(Bloomberg) -- Ukraine reached a preliminary agreement with the International Monetary Fund on a fresh disbursement of aid as part of a broader loan program to the war-battered nation.
The staff-level agreement, which is subject to approval by the IMF’s board, paves the way for Ukraine to receive some $900 million next month. IMF officials signed off on the accord following talks in Vienna on Tuesday, saying Kyiv had met its performance criteria.
The IMF and Ukraine forged a loan agreement for $15.6 billion over the next four years in late March after the Washington-based lender changed its rules to be able to lend to a nation at war for the first time in its 77-year history. The program aimed to support Ukraine’s economy and preserve its institutions amid the devastation of Russian invasion.
“The Ukraine economy is showing remarkable resilience and recent economic developments point to a gradual economic recovery in 2023, although the outlook remains highly uncertain as exceptionally high war-related uncertainty persists,” the IMF said in a statement.
In exchange for aid, the government in Kyiv committed to a slate of measures including improved tax collection, shielding the central bank’s independence and restoring online declarations for officials and lawmakers as a part of a drive to tackle corruption.
“Overall, macroeconomic and financial stability have been maintained, thanks to prudent policymaking as well as continuous and timely external support,” the IMF said, stressing the risk of a ballooning deficit.
The lender urged Ukraine to focus on revenue collection. Earlier this week, the parliament in Kyiv moved forward legislation that removes tax relief for small-business owners that was introduced after Russia’s invasion began last year, a step that’s a condition for further IMF aid.
The IMF lauded the “remarkable resilience” Ukraine showed, recovering rapidly from large scale air strikes on the nation’s infrastructure. It upgraded its outlook for the country’s economic growth to between 1% and 3% this year, up from a range that forecast a 3% contraction to 1% growth.
Kyiv also pledged to move gradually to a more flexible exchange rate, while easing off foreign-currency controls. It will also provide a better assessment of its banks and continue a campaign against graft.
©2023 Bloomberg L.P.
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