IMF concludes mission on Ukraine, urges authorities to avoid eroding tax revenues

An IMF team held productive discussions with Ukrainian authorities this week and will work in coming weeks on their request for enhanced program monitoring in the wake of Russia's invasion, IMF mission chief Gavin Gray said on Friday.

Gray said International Monetary Fund staff met for four days in Vienna with Ukrainian authorities, and discussed their findings with Finance Minister Serhiy Marchenko and Governor of the National Bank of Ukraine Andriy Pyshnyi.

He said Ukrainian leaders deserved "considerable credit" for maintaining an "important degree of macroeconomic stability" after the invasion, which has caused a severe contraction in gross domestic product and a sharp rise in inflation, while sending the country's fiscal deficit to unprecedented levels.

"The Russian invasion of Ukraine that started over seven months ago has caused tremendous human suffering and had a severe economic impact," Gray said, adding that the talks focused on recent macro-financial developments, the 2023 budget and associated external financing needs, financial sector issues and the mix of policies to support macroeconomic stability.

Gray said IMF officials were encouraging Ukraine to refrain from measures that erode tax revenues as they worked to align expenditures with available financing, but gave no details.

He said both sides would continue work in coming weeks on Kyiv's request for Program Monitoring with Board Involvement (PMB), a new option recently approved by the fund's board.

Such an agreement would lay out the authorities' policy intentions to support macroeconomic and financial stability and present an assessment of external financing needs for 2023, and could pave the way for a fully-fledged IMF program, Gray said.

The IMF this month approved $1.3 billion in fresh emergency funding for Ukraine through a new food shock window, on top of $1.4 billion in emergency aid approved in March.

Ukrainian authorities are seeking new IMF lending of around $20 billion as part of a larger program.

Ukrainian President Volodymyr Zelenskiy last week appealed to international donors for $55 billion in additional financial support - $38 billion to cover next year's estimated budget deficit, and another $17 billion to start to rebuild critical infrastructure.