An International Monetary Fund (IMF) team, led by Gavin Gray, conducted discussions with Ukrainian authorities in Kyiv and Warsaw from February 20 to 28 regarding the Seventh Review of Ukraine's four-year Extended Fund Facility (EFF) Arrangement. Following these talks, Mr. Gray announced that "IMF staff and the Ukrainian authorities have reached staff-level agreement on the Seventh Review of the EFF, subject to approval by the IMF Executive Board, with Board consideration expected in coming weeks."
The EFF arrangement is described as a vital support for Ukraine's economic program amid high uncertainty. According to Mr. Gray, "Program performance remains strong with all quantitative performance criteria for end-December met." He also noted that Ukraine has requested to adjust its access under the EFF program due to a revised profile of balance of payments needs in 2025.
Despite ongoing challenges from three years of war, Ukraine's economy shows resilience. The GDP growth for 2024 is estimated at 3.5 percent but is anticipated to moderate to 2-3 percent in 2025 due to various constraints including labor shortages and infrastructure damage. Inflation rose to 12.9 percent year-on-year in January, prompting the National Bank of Ukraine (NBU) to raise its policy rate by a cumulative 150 basis points since December.
Ukraine's budget for 2025 targets a deficit excluding grants of 19.6 percent of GDP and relies on increased revenue from tobacco excise taxes. The budget aims for significant external support from initiatives like the G7’s ERA initiative.
Mr. Gray emphasized that restoring fiscal sustainability requires reform implementation targeting domestic revenue mobilization and improved investment conditions. Reforms are needed in tax administration alongside state customs and tax services improvements.
With rising inflation risks, further actions might be necessary if inflation accelerates or expectations worsen: "Given the risks from rising inflation, the recent increases in the policy rate by the NBU are appropriate." Adequate reserves maintenance remains crucial amidst uncertain prospects.
Anti-corruption efforts should continue enhancing institutional credibility: "Parliamentary adoption this week of the law establishing the High Administrative Court...is a landmark step."
Post-war recovery will depend on effective public investment management (PIM), requiring strategic allocation within limited fiscal space: "A strategy-driven and transparent approach is essential."
Finally, while Ukraine's financial sector remains stable, vigilance is necessary due to elevated risks: "Developing financial markets infrastructure will be critical...including attracting foreign capital."
During their mission, IMF representatives engaged with Finance Minister Marchenko, NBU Governor Pyshnyy among others for collaborative discussions.