(Bloomberg) -- Ukraine passed a loan-program staff review by the International Monetary Fund that will unlock a $1.1 billion payment for the war-battered country.
The Washington-based lender’s economists finalized the fifth scheduled review of its $15.6 billion assistance program for Ukraine, the fund said in a statement on Tuesday night. The money will be disbursed after the executive board approves the deal, a step that’s mostly a formality. The IMF said that the board will consider it in the coming weeks.
Ukraine has struggled to keep its economy afloat as 2 1/2 years of war decimated its energy sector and destroyed swathes of its infrastructure and export capacity. The government in Kyiv relies on funding from allies including the US and European Union, where public support has waned as the Russian invasion continues.
Last week, members of the IMF staff visited Ukraine and met with government officials as part of the review.
The IMF’s lending and policy reviews have been at the center of an overall $120 billion-plus in international assistance pledged for Ukraine.
The fund said in its statement that Ukraine met all end-June quantitative performance criteria and the structural benchmark for the review. Understandings were also reached on policy settings and reforms to sustain macroeconomic stability as the war continues, the IMF said.
The fund said that it expects growth to be 3% this year, but that the economy will slow in the second half because of repeated attacks on energy infrastructure and the impact of the war on labor markets and confidence, and for growth of 2.5% to 3.5% in 2025. Risks to the outlook remain exceptionally high, the IMF said.
Heading into the talks, Ukrainian officials were expecting to face IMF pressure to devalue the country’s currency at a faster pace, cut interest rates and shore up tax-raising efforts to fill a budget gap, Bloomberg News reported last week, citing officials who had participated in preliminary discussions.
However, the IMF team didn’t make those steps requirements to pass this review, according to two officials familiar with the negotiations, who asked not to be identified as the talks were private.
The government did, however, commit to the condition that it follow corporate-governance standards when it appoints a chief executive officer and supervisory board of the power grid operator Ukrenergo.
The latest IMF agreement followed “difficult” talks, Ukraine’s Prime Minister Denys Shmyhal said earlier Tuesday.
“This is hard work, not an easy mission,” Shmyhal told reporters in Kyiv, citing “many challenges.”
Kyiv has also sought further assistance from the EU and US through a Group of Seven plan to secure $50 billion in loans derived from frozen Russian central bank assets.
The G-7 has set out to raise those funds, which could cover Ukraine’s budget needs for 2025, by the end of the year. The IMF has received assurances from the US and EU that the frozen-asset funds will be forthcoming, according to officials familiar with the talks.
Yet the IMF has also warned Kyiv that the outlook for foreign assistance is becoming less predictable. The next IMF review is scheduled for December. In 2025, the nation will receive two equal tranches totaling over $1.8 billion, provided it meets its commitments.
--With assistance from Eric Martin.
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