Ukraine to clinch first IMF loan to nation at war

The International Monetary Fund (IMF) says it has reached an agreement with Ukraine on funding worth $15.6bn (£12.8bn).

The organisation's first loan to a country at war is expected to be approved in the coming weeks.

It would also be one of the largest financing packages Ukraine has received since Russia's invasion.

The IMF recently changed a rule to allow loans to countries facing "exceptionally high uncertainty".

"Russia's invasion of Ukraine continues to have a devastating impact on the economy: activity contracted by 30 percent in 2022, a large share of the capital stock has been destroyed, and poverty levels have climbed," IMF official Gavin Gray said in a statement.

"The programme has been designed in line with the new fund's policy on lending under exceptionally high uncertainty, and strong financing assurances are expected from donors, including the G7 and EU."

Mr Gray also said the agreement would "mobilise large-scale concessional financing" for Ukraine from international donors and partners, without giving further details. The funding still needs to be approved by the IMF's executive board.

The IMF expects Ukraine's economy to record a slight contraction or growth this year.

Ukrainian Prime Minister Denys Shmyhal said the funding would help the country "finance all critical expenditure and ensure macroeconomic stability and strengthen our interaction with other international partners".

US Treasury Secretary Janet Yellen, who made a surprise visit to Ukraine last month, said: "An ambitious and appropriately conditioned IMF programme is critical to underpin Ukraine's reform efforts."

The US is the IMF's largest shareholder and the biggest contributor to Ukraine in terms of money spent.

Earlier this year, President Joe Biden announced nearly half a billion more dollars of US military aid to Ukraine. This was on top of the $112bn spent by Congress in 2022 alone.

Military aid, which accounts for more than half of US spending on Ukraine, pays for drones, tanks, missiles and other munitions systems as well as training, logistics and intelligence support.

Money has continued to pour into the conflict from all over the world since Russia's invasion of Ukraine last February.

Last week, the IMF said its executive board had approved a rule change to allow funding for countries facing "exceptionally high uncertainty".

Without mentioning Ukraine, it said the measure applied to countries experiencing "exogenous shocks that are beyond the control of country authorities and the reach of their economic policies".