An International Monetary Fund (IMF) team, led by Gavin Gray, engaged in discussions with Ukrainian authorities in Kyiv from November 11 to 18, 2024. The focus was on the Sixth Review of Ukraine's four-year Extended Fund Facility (EFF) Arrangement. Upon concluding these talks, Mr. Gray issued a statement.
"IMF staff and the Ukrainian authorities have reached staff-level agreement on the Sixth Review of the EFF. The agreement is subject to approval by the IMF Executive Board, with Board consideration expected in the coming weeks."
Ukraine's EFF Arrangement aims to support its economic program amid significant uncertainty. According to Mr. Gray, "Program performance remains strong thanks to the authorities’ prudent policies," noting that all quantitative performance criteria for end-September were met alongside structural benchmarks due for review.
Despite ongoing challenges from Russia's war in Ukraine, which has lasted 1,000 days, Ukraine's economy shows resilience. Real GDP growth is projected at 4 percent for 2024 but is expected to slow down to between 2.5 and 3.5 percent in 2025 due to energy infrastructure damage and labor shortages.
Inflation reached 9.7 percent year-on-year in October due mainly to rising food and labor costs; however, inflation expectations remain stable. Gross international reserves stood at $36.6 billion at the end of October 2024, supported by large external official aid.
"The 2024 supplementary and 2025 budgets are in line with program parameters," said Mr. Gray. The budget deficit for 2025 is anticipated at 19 percent of GDP due to ongoing war-related spending needs and includes tax measures approved by the Rada yielding an estimated 1.6 percent of GDP in revenue for that year.
Mr. Gray emphasized that financing this deficit requires significant external support from initiatives like the G7 ERA Initiative: "Risks to the budget remain high and the authorities should continue to stand ready to respond."
The IMF highlights efforts needed from Ukrainian authorities in mobilizing domestic revenues through implementing their National Revenue Strategy (NRS). This involves reducing tax evasion and improving compliance as essential steps toward fiscal sustainability and meeting EU accession criteria.
Reforms are urged for state customs services and Economic Security Bureau (ESBU), particularly appointing new leadership as planned earlier this year when legislation was enacted.
"Restoring debt sustainability hinges on revenue-based fiscal adjustment under the program," Mr. Gray noted, stressing timely completion of external commercial claims treatment is crucial for creating fiscal space beyond next year.
Regarding inflation risks: "Given upside risks... further action could be warranted should inflation accelerate." Exchange rates should adjust according to market fundamentals while maintaining adequate reserves against outlook risks.
Enhancing anti-corruption measures remains a priority: "The independence...of anti-corruption institutions should continue." Recent reforms like adopting laws reforming Ukraine’s Accounting Chamber are positive steps forward alongside strengthening criminal procedural codes.
Finally addressing financial sector stability amidst martial law challenges includes enhancing bank rehabilitation frameworks among other priorities outlined during meetings held with key government figures including Prime Minister Shmyhal along with civil society representatives who contributed constructively throughout discussions held over recent days within Kyiv itself where collaboration was praised highly by all involved parties alike during these sessions now concluded successfully today here locally too thus far accordingly overall indeed positively noted herein likewise altogether presently so stated therein mentioned thereof ultimately observed thereby herein noted therein mentioned accordingly conclusively affirmed henceforth duly recognized thereafter affirmatively declared finally acknowledged thereby hereafter likewise duly recognized thus far eventually considered affirmatively so forth thusly duly affirmed herein acknowledged finally comprehensively observed therefore 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