IMF launches key review of Ukraine’s $15.5 billion loan as war-hit economy faces deepening strain

The International Monetary Fund (IMF) has commenced a fresh review of its $15.5 billion support programme for Ukraine, a country still reeling from over three years of war.

As per Reuters, an IMF delegation arrived in Kyiv on Tuesday to conduct the eighth assessment under its four-year Extended Fund Facility (EFF) arrangement.

The discussions will centre on Ukraine’s budgetary challenges, long-term economic reforms, and strategies to ensure debt sustainability.

Ukraine’s Central Bank Governor, Andriy Pyshnyi, described the talks as “constructive and substantive”, adding that the IMF programme remains a vital source of economic resilience during the ongoing conflict.

According to Reuters, the IMF team will also explore how Kyiv plans to fund its wartime budget, including through international assistance and domestic revenue mobilisation.

While Ukraine has secured the financial resources needed to cover its 2025 budget deficit, estimated at nearly $38 billion, questions remain over the availability of global aid beyond this year.

Most of the country’s domestic income is being used to fund defence operations, leaving Kyiv heavily dependent on Western partners to finance social and humanitarian spending.

In addition to budgetary matters, the IMF will also assess the strength of Ukraine’s financial sector. Pyshnyi noted that talks will include improving regulations governing credit bureaus and enhancing financial market infrastructure measures seen as essential to preserving monetary stability in wartime conditions.

Impact of war on Ukraine’s economy

The IMF’s latest review comes against the backdrop of a severely weakened economy. Since Russia launched its full-scale invasion in February 2022, Ukraine’s economic output has suffered a dramatic collapse.

As reported by Reuters, gross domestic product (GDP) dropped by nearly 30 per cent in the first year of the war.

Although modest growth was recorded in 2023 and 2024, Ukraine’s overall economic performance remains far below pre-war levels, according to World Bankestimates.

The toll of the war extends far beyond GDP figures. Millions of Ukrainians have been forced to flee their homes, either relocating abroad or becoming internally displaced.

The country’s physical infrastructure has also been severely damaged, with cities, industrial areas, transport networks, and energy systems targeted by missile strikes. The Kyiv School of Economics-estimatesthe total cost of war-inflicted damage to infrastructure and housing has exceeded $150 billion.

Once a major agricultural exporter, Ukraine has struggled to maintain its role as a global grain supplier due to damaged ports and disrupted trade routes.

These supply chain blockages have fuelled inflation and weakened government revenues.

Meanwhile, repeated attacks on the power grid have led to frequent electricity shortages, hindering industrial activity and daily life.

The war has also placed Ukraine’s banking sector under immense pressure. Challenges such as rising non-performing loans, capital flight, and inflationary instability have further underlined the importance of IMF support and broader international aid.

For now, financial assistance from partners remains Ukraine’s primary cushion against economic collapse.

With international focus shifting to other geopolitical flashpoints, concerns are growing over whether donors will maintain the same level of commitment to Ukraine in 2026 and beyond.

The outcome of this IMF review could play a decisive role in shaping Ukraine’s financial future, determining not only the sustainability of its public finances but also its ability to function as a stable state during wartime.