Ukraine: Third Review of the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criterion, and Modifications of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Ukraine

UKRAINE IMFCountryReportNo.24/78 March2024 THIRDREVIEWOFTHEEXTENDEDARRANGEMENTUNDERTHEEXTENDEDFUNDFACILITY,REQUESTSFORAWAIVEROFNONOBSERVANCEOFAPERFORMANCECRITERION,ANDMODIFICATIONSOFPERFORMANCECRITERIA—PRESSRELEASE;STAFFREPORT;ANDSTATEMENTBYTHEEXECUTIVEDIRECTORFORUKRAINE InthecontextoftheThirdReviewoftheExtendedArrangementUndertheExtendedFundFacility,RequestsforaWaiverofNonobservanceofaPerformanceCriterion,andModificationsofPerformanceCriteria,thefollowingdocumentshavebeenreleasedandareincludedinthispackage: APressReleaseincludingastatementbytheChairoftheExecutiveBoard. TheStaffReportpreparedbyastaffteamoftheIMFfortheExecutiveBoard’sconsiderationonMarch21,2024,followingdiscussionsthatendedonFebruary22,2024,withtheofficialsofUkraineoneconomicdevelopmentsandpolicies.Basedoninformationavailableatthetimeofthesediscussions,thestaffreportwascompletedonMarch12,2024. AStatementbytheExecutiveDirectorforUkraine. TheIMF’stransparencypolicyallowsforthedeletionofmarket-sensitiveinformationandprematuredisclosureoftheauthorities’policyintentionsinpublishedstaffreportsandotherdocuments. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.org InternationalMonetaryFundWashington,D.C. ©2024InternationalMonetaryFund PR24/96 IMFExecutiveBoardCompletestheThirdReviewoftheExtendedFundFacilityArrangementforUkraine FORIMMEDIATERELEASE TheIMFBoardtodaycompletedtheThirdReviewoftheextendedarrangementundertheExtendedFundFacility(EFF)forUkraine,allowingtheauthoritiestodrawtheequivalentofaboutUS$880million(SDR663.9million),whichwillbechanneledforbudgetsupport. TheauthoritiescontinuetoperformstronglyundertheEFFunderchallengingconditions,meetingallbutonequantitativeperformancecriteriaforend-December,allstructuralbenchmarksthroughend-February,andallindicativetargets. TheUkrainianeconomycontinuedtoshowremarkableresiliencein2023,althoughwar-relatedheadwindsarere-emerging,andtheoutlookremainssubjecttoexceptionallyhighuncertainty.Sustainedreformmomentumisnecessarytosafeguardmacroeconomicstability,restorefiscalanddebtsustainability,enhanceinstitutionalreforms,andlaythegroundworkforreconstructioneffortsandthepathtoEuropeanUnion(EU)accession. Washington,DC–March21,2024:TheExecutiveBoardoftheInternationalMonetaryFund(IMF)todaycompletedthethirdReviewoftheEFFarrangementforUkraine.ThecompletionofthethirdreviewenablestheauthoritiestoimmediatelydrawUS$880million(SDR 663.9million),whichwillbechanneledforbudgetsupport. Ukraine’s48-monthEFFarrangement,withaccessofSDR11.6billion(equivalenttoUS$15.6billion,orabout577percentofquota),wasapprovedonMarch31,2023,andformspartofaUS$122billionsupportpackageforUkraine.Theauthorities’IMF-supportedprogramaimstoanchorpoliciesthatsustainfiscal,external,priceandfinancialstabilityatatimeof exceptionallyhighwar-relateduncertainty,supporttheeconomicrecovery,aswellasenhancegovernanceandstrengtheninstitutionstopromotelong-termgrowthinthecontextofreconstructionandUkraine’spathtoEUaccession. TheEFFcontinuestoprovideastronganchorfortheauthorities’economicprogram,whichhasremainedontrackdespiteextremelychallengingcircumstancesduetoRussia’songoingwarinUkraine.Allbutonequantitativeperformancecriteriaandallindicativetargetsforend-Decemberweremet.Theauthoritiesalsometallstructuralbenchmarksthroughend-February,underscoringtheircontinuingcommitmenttoanambitiousreformagenda.TheBoardapprovedtheauthorities’requestforawaiverfornon-observanceoftheDecemberperformancecriterionontaxrevenues,whichwasmissedbyaminoramount. Theeconomywasmoreresilientthanexpectedin2023,withrobustgrowthoutturns,continuedsharpdisinflation,andthemaintenanceofadequatereserves.However,headwindsarere-emergingin2024,withgrowthexpectedtosoftento3–4percentduetouncertaintyabouttheongoingwarandassupplyconstraintsbecomemorebinding.Theoutlookremainssubjecttoexceptionallyhighdownsiderisksarisingfromwar-relatedfactors,potentialshortfallsinexternalfinancingandthesocio-economicimpactofpoliciesthatmayberequiredifshocksmaterialize. 2 FollowingtheExecutiveBoarddiscussiononUkraine,Ms.KristalinaGeorgieva,ManagingDirectoroftheIMF,issuedthefollowingstatement1: “Russia’sinvasionofUkrainecontinuestobringenormoussocialandeconomiccoststoUkraine.However,macroeconomicandfinancialstabilityhasbeenpreserved,reflectingskillfulpolicymakingbytheUkrainianauthoritiesaswellassubstantialexternalsupport.Theeconomyhasbeenresilient,withstronger-than-expectedmacroeconomicoutturnsin2023.Ukraine’sperformanceandcommitmentundertheprogramhascontinuedtobestrong. “Lookingahead,therecoveryisexpectedtoslowsomewhat,giventheexceedinglyhighriskstotheoutlookstemmingmainlyfromtheexceptionallyhighwar-relateduncertaintyaswellaspotentialdelaysinexternalfinancing.Theauthoritiesshouldbevigilantagainsttheserisks.ItisalsocriticalthattheexternalfinancingcommittedtoUkrainebyalldonorsisdisbursedinatimelyandpredictablemannertosafeguardUkraine’shard-wonmacroeconomicstabi