The Board of Directors of the International Monetary Fund (IMF) approved a new four-year Extended Fund Facility (EFF) for Ukraine on February 26, amounting to $8.1 billion. This program is expected to mobilize significant concessional financing from international donors and partners, aimed at addressing Ukraine’s balance of payments challenges and restoring debt sustainability.
Ukrainian Prime Minister Yulia Svyrydenko commented on the IMF’s decision on February 27, stating that the country will soon receive the first tranche of approximately $1.5 billion. This initial funding will be directed towards covering the budget deficit and supporting macro-financial stability.
The IMF-supported program is part of a broader financial framework designed to address an anticipated budget deficit of $136.5 billion over the next four years. It emphasizes the continuation of reforms that have previously ensured macroeconomic and financial stability in Ukraine.
Svyrydenko highlighted that the IMF’s decision paves the way for additional financing from the European Union, G7 countries, and international financial institutions, as well as potential reductions in official debt payments through debt relief mechanisms.
Earlier in February, Svyrydenko noted that the IMF had streamlined agreements with Ukraine established in November, revising prior measures and structural benchmarks following extensive discussions, including direct consultations with IMF Managing Director Kristalina Georgieva.
Additionally, the government reached an understanding with the IMF regarding the taxation of individual entrepreneurs. They agreed to raise the VAT threshold for small businesses to 4 million hryvnias, which represents the highest VAT threshold in Europe for goods. Currently, there are 257,000 individual entrepreneurs in Ukraine above this threshold, meaning the changes will affect approximately two-thirds of all such businesses.
The implementation date for this VAT adjustment, initially discussed for January 1, 2027, remains under consideration.
The IMF has approved an $8.1 billion EFF for Ukraine, aiming to address its budget deficit and restore financial stability. The program will facilitate additional funding from various international sources and includes reforms to support small businesses.