement would “mobilize large-scale concessional financing” for Ukraine from donors and international partners, without giving further details. The financing still needs to be approved by the IMF’s Executive Board.

The International Monetary Fund expects Ukraine’s economy to contract or grow slightly this year.

Ukrainian Prime Minister Denys Shmyhal said the funding would help the country “finance all important expenditures, ensure macroeconomic stability and strengthen our interaction with other international partners.”

“An ambitious and appropriately conditional IMF program is critical to supporting Ukraine’s reform efforts,” said US Treasury Secretary Janet Yellen, who paid a surprise visit to Ukraine last month.

The United States is the largest contributor to the International Monetary Fund and the largest contributor to Ukraine in terms of money spent.

Military aid, which accounts for more than half of US spending on Ukraine, pays for drones, tanks, missiles and other munitions systems as well as training, logistical and intelligence support.

Money has continued to flow into the conflict from around the world since Russia’s invasion of Ukraine last February.

The International Monetary Fund said last week that its executive board approved a rule change to allow financing to countries facing “exceptionally high uncertainty”.

Without mentioning Ukraine, it said the measure applied to countries experiencing “external shocks beyond the control of the country’s authorities and the reach of its economic policies.”