According to the IMF, the Russian invasion has severely damaged Ukraine’s economy, causing activity to decline by about 30% last year, destroying much of its capital assets, and escalating poverty.
The fund’s board authorized a 48-month Extended Fund Facility (EFF) program with a $15.6 billion value.
The IMF revealed in a news conference on Friday that it is the IMF’s share of a $115 billion overall support package made up of debt relief, grants, and loans by multilateral and bilateral institutions.
Recently, the IMF modified its regulations to permit loan programs for nations experiencing “exceptionally high uncertainty.”
The new four-year programme aims to “anchor macroeconomic and financial stability as well as to undertake critical structural reforms as the war continues,” IMF Deputy Managing Director Gita Gopinath said in a statement. Of the total amount approved by the IMF, $2.7bn is being made available to Ukraine immediately, with the rest of the funds due to be released over the next four years.
The more “ambitious structural reforms” to support sustained growth and post-war reconstruction, as well as facilitate Ukraine’s path to EU accession among other goals, will be left until active combat ends, she added.
The EFF loan is the first major financing programme approved by the IMF for a country involved in a large-scale war. Ukraine’s previous $5bn IMF programme expired last year.
“Russia’s invasion of Ukraine continues to have a devastating economic and social impact,” Gita Gopinath said.
Despite this, Ukrainian authorities “have nevertheless managed to maintain overall macroeconomic and financial stability, thanks to skillful policymaking and substantial external support,” she added.
At the same time, governance should be improved to enable long-term growth after the end of the war, the IMF said.
The programme also includes additional guarantees from some IMF members in the event that active combat continues beyond the current estimate of mid-2024.
If the current conflict were to continue into 2025, it would raise Ukraine’s financial needs from $115bn to around $140bn, said the IMF.
Kyiv had already agreed on the loan programme with international donors about two weeks ago. However, that agreement still had to be approved by the executive board.
Ukraine had sought the billion-dollar aid programme and months of negotiations preceded it.
Ukrainian President Volodymyr Zelenskyy welcomed the new funding.
“It is an important help in our fight against Russian aggression,” he wrote on Twitter. “Together, we support the Ukrainian economy. And we are moving forward to victory!”