IMF funds: What risks does Ukraine face with Trump's return?

Ukraine's collaboration with the IMF is currently progressing quite successfully. Kyiv is meeting all the requirements for receiving funding, sometimes even ahead of schedule. However, representatives of the Ukrainian government do not rule out that the situation may change soon. What has led to such concerns is explored by RBC-Ukraine's special correspondent Yurii Doshchatov.

The IMF mission began its work in Kyiv on November 11 to analyze the implementation of Ukraine's funding program. This is already the sixth review of the EFF credit program amounting to $15.6 billion, established in the spring of 2023. Over the course of a year and a half since the program's inception, which is designed for four years, Ukraine has received $8.7 billion out of the total loan amount.

The program review is expected to conclude with the allocation of a seventh loan tranche worth $1.1 billion. Currently, there are no doubts that the mission's work will result in a positive outcome, and the funds will be deposited into the National Bank's accounts before the end of the current year.

For the sixth program review, Ukraine needed to meet four "beacons".

By November, it was necessary to:

• analyze pre-war policies and practices of medium-term budget planning;
• assess financial risks to financial stability and prepare an action plan for various scenarios;
• evaluate the financial condition of centralized heating supply enterprises;
• develop a policy for managing state property in state enterprises, a dividend policy, and a privatization strategy.

The Ministry of Finance reported that all these conditions have been fulfilled.

Moreover, Ukraine is progressing even ahead of schedule. To date, one beacon with a deadline in December has been completed. A law has already been adopted to ensure the functional independence of the National Commission for State Regulation of Energy and Public Utilities (NERC).

Opposition politicians also acknowledge progress in meeting funding conditions. "We are currently doing well with the beacons. Many things have even been done in advance," said MP Yaroslav Zheleznyak from the Holos party.

In the near future, another December beacon is planned to be fulfilled – the appointment of a supervisory board for the company "Ukrenergo".

This condition was introduced into the program after two independent members of the company's supervisory board announced their resignation in September 2024 due to pressure from the authorities. The supervisory board of "Ukrenergo" needs to be appointed by December 9. However, according to information from the publication, this may happen before the end of November.

Perhaps the only question that may arise for the IMF is the fate of the tax increase bill (bill No. 11416 d). The document was sent to the President of Ukraine back in October but has not yet been signed by the head of state. However, sources from the publication and MPs expect that the document will still be signed, as the draft budget for 2025 has been prepared considering the changes contained in this bill.

Collaboration with the IMF may become complicated

While all previous reviews of the IMF credit program have proceeded almost without serious issues, further cooperation may become somewhat complicated. Several sources in the government told RBC-Ukraine about this.

"We have clear signals that it will become more difficult," said one of the publication's sources. "The IMF may become more cautious in its dealings with Ukraine," stated another source.

Concerns are linked to the imminent arrival of the new US President Donald Trump, who is quite skeptical about supporting Ukraine. The US is the largest shareholder of the Fund, holding nearly 17% of the votes, which allows it to block decisions of the board of directors.

However, according to Vitalii Vavryshchuk, head of macroeconomic research at ICU Group, such concerns are premature. "I think these are assumptions similar to the possibility of Trump's team initiating peace talks with Russia. Many now expect a sharp change in US foreign policy towards Ukraine following the new president's administration. But at this stage, these speculations are not backed by anything," he commented to RBC-Ukraine.

Nonetheless, Vavryshchuk did not rule out that the US may approach the issue of taxes in Ukraine more fundamentally after the change of power. "The US wants to have more arguments in favor of supporting Ukraine," noted the publication's source. This means that lenders may insist more strongly on Ukraine seeking additional resources domestically when providing funds. It is worth noting that the IMF program has already identified a source of additional funding for the state budget in 2025 in case of a shortfall – increasing VAT.

However, for now, sources in the government state that there are no grounds for further tax increases.

What are Ukraine's financial prospects

Overall, Ukraine's financial situation for the next year remains somewhat uncertain. The issue of lending from the G7 for $50 billion has not been definitively resolved. There are only promises of loans from the group members, particularly from the EU, Japan, the US, and Canada. However, not only the loan agreements are not ready – even the final amounts and conditions of these loans have not been agreed upon.

At this point, we can only confidently discuss funding for Ukraine under the Ukraine Facility. Under this program, €12 billion is expected to be allocated in 2025. The publication's sources also indicate that there is great hope for the EU, which has promised a loan of €35 billion funded by revenues from frozen Russian assets. The third source is the IMF, which has already revised its schedule and the volumes of funding for the next year, increasing the amount of tranches by almost $880 million.

If financing from all three sources proceeds as planned, then next year Ukraine should be able to accumulate the necessary $38 billion and cover the budget deficit, provided that it does not increase. However, the risks of rising expenditures due to the ongoing war remain quite significant.