Ukraine Unveils Reform Program with IMF Support

IMF Approves $17.01 billion to support Ukraine’s economic reform program

Focus on five key areas: exchange rate flexibility, banking stability, fiscal policy, energy policy, and governance

Government launching new social protection program to cushion the impact on low-income families

The loan, under a two-year Stand-By Arrangement, backs a policy program that aims to restore macroeconomic stability, promote sustainable growth, and strengthen economic governance and transparency. The IMF approval makes $3.2 billion immediately available to Ukraine with the remainder subject to frequent reviews. The Stand-By Arrangement entails exceptional access to IMF resources, amounting to 800 percent of Ukraine's IMF quota.

The program also is expected to unlock additional and sizable international official assistance, and help restore confidence among private investors.

In an interview, Reza Moghadam, Director of the IMF’s European Department, emphasizes the needs for Ukraine to address deep-seated structural problems and vulnerabilities. He also notes that the Ukrainian authorities have taken ownership of economic reforms, which are long overdue and urgently needed. “The government’s implementation of a comprehensive set of program actions up front demonstrates strong commitment to reform policies and objectives,” Moghadam said.

IMF Survey: What are the key challenges facing Ukraine today?

Moghadam: Ukraine is experiencing its second major economic crisis in six years. An overvalued exchange rate accompanied by loose fiscal policy and sizable losses in the state-owned gas company Naftogaz resulted in large twin deficits, a steady rise in indebtedness, recurrent difficulties with external financing, and depletion of international reserves. Such vulnerabilities made the economy especially susceptible to economic and political shocks that eventually led to the current crisis.

The new government that took office in late February has quickly taken steps toward restoring macroeconomic and financial stability. However, in addition to entrenching macroeconomic stability, Ukraine needs to undertake deep-reaching structural reforms to reduce imbalances, improve governance and the business climate––Ukraine’s long-standing weaknesses––and move toward balanced growth. An emphasis on capacity building is critically needed to address the legacy of ad hoc policy design and implementation.

IMF Survey: What are the main elements of Ukraine’s economic reforms?

Mog...