International Monetary Fund extends $15.6 billion loan to Ukraine as war with Russia rages

A $15.6 billion loan program for Ukraine has been approved for Ukraine by the International Monetary Fund as part of a $115 billion package to bolster its war-torn economy.

With third of a population displaced in a country that will require hundreds of billions of dollars in reconstruction costs, the IMF’s support could give Ukraine some breathing room.

“It is an important help in our fight against Russian aggression,” Ukrainian President Volodymr Zelenskyy wrote on Twitter Friday as he thanked the IMF. “Together we support the Ukrainian economy,” he said.

The loan program will span four years, run in two-phases, with the first phase focused on helping Ukraine close its massive budget deficit and steady disinflation, the IMF said in a statement Friday, which would ease the crunch on government spending.

Ukraine will immediately receive $2.7 billion as part of the program, the IMF said Friday, requiring it to focus on financial stability and undertake ambitious structural reforms, particularly in the energy sector.

“The overarching goals of the authorities’ program are to sustain economic and financial stability at a time of exceptionally high uncertainty,” the IMF statement said, adding it would promote reforms for Ukraine’s post-war accession to the European Union.

The E.U. approved Ukraine’s application in last year in June, granting it a candidate status.

In October, the IMF said Ukraine needed as much as $5 billion a month and Russia has since only continued its destructive campaign, despite the United Nations General Assembly passing a non-binding resolution that called on Russia to make reparations to its neighbor in November.

Friday’s loan was approved under IMF’s Extended Fund Facility (EFF) and it is the first major conventional financing program the fund has approved for a country involved in full-scale war.

Risks to the arrangement were “exceptionally high,” First Deputy Managing Director of IMF, Gita Gopinath, said, as she lauded Ukrainian authorities for maintaining financial stability despite the grueling war.

With Europe’s largest armed conflict since the World War II now poised to enter its new phase, costs are only expected to rise.

Seven people were killed in Ukraine’s eastern regions of Sumy, Kherson, Donetsk and Zaporizhzhia, the Ukrainian military said Saturday in a Facebook post Saturday about the previous 24 hours. It added that almost 60 settlements along the frontline came under fire from artillery, tanks and air.

Ukraine will now have to meet tight IMF targets, while also financing its possibly decisive spring counteroffensive which the Ukraine’s Defense Minister Oleksii Reznikov said last week could begin as soon as April.

The loan program is designed to support Ukraine’s struggles with meeting its payments arising from the “large exogenous shock of the war,” the IMF said. It follows the previous $1.4 billion financing provided in March of last year and a follow-up of another $1.3 billion under a “food shock window” program in October.

While the first phase of the loan focuses on macroeconomic stability and the second, the second phase, which begins once active combat subsides, will focus on reforms to improve growth in the medium to long term.

Ukraine will also be required to develop “independent and effective anti-corruption institutions” to help mitigate corruption risks and boost donor confidence, the IMF said.

“Deepening integration with the E.U. single market and steadfastly implementing the E.U. accession requirements will be crucial to bring to fruition long sought institutional and structural reforms,” it said

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