The Board of Governors of the International Monetary Fund on Monday completed the second review of the EFF program for Ukraine and approved the allocation of SDR664 million for the third tranche ($881 million at the current rate).

“We have worked very closely with Ukraine’s economic team over the past weeks, and today we completed the second review of our program under the banner of exceptional performance,” IMF Managing Director Kristalina Georgieva said at a meeting with Ukrainian President Volodymyr Zelenskyy in Washington.

"The authorities have made strong progress toward their EFF commitments under challenging conditions, meeting all applicable quantitative performance criteria through end-June and indicative targets through end-September and the majority of structural benchmarks through end-October. In particular, the authorities have continued to advance their governance and anti-corruption agenda," the release reads.

"The Ukrainian economy continues to show remarkable resilience, although the outlook remains subject to exceptionally high war-related uncertainty. Continued strong ownership and reform momentum - including domestic revenue mobilization combined with timely and predictable external financing - are necessary to safeguard macroeconomic stability, enhance institutional reforms, and support reconstruction efforts, while facilitating a green recovery on the path to European Union (EU) accession," the fund said.

"Despite Russia’s war in Ukraine, macroeconomic indicators have been stronger than expected, contributing to upward revision in the growth outlook. Economic resilience has resulted in better growth outturns, continued sharp disinflation, and a stable FX market, including following the National Bank of Ukraine’s exit from the exchange rate peg, backed by strong reserves. The baseline projection for real GDP growth in 2023 has been revised up to 4.5%. Growth is expected to somewhat soften in 2024 to 3–4% as the war continues. The outlook remains subject to significant risks related to the exceptionally high uncertainty stemming from the war, potential policy slippages, and delays or shortfalls in external financing," the fund stated.

"It is also critical that external financing on concessional terms continue on a timely and predictable basis and sustain the reform momentum. As the war prolongs, it continues to strain Ukraine’s public finances. Timely external disbursements as well as continued effort on the domestic market are key to meeting Ukraine’s financing needs and preserving macroeconomic and financial stability. In addition, decisive policy actions are needed to secure fiscal and debt sustainability. Revenue mobilization is a crucial pillar to help meet financing needs and support reconstruction and social spending. Fiscal priorities include launching the National Revenue Strategy, avoiding measures that erode the tax base, and progressing on reforms to further strengthen the frameworks for medium-term budget preparation, budget credibility, fiscal risks and transparency, and public investment management. A commercial debt treatment in line with program parameters will also help restore sustainability and create space for critical spending," Georgieva said.

"As part of the National Bank of Ukraine’s conditions-based strategy, the recent successful transition to a managed exchange rate regime is an important step toward normalizing the monetary and exchange rate policy frameworks, alongside the gradual easing of emergency FX measures. Continued evidence of sustained disinflation and stability in the FX cash market could support further easing in monetary policy. Whereas the financial sector has been stable and operational, heightened vigilance is required, and efforts to strengthen bank diagnostics, supervision, governance, and contingency planning should continue," she added.

"Steadfast reform momentum to anti-corruption and governance frameworks will be essential to mitigate corruption risks and promote public trust and donor confidence. Decisive structural reforms, in public investment management, governance, and the business environment, can also begin to lay the groundwork for achieving strong, balanced, and green growth in the reconstruction phase and support Ukraine’s path to EU accession. An integrated strategy for reconstruction will also help to mitigate fiscal risks and increase the efficiency of spending. Appropriate policy and reform choices can help support the return of migrants, investment flows and productivity growth needed to support a sustained high growth path in the years ahead," she said.