IMF approves rule change that would allow new Ukraine loan program

The International Monetary Fund said its executive board on Friday approved rule changes that would allow the IMF to approve new loan programs for countries facing “exceptionally high uncertainty” – a move expected to pave the way for a new Ukraine loan program.

The changes to the IMF’s financing assurances policy would apply to countries experiencing “exogenous shocks that are beyond the control of country authorities and the reach of their economic policies,” the IMF said in a statement.

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Ukraine, which has been battling a Russian invasion for more than a year, is seeking an IMF financing package of around $15 billion. But the Fund’s rules designed to deal with country economic crises did not allow for non-emergency loans to countries facing such massive uncertainties, such as from major wars or multi-year natural disasters induced by climate change.

The IMF said the rule revisions would address key barriers to such loans by allowing official bilateral creditors and donors to provide upfront assurances about repayment to the IMF and delivering debt relief to the borrowing country.

The IMF statement did not mention Ukraine specifically, but the rule changes have been designed alongside negotiations with authorities in Kyiv over new financing.

The Fund said on Wednesday that its staff had made “very good progress” in talks with Ukraine over the previous week on policies that could underpin a new IMF lending program for the war-torn country.

A source close to the discussions said IMF staff and Ukrainian authorities were expected to reach agreement on a new financing package as early as next Tuesday.

In a statement, the board said loans to countries facing exceptionally high uncertainty “would require careful judgment about whether such a program would be feasible and credible given its likely risk characteristics and be consistent with legal and policy requirements for Fund lending.”

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