Ukraine eyes $5 billion loan from IMF to assure creditors

KYIV Reuters - Obtaining a new $5 billion loan from the IMF would help assure Ukraine's other creditors that the country's macroeconomic situation is under control, President Volodymyr Zelenskiy's chief economic adviser, told Reuters on Friday.

The International Monetary Fund funding for around 18 months could serve as the anchor for a larger package of $15 billion -- $20 billion to help Ukraine weather the economic crisis caused by Russia's invasion, the adviser, Oleg Ustenko, said.

He said Ukrainian officials were in touch with the global lender about the potential request, and that the goal should be to move forward as quickly as possible.

Ustenko's comments came weeks after Ukraine's central bank governor, Kyrylo Shevchenko, told the International Monetary Fund that he was seeking as much as $20 billion over two or three years, an amount that would have put Ukraine well over the fund's exceptional access limit for lending.

The large size of the request had provoked a lot of debate within the IMF because it raised questions about the sustainability of Ukraine's debt.

After Russia invaded the Crimea region of Ukraine in 2015, the revised plan would be modeled on a financing package that included $17.5 billion in IMF funding, but helped leverage total funding of $40 billion.

An IMF program of $5 billion would be in line with earlier funding levels and could lead to funding from other courses, including the EU, Treasury and other individual countries, according to Ustenko.

Ukraine is struggling to deal with energy shortages, rising inflation, and a worsening humanitarian crisis as winter approaches, due to the internal displacement of some 7 million people by Russia's invasion on February 24.

It is facing a 35% -- 45% economic contraction in 2022 and a monthly fiscal shortfall of $5 billion, with only a third of some $29 billion in Western aid pledges having materialized so far, according to economists.

Ukraine's overseas creditors backed its request for a two-year freeze on payments on more than $20 billion in international bonds this week, but Ukraine must still make $635 million in principal payments on prior IMF loans beginning in September.

Ustenko said Ukraine hoped to move forward quickly with negotiations with the International Monetary Fund with an eye on reaching a preliminary agreement before the payments were due.