IMF believes funding Ukraine now is more cost-effective for partners than to risk its defeat

Ukraine has demonstrated that it is a reliable borrower with a sound debt repayment plan, making it more advantageous for its partners to provide funding now and prevent Ukraine's defeat in the war.

Source: Priscilla Toffano, the International Monetary Fund (IMF) representative in Ukraine, during the Reform Matrix: Foundations for Strengthening Economic Growth for EU Accession conference in Kyiv, as reported by Interfax-Ukraine

Quote: "Funding the country now is worth it – not just from the perspective of values, principles, or morality, but it may also be cheaper for Ukraine’s allies. It is less expensive to finance Ukraine now and prevent it from losing the war than to cover the costs of additional defence or refugees if Ukraine were to lose."

Details: Toffano emphasised that Ukraine must continue to demonstrate to its international partners its ability to implement sound policies.

She acknowledged Ukraine’s efforts to increase domestic revenue but noted that the shock caused by Russian aggression is so severe that external financing remains indispensable. In this context, she highlighted the importance of the G7's new initiative, the USAID's Economic Resilience Activity (ERA), which aims to allocate US$50 billion to Ukraine using proceeds from frozen Russian assets.

Toffano also pointed out that Ukraine's expenditures will remain high after the war due to reconstruction efforts, substantial social spending, particularly on veterans' adaptation and efforts to repatriate citizens who have fled abroad.

In light of these challenges, she stressed the importance of increasing taxes, referencing the IMF's proposal to raise value-added tax (VAT) and adhere to the National Revenue Strategy.

Background: The International Monetary Fund has revised its forecast for Ukraine's real GDP growth, predicting a 4% increase in 2024 and 2.5-3.5% growth in subsequent years.

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