The International Monetary Fund (IMF), which on Friday approved the disbursement of $1.3 billion to Ukraine under the new food shock window of the Rapid Financing Instrument, will remain closely engaged with the Ukrainian authorities, with whom staff discussions will start soon on Program Monitoring with Board involvement (PMB), Managing Director of the IMF Kristalina Georgieva said.

"The PMB will aim to provide a strong anchor for macroeconomic policies, further catalyze donor support, and help to pave the way towards the upper credit tranche arrangement," she said following the Executive Board discussion.

Russia's invasion of Ukraine that started over seven months ago has caused large loss of life, massive population displacement, and significant destruction of infrastructure and housing, Georgieva said.

"The impact on economic activity has been enormous: real GDP has severely contracted, inflation has risen sharply, trade has been significantly disrupted, and the fiscal deficit has increased to unprecedented levels," she said.

According to the IMF Managing Director, the Ukrainian authorities deserve considerable credit for having maintained an important degree of macro-financial stability in these extremely challenging circumstances. As the economy adapts to the now prolonged war, key macroeconomic policies have been geared toward safeguarding priority expenditures, easing pressure on the hryvnia and international reserves, and preserving financial stability.

Ukraine faces risks and uncertainties related to the hazardous security situation, policy implementation capacity, and external developments, she said, adding that unique to the extreme circumstances now prevailing in Ukraine, very high uncertainty makes it difficult, at present, to assess with sufficient precision what would be required to ensure sustainability of Ukraine's debt, but the balance of probabilities suggests that there are higher risks of debt being unsustainable.

"In conjunction with Ukraine's continued commitment to economic, fiscal and governance reforms as well as strong engagement of all other stakeholders, including International Financial Institutions and the private sector, the bulk of Ukraine's official bilateral creditors and donors— through the relevant Executive Directors at the Fund—have signaled that they intend to continue financially supporting Ukraine to help achieve a balanced growth path and medium-term external viability," Georgieva said.

She added that in order to allay the risks to the Fund from lending to Ukraine under these circumstances, these bilateral creditors and donors have reaffirmed their recognition of the Fund's preferred creditor status in respect of the amounts outstanding to Ukraine, including the requested drawing by Ukraine under the new RFI Food Shock Window. They undertake – given Ukraine's continuing cooperation with the Fund – to provide financial support on appropriate terms to secure Ukraine's ability to service to the Fund its existing obligations.