IMF Kicks Off Critical Review Amid Ukraine's Wartime Reshuffle

An IMF mission started the fifth review of its $15.6 billion lending programme to wartime Ukraine amid a government reshuffle. With Kyiv spending 60% of its budget on the army, the IMF's support is crucial. This review could unlock $1.1 billion in additional financing.

An International Monetary Fund (IMF) mission commenced on Wednesday, undertaking its fifth review of a $15.6 billion lending program to Ukraine, which is in the midst of significant government changes due to ongoing war efforts. This four-year IMF program is an essential segment of a broader worldwide economic support package aimed at aiding Ukraine as it confronts its third winter under Russian invasion.

The IMF review takes place against a backdrop where Kyiv allocates about 60% of its budget to military expenditure, heavily relying on Western financial aid to cover pensions, public sector wages, and various social and humanitarian expenses. According to an IMF statement, discussions on policy have begun between the Fund's mission and Ukrainian officials.

Compounding the financial strain, President Volodymyr Zelenskiy's government is undergoing a significant reshuffle. Notably, six ministers have resigned, though Finance Minister Serhiy Marchenko is expected to retain his role. Marchenko has highlighted an uncovered financial gap of approximately 500 billion hryvnias ($12 billion) needed for defense this year. To address this, the government is raising taxes, increasing import and excise duties, and borrowing more domestically. Additionally, a debt restructuring agreement with bondholders has been reached. The successful completion of this IMF review could unlock $1.1 billion in new financing in the ensuing months.

(With inputs from agencies.)