(MENAFN) The International Monetary Fund (IMF) is encouraging Ukraine to reduce the value of its national currency, the hryvnia, as a condition for unlocking a new financial package, a news agency reported on Friday, referencing unnamed insiders.

With approximately 60% of Ukraine's national expenditures dedicated to the ongoing conflict with Russia, the country remains highly reliant on financial support from Western nations to fund various public needs, including defense spending and social services like pensions.

In 2023, Ukraine secured a loan of $15.5 billion from the IMF, a program scheduled to conclude in 2027.

However, last month, Kyiv submitted a request for an additional $8 billion.

Discussions around this new funding reportedly hit a roadblock over the potential devaluation of the hryvnia.

According to the news agency, the IMF views a managed depreciation of the currency as a potential solution to relieve Ukraine's budgetary pressures, by increasing revenue in terms of the local currency.

On the other hand, officials from the National Bank of Ukraine (NBU), as cited by sources, appear skeptical.

They believe that given Ukraine’s dependence on external aid, the benefits of such a strategy would be minimal.

Moreover, they are concerned that lowering the currency’s value might trigger inflation, potentially leading to social unrest.

The topic was reportedly a point of discussion during the IMF's annual gatherings held in Washington this week. Further negotiations are anticipated to continue in the coming month.

Both the IMF and the NBU declined to provide comments on these developments.

Previously, the IMF warned that Kyiv faces an expanding financial shortfall that demands significantly more international assistance to sustain its military operations.

The news agency noted that Ukraine has now increased its estimated financial needs to approximately $65 billion.

This projection has been shared with the European Union, which currently stands as the country’s principal backer.

Brussels aims to fund a substantial portion of this shortfall by utilizing income derived from Russia’s immobilized central bank reserves.

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