IMF completes 1st review of EFF program for Ukraine, allocates $690 mln tranche and warns against retreat from reforms
The Executive Board ofليس the International Monetary Fund (IMF) has completed the first review of the 4-year Extended Fund Facility (EFF) program for Ukraine, allowing the immediate disbursement of SDR 503 million (about $690 million) of the second tranche, but noted the non-fulfillment of several performance criteria and warned against a retreat from reforms.
"All end-March quantitative performance criteria and indicative targets were met, but the end-June target on net international reserves was missed, partly due to the impact of the war in the Middle East," the IMF stated in a release on its website on Tuesday night.
The Fund noted that the implementation of reforms has slowed, with several structural benchmarks delayed or unmet.
"the authorities have agreed to corrective actions and revised timelines for key reforms, while reaffirming their commitments to the program’s fiscal, governance, anti-corruption, energy-sector, and financial-sector objectives," the message emphasizes.
The IMF specified that taking into account the first tranche, total disbursements under the program will amount to approximately SDR 1.6 billion (about $2.2 billion).
The Fund also reported that the board of directors completed the 2026 Article IV consultations, which focused on policies to preserve macroeconomic stability during the war and support Ukraine's transition to a dynamic market economy meeting EU accession goals.
"Key priorities include reducing informality, strengthening domestic revenue mobilization—particularly by tackling tax evasion and avoidance, improving the investment climate, enhancing governance and anti-corruption institutions, advancing state-owned enterprise reforms, strengthening public investment management, and furthering financial inclusion," the release notes.
"Ukraine continues to demonstrate remarkable resilience in the face of Russia’s devastating war. Sound policies, anchored by the Fund-supported program, together with strong international support, have helped preserve macroeconomic and financial stability under exceptionally difficult circumstances," IMF Managing Director Kristalina Georgieva said.
Nevertheless, economic prospects have weakened, mainly due to intensified attacks on critical infrastructure and the negative spillovers from the war in the Middle East, the IMF stated. It forecasts a slowdown in Ukraine's GDP growth from 1.8% last year to 1–1.6% this year, with an acceleration to 3.5% next year.
At the same time, the Fund expects inflation to rise to 10.5% this year and return to last year's level of 8% next year.
According to the release, directors expressed regret over the breach of the net international reserves target at the end of June, partly due to the impact of the war in the Middle East.
It is noted that the program remains fully financed under both baseline and downside scenarios, thanks to ongoing financing assurances from international partners, notably through the European Commission's new Ukraine Support Loan (USL) of EUR 90 billion and other instruments, G20 ERA financing, and other bilateral support.
The Fund recalled that the Group of Creditors for Ukraine, which holds the majority of Ukraine's official bilateral debt, has extended its debt service suspension and committed to finalizing a definitive debt treatment post-war.
"Preserving macroeconomic stability remains the immediate priority. This requires prudent fiscal policy, sustained revenue mobilization efforts, vigilant monetary policy, exchange rate flexibility, and measures to safeguard financial-sector resilience," Georgieva emphasized.
According to her, looking beyond the war, Ukraine's economic success will depend on accelerating reforms that foster a more dynamic private sector, reduce the informal economy, strengthen governance and the rule of law, improve the investment climate, deepen financial markets, and support EU accession.
"Readiness to undertake additional measures, if needed, will continue to be an important buffer against potential further shocks," the managing director noted.
IMF directors expressed concern over setbacks in implementing critical structural reforms for the program and underscored high risks for enterprises given the exceptionally high uncertainty surrounding the war. They urged Ukraine to maintain strong ownership and timely implementation of reforms under the program, which is a key factor for sustainable macroeconomic stability.
Directors called for expenditure prioritization and re-emphasized that restoring medium-term fiscal and debt sustainability will require strengthening domestic revenue mobilization and tax administration, increasing spending efficiency, and bolstering budget systems. Finalizing the authorities' debt restructuring strategy will also contribute to restoring sustainability, the IMF added.
Regarding monetary policy, the Fund urged keeping it focused on anchoring inflation expectations, welcomed greater exchange rate flexibility, but recommended a cautious approach to foreign exchange market liberalization and a gradual return to full-fledged inflation targeting only when conditions allow.
Directors emphasized the importance of maintaining the independence of the National Bank of Ukraine and adhering to a data-dependent monetary policy approach. They called for further progress in strengthening financial sector supervision and further improving governance, particularly in state-owned banks, to support sustainable credit growth and reconstruction, and noted that accelerating anti-money laundering and combating the financing of terrorism (AML/CFT) reforms will also be important.
Directors emphasized that the Fund‑supported program remains a key anchor for sustained macroeconomic stability and underscored the importance of maintaining strong ownership and implementing reforms in a timely manner. This is critical to maintaining policy credibility, catalyzing external financing, supporting Ukraine’s EU accession, and achieving program objectives. Directors cautioned against backsliding on reforms and recommended strengthening coordination and building broad‑based support for key reforms," the release states.
According to the updated IMF forecast, Ukraine's unemployment rate will decrease from 11.6% to 10.2% this year, but increase again to 11.3% next year, while nominal income growth will slow from 22.6% last year to 20.4% this year and 13.2% next year.
The Fund expects general government revenue and expenditure to grow this year to 66.5% of GDP and 77.9% of GDP, respectively, decreasing to 63.1% of GDP and 66.0% of GDP next year, compared to 56.6% of GDP and 74.2% of GDP last year.
Accordingly, the general government deficit excluding grants is projected to narrow from 23.5% of GDP last year to 21.1% of GDP this year and 17.8% of GDP next year, while public debt, after growing this year from 107.1% of GDP to a peak of 111.8% of GDP next year, will decline to 110.3% of GDP.
The IMF also expects growth of the broad money aggregate (M3) to slow this year from 15.3% to 10.6%, recovering to 12.7% next year, which will not prevent an acceleration in private sector credit growth from 8.6% to 16.0% this year and to 18.8% next year.
Finally, the Fund projects an increase in Ukraine's international reserves from $57.3 billion to $65.5 billion this year, and to $66.6 billion next year, with a reduction in the current account deficit from 16% of GDP this year to 11.0% of GDP, and to 4.7% of GDP next year, along with a gradual increase in foreign direct investment from 1.2% of GDP last year to 1.3% of GDP this year and 2.6% of GDP next year.