- By Annabelle Liang
- Business reporter
The International Monetary Fund (IMF) says it has reached an agreement with Ukraine on funding worth $15.6bn (£12.8bn).
The organization’s first loan to a country at war is expected to be approved in the coming weeks.
It could also be one of the largest financing packages Ukraine has received since the Russian invasion.
The IMF recently changed a rule to allow loans to countries facing “higher uncertainty”.
“Russia’s invasion of Ukraine continues to have a devastating effect on the economy: activity will contract by 30 percent in 2022, a large part of the capital stock has been destroyed, and the level of poverty has increased,” the official of IMF Gavin Gray said in a statement.
“The program is designed in accordance with the new lending fund policy under extremely high uncertainty, and strong financial guarantees are expected from donors, including the G7 and the EU.”
Mr Gray also said the agreement would “activate large-scale concessional financing” for Ukraine from international donors and partners, without giving further details. The fund still needs to be approved by the IMF’s executive board.
The IMF expects Ukraine’s economy to record little contraction or growth this year.
Ukrainian Prime Minister Denys Shmyhal said the fund would help the country “finance all critical expenditures and ensure macroeconomic stability and strengthen our relations with other international partners”.
US Treasury Secretary Janet Yellen, who made a surprise visit to Ukraine last month, said: “An ambitious and well-conditioned IMF program is essential to support Ukraine’s reform efforts. .”
The US is the largest shareholder of the IMF and the largest contributor to Ukraine in terms of money spent.
Military aid, which accounts for more than half of US spending on Ukraine, pays for drones, tanks, missiles and other munitions systems as well as training, logistics and intelligence support.
Money has continued to pour into the conflict from around the world since Russia invaded Ukraine in February.
Last week, the IMF said its executive board had approved a rule change to allow funding for countries facing “higher uncertainty”.
Without mentioning Ukraine, it said that the measure was applied to countries experiencing “exogenous shocks beyond the control of the national authorities and the achievement of their economic policies”.