Key Ukrainian adviser says new $5bn IMF loan would reassure other creditors

A participant stands near an IMF logo at the International Monetary Fund – World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo

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KYIV, Aug 12 (Reuters) – Securing a new $5 billion loan from the IMF would help assure Ukraine’s other creditors that the war-torn country’s macroeconomic situation was under control, said President Volodymyr Zelenskiy’s chief economic adviser told Reuters on Friday.

New financing from the International Monetary Fund for about 18 months could anchor a larger package of $15-20 billion to help Ukraine weather the economic crisis caused by the Russian invasion, the minister said. adviser Oleg Ustenko.

He said Ukrainian officials were in contact with the global lender about the potential request, adding the aim should be to move forward as soon as possible.

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Ustenko’s comments came weeks after Ukraine’s central bank governor Kyrylo Shevchenko told Reuters he was seeking up to $20 billion from the IMF over two or three years, an amount that would have placed Ukraine well beyond the “exceptional access limit” of the loan fund.

The magnitude of this request had sparked an intense debate within the IMF as it would also have raised questions about the sustainability of Ukraine’s debt.

The revised plan would be modeled on a financing plan agreed in 2015, after Russia’s invasion of Ukraine’s Crimea region, which included $17.5 billion in IMF financing, but leveraged a total financing of $40 billion.

“A $5 billion IMF program would be in line with past funding levels and could be a catalyst for funding other courses, including the EU, Treasury and other individual countries,” Ustenko told Reuters.

Ukraine, grappling with the internal displacement of some 7 million people following the February 24 Russian invasion, is struggling to mobilize resources to deal with energy shortages, rising inflation and to the worsening of the humanitarian crisis as winter approaches.

It faces a 35%-45% economic contraction in 2022 and a monthly budget deficit of $5 billion, with only a third of the roughly $29 billion in Western aid pledges having materialized so far. present, according to economists.

This week, Ukraine’s foreign creditors backed its request for a two-year freeze on payments on nearly $20 billion in international bonds, but Ukraine still needs to make $635 million in principal payments on previous IMF loans from mid-September. Read more

Ustenko said Ukraine hoped to move quickly in negotiations with the IMF with a view to reaching a preliminary agreement before those payments are due.

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Reporting by Andrea Shalal; Editing by Leslie Adler

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