Ukrainian representatives and IMF experts have reached a staff-level agreement on a new financing program. The agreement provides for a four-year term with a total amount of $15.6 billion and includes measures to support the economic recovery of Ukraine.
Three peculiar features of the new program
1. This is the Fund's first program under the newly introduced policy on lending under exceptionally high uncertainty.
This policy was introduced in response to the challenge of the war in Ukraine, when the country needs financial assistance not because of bad economic policy, but because of external factors beyond its control.
These can be aggressive wars against the country, as in the case of Ukraine, or, for example, natural disasters.
2. The four-year-long program was divided into two phases.
The first phase is envisioned for 12–18 months. According to the baseline scenario of the IMF and the government, active hostilities in Ukraine are expected to cease within this period.
This phase is intended to help Ukraine sustain financial stability, including controlled price dynamics, a stable exchange rate, and the stability of the banking system.
The second phase, after the active phase of the war is over, is focused on the return to pre-war monetary policy (a flexible exchange rate and an inflation targeting regime) and more long-term reforms.
3. Even from the press release, it is obvious that the number one priority of the program is tax policy, from closing existing tax loopholes and avoiding new ones in the first phase to systemic tax reform in the second phase.
Experts at the Center for Economic Strategy (CES) also believe that the priority of the coming years should be the revision of the policy in all aspects, from the taxation scheme to administration.
