IMF sanctions stand-by agreement worth $5 billion for Ukraine lasting 18 months

International Monetary Fund (IMF) has approved an 18-month standby agreement for Ukraine totalling US$5 billion. The program will help the country deal with the economic strain due to coronavirus and will focus on local businesses, safeguarding financial stability, moving forward with key governance and anti-corruption measures.

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IMF loan sanctioned 

An initial amount of SDR 1.5 billion (about US$2.1 billion) has been sanctioned immediately, whereas the rest of the amount will be done later, over as many as four reviews. 

The Executive Board also discussed the ex-post evaluation of exceptional access under Ukraine’s 2015 extended arrangement under the Extended Fund Facility (EFF), which concluded that the extended arrangement helped restore macroeconomic stability and growth but did not fully address Ukraine’s underlying balance of payments vulnerabilities.

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Regarding the standby agreement, Kristalina Georgieva, Managing Director and Chair said, "The program will focus on safeguarding medium-term fiscal sustainability, preserving central bank independence and the flexible exchange rate, and enhancing financial stability while recovering the costs from bank resolutions."

"The National Bank of Ukraine (NBU) has skillfully managed monetary policy during a very challenging period. Central Bank independence should be preserved, and monetary and exchange rate policies should continue to provide a stable anchor in the context of the inflation-targeting regime while allowing orderly exchange rate adjustment and preventing liquidity stress," she added.

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IMF had previously approved a 14-month SBA in December 2018 totalling up to US$3.9 billion. The country has been receiving a number of such funds fro the IMF with one granted in 2015 as well.

The SBA allows the Fund to respond flexibly to countries’ external financing needs-and to support their adjustment policies with short-term financing.

Earlier this year, Ukraine adopted laws lifting the ban on the sale of farmland and preventing former owners of nationalized or liquidated banks from regaining ownership or receiving state compensation. Both were listed by the IMF among conditions for providing aid to Ukraine last year.

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(With inputs from agencies)

(Image credits: AP)