On 30 January, the #RRR4U consortium presented a new issue of the Monitoring of IMF and EU Assistance under the Ukraine Facility. The report demonstrates significant progress in fulfilling Ukraine’s commitments to key international donors. However, compliance with the implementation calendar is deteriorating, which could lead to delays in funding.
‘We have reached a historic high as we have successfully completed the sixth review of the IMF programme. Ukraine has never gone this far before. This indicates that we have done our homework effectively. However, the question is what is next, because Ukraine has not fulfilled the two structural benchmarks required for the seventh review of the Programme,’ said Yuriy Romashko, Executive Director of the Institute for Analysis and Advocacy.
On 20 December 2024, the IMF Board of Directors approved the revision of the programme, after which Ukraine received a tranche of $1.1 billion. ‘The programme has already been implemented by 63% in terms of funding. In the coming years, we will receive less money. The maximum amount we can get in 2025 is USD 2.7 billion if we fulfil all the milestones,’ the expert said.
The sixth revision of the programme resulted in three new structural beacons: an operational strategy for the securities market regulator, minimisation of operational risks of financial institutions, and evaluation of the NEURC’s activities. At the same time, Ukraine has not fulfilled two commitments for which the deadline expired on 31 December. ‘We are facing a difficult seventh review of the Programme in March, as we have not cancelled the Lozovyi amendments and have not established the Supreme Administrative Court. These structural beacons have already been postponed several times,’ the expert warned. The seventh review could bring $900 million from the IMF to the budget.
Unlike the IMF programme, the experts did not record any unfulfilled obligations under the Ukraine Facility plan, although there were difficulties here as well. ‘In 2024, Ukraine successfully coped with its homework and managed to get €16.1 billion to the budget. In 2025, if we perform well and meet the indicators, we will be able to receive €12.5 billion,’ said DiXi Group project expert Alyona Korogod.
After meeting the third-quarter targets, the European Commission disbursed the €4.1 billion tranche only in mid-December. ‘We received it with a delay, because indicator 4.4, which provided for amendments to the Criminal Code and the Criminal Procedure Code, was not implemented on time,’ the expert said. According to her, since the EU has not yet approved the mechanism of partial payment for the fulfilled indicators, we received the full amount, despite the delay in fulfilling this indicator.
On 23 January, the Ministry of Economy reported to the EU on the fulfilment of 13 indicators required to receive the next tranche of EUR 3.5 billion. ‘We have now submitted a report to the European Commission that we have fulfilled all the indicators for the 4th quarter. I hope they will give us a positive assessment. Then it will be the first time in many years that Ukraine has promised something and fulfilled it word for word,’ said First Deputy Minister of Economy Oleksiy Sobolev.
EU and IMF funding are not the only sources of Western funds for the budget. ‘The IMF programme is for the period of 2023 for foreign financing of Ukraine. Ukraine’s plan is for 2024. And 2025 is primarily the ERA funding mechanism. This is the $50 billion that Ukraine will receive from the G7 countries at the expense of income from frozen Russian assets,’ said Maksym Samoiliuk, economist at the Centre for Economic Strategy.
De jure, it will be contingent debt obligations, de facto, it will be a grant. ‘This year, the ERA will cover most of our funding needs. And despite all the geopolitical and military challenges facing Ukraine, from a budgetary point of view, we are entering the year in a more stable position than we were in 2024,’ said Maksym Samoiliuk.
This year’s financing needs amount to $38 billion, of which $2.7 billion is expected from the IMF and $13.1 billion from the EU under the Ukraine Facility. The remaining need of $22.2 billion will be covered almost entirely by the ERA, which totals $50 billion. Of this amount, $1 billion from the United States was transferred to the budget in 2024. The EU disbursed the first €3 billion under this mechanism in January 2025. ‘The ERA funds must be used wisely and a safety margin must be maintained for 2026-2027. If we enter 2025 with a certain budgetary stability, no one can say what will happen in the future,’ said Maksym Samoiliuk.
