A strong statement of support for Ukraine overnight with news that the IMF board approved a new $8.1 billion four-year Extended Financing Arrangement (EFF) for Ukraine.
See the IMF press release and the staff report below:
- IMF Executive Board Approves US$8.1 Billion under an Extended Fund Facility (EFF) Arrangement for Ukraine
- Ukraine: Request for an Extended Arrangement Under the Extended Fund Facility and Cancellation of the Current Arrangement-Press Release; Staff Report; Supplementary Information; and Statement by the Alternate Executive Director for Ukraine
Actually, a new IMF EFF had been taken as a given after the EU Council decision in December to provide a new €90 billion ($106 billion) loan to Ukraine to help cover the $136.5 billion budget/balance of payment (BOP) financing gap prior identified by the fund for the period to 2029 – the EU also had estimated a €140 billion ($165 billion) all in financing gap for 2026-27 (including defence related needs).
All that was, though, thrown into disarray this week with the decision of Hungary to stall giving its signature to the €90 billion EU loan on account of what it argues has been Ukrainian slow-boating in getting the Druzhba oil pipeline back on tap after recent Russian attacks.
Orban in Hungary faces a difficult election campaign – he is 10-20 points behind in the polls on April 12, and seems to be intent on creating crises with Ukraine and the EU as a strategy to rally the nationalist vote back in his favor. This would have suggested no early sign off on the €90 billion – unanimity is required from all EU 27 member states, even though those like Hungary (Czech Republic and Slovakia) are not actually contributing to the facility, and given the €90 billion was central for filling IMF-assumed financing gaps, it was hard to see the fund agreeing on the EFF.
In recent days, EU officials have been talking up prospects for some compromise with Hungary – albeit I don’t see Orban giving way any time soon.
The IMF would have required sufficient financing assurances from the EU et al, that its $8.1 billion is safe, and perhaps therein comments by EU foreign policy chief this week that if no decision over the €90 billion EU loan can be reached, because of the Hungarian veto, then the funds would need to be, and would, found from frozen Russian assets, might have provided some reassurance for the fund board.
But in the end, the fund seems to have demanded a stronger backstop, and this was provided in the board press release, as below:
“A significant group of Fund shareholders reaffirm their recognition of the Fund’s preferred creditor status in respect of the amounts currently outstanding to the Fund by Ukraine, plus any purchases under the new extended arrangement. These shareholders comprise the following countries: Austria, Belgium, Canada, Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Kingdom, and the United States.”
“They further undertake to provide adequate financial support to secure Ukraine’s ability to service all of its obligations to the Fund, in accordance with the Fund’s preferred creditor status and complementing the Fund’s multilayered risk management framework.”
This is quite an extraordinary statement – I think unprecedented in IMF programs. But basically, the Western nations mentioned are saying, “We are up to cover the fund exposure in a worst-case scenario herein,” kind of a blank check to cover IMF funding, but beyond that, in terms of the commitment to backstop Ukraine, whatever Putin’s buddies like Orban and Fico decide to do.
Notably, the above statement also includes the US, even though it has pulled most of its funding for Ukraine.
Not sure if someone therein at the US Treasury got that through under the noses of the White House, or that even the White House realized that if the IMF program was not signed off, then much of Ukraine’s funding would be logjammed and Washington would get the blame – all that would further diminish the Transatlantic relationship/alliance.
And from the US perspective, it is only guaranteeing that it will cover its share of IMF loans in a worst-case scenario if EU et al. funding somehow stalls. The latter scenario still seems unlikely given the importance now of Ukraine to the wider defense of Europe – and the fact that core European countries, like Germany and France, have finally (four years too late) finally figured that one out.
Getting sign-off for the IMF EFF was also important as an anchor to other bilateral and multilateral lending, including big tickets from the likes of Norway, which is now at $8 billion just for 2026.
So crisis avoided for the time being.
Reprinted from the author’s tashecon blog. See the original here.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.