IMF intends on forcing Ukraine to devalue currency
Date
9/18/2024 8:39:07 AM
(MENAFN) The International Monetary Fund (IMF) is poised to increase its demands on the Ukrainian government to address the nation’s budget deficit in order to secure continued financial assistance. According to a report by Bloomberg, an IMF delegation is scheduled to visit Kyiv later this week to assess whether the Ukrainian government is meeting crucial economic targets, including the devaluation of the national currency, the hryvnia.
These measures are critical for Ukraine to unlock the next installment of USD1.1 billion from a larger USD15.6 billion loan program. Since the onset of the conflict in February 2022, Ukraine has received approximately USD122 billion in international aid from various sources, including the United States, the European Union, and the IMF. Despite this support, Prime Minister Denis Shmigal recently highlighted a pressing budget gap of USD15 billion for 2025 that remains unaddressed by financial commitments from creditors.
To help alleviate this deficit, the IMF is reportedly advising the National Bank of Ukraine to accelerate the pace of the hryvnia's devaluation and to adopt a more accommodative monetary policy in light of moderate inflation. Such steps are expected to enhance local currency revenue for the Ukrainian budget and reduce borrowing costs for the Finance Ministry.
However, the central bank has expressed reservations about further weakening the currency, which has already depreciated by over 30 percent against the US dollar since the conflict escalated. In an attempt to stabilize the economy, Ukraine’s central bank adjusted the fixed exchange rate last October. Allowing the currency to decline further poses risks to the central bank’s efforts to maintain price stability, complicating the economic landscape.
As Ukraine navigates these complex financial demands from the IMF, the path ahead will be crucial in determining the country's economic stability and its ability to meet both domestic and international financial obligations.
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