Ukraine clinches £12.7bn IMF loan to shore up finances amid Russian invasion

Cost of rebuilding from Putin’s war rises to £336bn

Ukraine is to get a £12.7bn loan from the International Monetary Fund to help fund its defence against Russia’s invasion – as a new report estimates it will cost £336bn to rebuild the country.

The four-year deal, expected to be ratified by the lender’s board in the coming weeks, is based on Ukraine’s path to joining the European Union after the war.

It is also the biggest ever IMF loan to a country still at war.

Ukraine said the loan would help it maintain financial stability and close its budget deficit after the conflict has ended.

“The overarching goals … are to sustain economic and financial stability in circumstances of exceptionally high uncertainty, restore debt sustainability, and support Ukraine’s recovery on the path toward EU accession in the post-war period,” said IMF’s mission chief for Ukraine, Gavin Gray.

The loan is expected to help unleash large-scale financing for Ukraine from international donors and partners.

IMF experts currently expect the change in Ukraine’s real gross domestic product for 2023 to range from -3% to +1%, Gray added.

US Treasury Secretary Janet Yellen, who paid a surprise visit to Ukraine last month, welcomed the deal as “ambitious and appropriately conditioned.”

Meanwhile, an estimate published on Wednesday by the World Bank, United Nations, European Commission and Ukraine found the cost of rebuilding after the war has risen to £336bn, equivalent to 2.6 times Ukraine’s expected 2022 gross domestic product.

The new projection does not include data on the loss of infrastructure, housing and businesses in territories now occupied by Russian forces.

According to the rapid needs assessment, Ukraine will need $14 billion for critical and priority reconstruction and recovery investments in 2023, which will require $11 billion in financing beyond that addressed in Ukraine’s 2023 budget.

The largest proportionate increase was in energy, where damage was more than five times the level seen in June 2022, the World Bank said. The biggest jumps came in frontline regions such as Donetsk, Kharkiv, Luhansk and Kherson, which have been heavily targeted in Russian missile attacks since October.

Reuters and Associated Press contributed to this report.