FRANKFURT – Ukraine's economy is showing “remarkable resilience” following Russian attacks on its electricity infrastructure, officials from the International Monetary Fund said Tuesday as they signed off on an initial loan of $900 million and raised their estimate for the country’s economic growth.
The outlook improved to 1% to 3% growth this year from minus 3% to plus 1% in an earlier assessment in March, said Gavin Gray, the IMF's mission chief to Ukraine.
Inflation is coming down and the hryvna currency is stable despite the massive disruption of the war, Gray said. But he warned that the economic outlook faces “exceptionally high risks.”
“Through the winter, Ukraine faced devastating attacks on its critical infrastructure, and missile strikes continue countrywide,” Gray said in an online news conference. “Despite this, the Ukrainian economy has shown remarkable resilience — economic activity in the first quarter rebounded strongly, as the energy system rapidly recovered from attacks on critical infrastructure, foreign exchange markets stabilized, and inflation started to decline decisively.”
The recovery was expected to strengthen “as the economy progressively adapts to war conditions, ” he said.
Ukraine’s economic output shrank by about 30% in 2022 after Russia invaded in February of that year.
The IMF said Ukrainian officials had met requirements for reforming economic policies under a first review of what is to be a $15.6 billion loan package over four years. The changes include drafting tax legislation aimed at improving revenue collection and assuring donors that are keeping the country's state finances afloat that Ukraine will be able to pay its share of financial burdens.
Release of a first, $900 million installment of assistance was agreed at staff level but still requires approval of the IMF's executive board.
The positive review was in sharp contrast to Ukraine's pre-war IMF programs, which were marked by missed deadlines and a lack of progress in reforming the economy and resisting the domination of politically connected business figures known as oligarchs.
Ukrainian officials have been at pains to show they are cracking down on corruption as they seek membership in the European Union. The head of the country's Supreme Court was arrested this month on bribery charges, while several senior officials, including front-line provincial governors and a deputy defense minister, lost their jobs over corruption allegations in January.
The IMF loan program is expected to open the way for an additional $115 billion in loans and grants from Ukraine's allies, including the U.S., the European Union and other members of the Group of Seven rich democracies. The aid is intended to cover huge budget deficits caused by vastly higher military spending and the loss of tax revenue from areas occupied by Russian troops as well as to support economic reform efforts.