Ukraine's IMF funding: Risks after Trump's comeback

On November 11, the IMF mission began its review in Kyiv to assess Ukraine's progress under the $15.6 billion Extended Fund Facility (EFF) program, signed in the spring of 2023. In a year-and-a-half of a 4-year program, Ukraine has already received $8.7 billion of the total loan amount.

The program review is expected to conclude with a seventh $1.1 billion loan tranche disbursement. The IMF mission's work is anticipated to have a positive outcome, with funds likely arriving in the Ukrainian National Bank's accounts by the end of the year.

Ukraine had to meet four structural benchmarks before the sixth program review.

Till November, Ukraine had to:

• analyze pre-war fiscal policies and practices for medium-term budget planning;

• assess financial risks to stability and create an action plan for different scenarios;

• evaluate the financial condition of centralized heating enterprises;

• develop governance policies for state-owned enterprises, including dividend policies and privatization strategies.

According to the Ministry of Finance, all of these requirements have been met.

Moreover, Ukraine is even ahead of schedule. To date, one benchmark with a December deadline has been completed. The law on ensuring the functional independence of the National Energy and Utilities Regulatory Commission (NEURC) has already been adopted.

Members of the opposition recognize the progress. "In terms of benchmarks, we're doing okay. Many goals have even been achieved ahead of time," commented Yaroslav Zhelezniak, a member of the parliament from the Holos party.

Another December milestone — appointing a supervisory board for the state-owned energy company Ukrenergo — is also nearing completion. This requirement arose after two independent board members resigned in September 2024, citing governmental pressure. The board appointments are due by December 9 but could be finalized by late November.

The only issue that may arise with the IMF is approving a tax increase bill (Bill No. 11416 d), which was submitted to President Zelenskyy in October but remains unsigned. Nevertheless, sources and members of parliament expect the bill to be approved, as it is already provided in the 2025 budget project.

Working with the IMF may become more difficult

While previous reviews of the IMF program have been relatively smooth, future cooperation could face obstacles, according to multiple sources within the government.

"We are getting clear signals that it will become more difficult," one source noted. Another source suggested that the IMF might become more cautious in its work with Ukraine.

The concerns arise as the new US administration under President Donald Trump comes, and Trump is skeptical about support for Ukraine. As the IMF's largest shareholder with nearly 17% of voting power, the US can veto board decisions.

However, Vitalii Vavryshchuk, head of the Macroeconomic Research Department of ICU Group, believes these concerns may be premature. "I think these assumptions are speculative, similar to the idea that the Trump team might initiate peace talks with Russia. At this point, there is no evidence that US foreign policy toward Ukraine would drastically change," said Vavryshchuk in a commentary to RBC-Ukraine.

Nonetheless, he didn't rule out that the US could push for a stricter approach to tax policies in Ukraine. "The US wants stronger arguments in favor of supporting Ukraine," he noted. This could lead to lenders pressing Ukraine to raise more domestic revenue. The IMF program already outlines VAT increases as a potential budget source for 2025 if funding shortfalls arise.

For now, sources in the government indicate that there is no need for additional tax rises.

Ukraine's financial outlook for 2025

Ukraine's financial prospects for next year remain uncertain. The issue of a potential $50 billion in G7 credit support has yet to be finalized. So far, there are only pledges from G7 members, including the EU, Japan, the US, and Canada, with neither agreements nor terms settled.

Only one funding stream appears certain: the Ukraine Facility program, which is expected to provide €12 billion in 2025. Sources are also optimistic about a €35 billion loan the EU plans to fund using income from frozen Russian assets. The IMF remains the third pillar of support, having recently increased the planned disbursements by nearly $880 million.

If these three financing sources proceed as expected, Ukraine could secure the $38 billion needed to cover its budget deficit — assuming no additional expenditures are required. Yet, with the ongoing war, spending pressures continue to pose significant risks.