Oleksandra Betliy, Senior Research Fellow at the Institute for Economic Research and Policy Consulting, believes that significant funding prevents difficult decisions from being made. ‘There is a risk that it will be more difficult to make important decisions on both the IMF and the Ukraine Facility because ‘we don’t need the money so critically’. But without funds and an active IMF programme that we are implementing, it will be very difficult for us to get funding for 2026,’ she warned.
As part of the monitoring, the experts analysed the government’s steps to implement the reform of the public investment management system (PIM), which is designed to increase the efficiency of spending of state and local budgets, as well as the public sector of the economy. ‘The public investment management system should be linked to medium-term budget planning. Four IMF structural beacons and two indicators of the Ukraine Plan speak to this reform,’ said Oleksandra Betliy.
In 2024, the government adopted several resolutions to implement the IPA reform. In particular, it established the Strategic Investment Council, project selection criteria, and made the first approach to the formation of the Single Project Portfolio. Out of more than 700 projects worth about UAH 3 trillion, only a few were selected for this year due to limited funding. ‘Prioritisation is needed because there are too many projects and the needs are too great. 90 projects were selected. The budget allocates UAH 36 billion for this. And the necessary additional funding of more than UAH 200 billion is expected from IFIs, including the World Bank and the European Investment Bank,’ the expert says. All these projects are published on the DREAM digital recovery platform.
The Ministry of Economy acknowledged that the capacity of communities to prepare projects with high-quality feasibility studies is very low, and many projects are included in the Unified Project Portfolio only in the form of ‘concepts’. ‘This year, we are launching the Project Preparation Facility, i.e. groups of consultants and special mechanisms that will help prepare priority projects,’ announced Oleksiy Sobolev.
In the next budget season, the government will rank projects according to the Ukraine Facility plan. ‘This is the most systematic document of economic development, which is backed not only by Ukrainian desire but also by money. Donors are ready to finance these projects,’ he stressed.
Oleksandra Betliy added that for the successful implementation of investment projects in the field of reconstruction, it is urgently important not only to increase the capacity of communities to prepare projects, but also to revise legislation in the field of construction.
Yaroslav Tashuta, Head of the Public Investment Management Sector at the Ministry of Finance, noted that recent amendments to the Budget Code have united budget planning and the investment component. ‘Everything will be public, transparent, everyone will see what is happening with projects, how they are financed, how decisions are made on certain projects. This will allow us to approach the issue of public investment in a comprehensive manner,’ he promised.
The Parliament called the amendments to the Budget Code on public investment management the most difficult budgetary beacon of the IMF. These changes depoliticised the process of selecting projects both within the government and by MPs. ‘Not all MPs used their powers in good faith, and they were often used to lobby for their own interests. These are not always corrupt interests, sometimes it is political lobbying in the interests of their constituency. And most often, these objects would become unfinished if the MP did not get such funding continued for the next year,’ said Roksolana Pidlasa, chairman of the Verkhovna Rada Budget Committee.
According to Roksolana Pidlasa, the IMF opposed the participation of MPs in the distribution of investment projects, as ‘this politicises the process and reduces its transparency.’ Priscila Tofano, IMF Resident Representative in Ukraine, confirmed that strengthening institutions is their top priority: ‘When the reconstruction starts in earnest, hopefully soon, then the space for financial misconduct will increase. And the task is to prevent this.’
It is important to have a strategy that prioritises the right projects for communities. ‘At our next mission at the end of February, we will assess the implementation of the action plan for the reform of the public investment management system. We will discuss new beacons, key priorities in the single project portfolio processes, and strengthening the medium-term budgetary framework,’ announced Priscila Tofano.
For more details, please follow the link.
Watch the video https://www.youtube.com/watch?v=yj1rnmQiyqI
The preparation of the Monitoring and this event were supported by the International Renaissance Foundation.
The discussion was moderated by Ihor Burakovsky, Chairman of the Board of the Institute for Economic Research and Policy Consulting.
RRR4U (Resilience, Reconstruction and Relief for Ukraine) is a consortium of four Ukrainian civil society organisations: Centre for Economic Strategy, Institute for Economic Research and Policy Consulting, Institute for Analysis and Advocacy, DiXi Group.
Source: DiXi Group
