The International Monetary Fund (IMF) announced Wednesday that it will release a $15.6 billion loan package to Ukraine. The Washington-based organization told nations putting up the funds that Kyiv is strong financially and combating corruption.
The reaction from Ukraine, of course, was positive. The finance ministry said the program will stimulate financing and maintain stability, leading to reconstruction after victory over the Russian invaders.
The Associated Press reported the IMF loan program will extend for four years. The first year to 18 months will center on closing the enormous budget deficit faced by the nation.
It will also reduce the initiative to print more currency to finance the war effort along with rebuilding destroyed cities.
IMF rules were amended to allow for lending to a nation at war. This was previously prohibited, but changes now mean that funds became available for a situation of “extremely high uncertainty.”
The IMF gave Ukraine $15.6 billion – an unprecedented loan for a country that will not be able to repay it
The IMF and Kiev have reached a working-level agreement on a four-year comprehensive loan program, Bloomberg reports. Thus, Ukraine will receive $15.6 billion. It is… pic.twitter.com/6bn8szHrOF
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There have been allegations of corruption at the highest levels of the Ukrainian government predating last year’s Russian invasion. Critics charge there is an almost complete lack of accountability going hand-in-hand with the tens of billions flowing into the country.
Earlier this year, President Volodymyr Zelenskyy purged nine senior government officials in response to charges that his administration was mishandling international funds. Five regional governors and four deputy ministers were cut loose in the house cleaning.
Part of the IMF program will focus on Ukraine’s efforts to join the EU and reconstruction after the war ends.
Also, many feel the unexpected IMF action will open doors for governments such as the EU and G7 nations to provide more funds for Kyiv. The multi-billion dollar loan signals that the international community believes Ukraine is pursuing sound economic policies in the midst of war.
For its part, the IMF said Ukrainian officials met all their requirements for a sound economic policy and reached predetermined goals. The country had to dramatically increase military spending during a time when economic activity plunged 30% after the invasion.
The deficit incurred by Kyiv has largely been financed by the U.S., U.K. and other European nations. The funding is also expected to forestall reliance on the inflationary practice of printing additional currency to meet economic demands.