Ukraine expects pressure from IMF to further devalue currency as financing negotiations begin
Ukraine is expecting increased pressure from the International Monetary Fund (IMF) to further devalue its currency, cut interest rates, and raise taxes, Bloomberg reported on Sept. 4, citing unnamed officials.
The fifth round of negotiations with Ukraine on revisions of the Extended Fund Facility (EFF) program was set to begin on Sept. 4, the IMF said. The EFF is a four-year funding agreement that will allow Ukraine to access $15.6 billion in financial aid in regular installments.
The fourth round of financing through the EFF program was approved in June, which resulted in the disbursement of $2.2 billion.
Unnamed sources familiar with the negotiations told Bloomberg that the IMF is planning to pressure Ukraine to take measures to shore up gaps in the country's budget so that it can continue to receive IMF funding. If the fifth review is approved, Ukraine could receive an additional $1.1 billion disbursement.
At the same time, sources said Ukraine's National Bank is hesitant to further devalue the currency, which could hinder the bank's ability to ensure price stability. The hryvnia hit a historic low of Hr 41.04 per dollar in July.
The prospect of raising taxes, such as a proposal to increase the value-added tax from the current level of 20%, could prove to be politically unpopular.
Sources told Bloomberg that the IMF has criticized previous tax increases as being "too lenient."
Despite inflows of foreign financial aid, Prime Minister Denys Shmyhal said in August that Ukraine's budget deficit for 2025 is projected to be $35 billion — roughly $20 billion of which will be covered by the EU's Ukraine Facility program and by assistance from the IMF.
Nate Ostiller
