IMF pressures Ukraine to devalue its currency
(MENAFN) The International Monetary Fund is reportedly urging Ukraine to devalue its currency, the hryvnia, as part of negotiations for a new financial assistance package, according to Bloomberg.
Ukraine allocates roughly 60% of its budget to the ongoing conflict with Russia and relies heavily on Western support to cover military expenses, pensions, and other public spending.
The country received a $15.5 billion IMF loan in 2023, set to expire in 2027. Last month, Kiev requested an additional $8 billion, but discussions have reportedly stalled over the currency issue.
Sources cited by Bloomberg indicate that the IMF views a controlled devaluation as a way to increase local-currency budget revenues and relieve financial pressure. However, officials at the National Bank of Ukraine reportedly see limited benefit, warning that a weaker hryvnia could trigger inflation and social unrest, given the country’s dependence on foreign aid.
The matter was reportedly addressed during the IMF’s annual meetings in Washington this week, with follow-up discussions expected next month. Both the IMF and the National Bank of Ukraine declined to comment on the report.
The IMF has previously cautioned that Ukraine faces a widening funding gap, requiring billions more to sustain its war effort. Bloomberg noted that Kiev has raised its financing needs to approximately $65 billion, a figure shared with the European Union, which currently serves as its primary sponsor. The EU intends to cover much of the gap using revenues from frozen Russian central-bank assets.
Western nations froze around $300 billion in Russian assets in 2022, including €200 billion ($209 billion) held at the EU clearinghouse Euroclear. The G7 subsequently backed using interest from these funds to secure $50 billion in loans for Ukraine. This month, EU finance ministers discussed allocating another €140 billion from the assets, to be repaid if Moscow provides reparations. Some EU members have cautioned that the plan carries legal and fiscal risks, which will be reviewed at the upcoming EU summit.
Moscow has criticized the proposal, calling it “theft” and arguing it violates international law while undermining trust in Western financial systems. The Kremlin also contends that ongoing Western military and financial aid to Ukraine only prolongs the conflict.
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