IMF outlines $32B in additional financing for Ukraine, anticipates war's end by late 2025

The scenario requires $32 billion in additional financing, which would be covered by the proposed G7 Emergency Revenue Assistance for Ukraine (ERA) initiative, using proceeds from frozen Russian assets. Of the proposed $33 billion, $19.1 billion will be needed next year, $9.2 billion in 2026, and $4.9 billion in 2027.

Total official financing needs are estimated at $35.7 billion next year, $19.1 billion in 2026, and $5.4 billion in 2027. The European Union will provide $13.7 billion, $7.9 billion, and $0.6 billion, respectively, under the Ukraine facility, down from $17.5 billion this year. The IMF will provide an additional $2.7 billion in 2025, $1.9 billion in 2026, and $1.1 billion in 2027.

According to the presented model, these funds will increase Ukraine's international reserves from $42.6 billion at the end of this year to $44.9 billion next year and $49.1 billion in 2026. However, a revised negative scenario assumes the end of the war in mid-2026, requiring the full $50 billion in the state budget under the ERA initiative. In this scenario, the estimate of resources needed from other external partners increases.

The IMF staff assesses the risk of a protracted war as high, but lower than at the time of the fourth review in June this year. Other risks include energy supply, the pace of international support, reform fatigue, and limited capacity to design programs to absorb additional shocks.

The IMF emphasizes that the ERA initiative is designed not to create additional debt for Ukraine. The frozen Russian assets and their income will be sufficient to cover the funding. Ukraine has already received $57.9 billion in external support since the start of the program in March 2023 and expects an additional $16.8 billion by the end of the year.

This follows an earlier report by Deutsche Welle on the same day that the IMF had approved the fifth review of its four-year Extended Fund Facility (EFF) program for Ukraine, allowing the country to receive a new tranche of $1.1 billion. 

Ukraine has met all the criteria set during the previous economic review, the IMF said. The Ukrainian government has also met structural benchmarks related to "tax incentives, state-owned enterprises affected by the war, customs reform, and public investment management."
Ukraine's economy was more stable than expected in the first half of 2024. However, the outlook for the second half of 2024 and 2025 has deteriorated due to Russian attacks on energy infrastructure.