The International Monetary Fund’s pressure on Ukraine to devalue its national currency

According to the Sedaye Sama News Agency, According to Russia Today, citing Bloomberg, the International Monetary Fund (IMF) is pressuring the Ukrainian government to devalue its national currency, the hryvnia. The purpose of this move is reportedly to pave the way for Kyiv to secure a new loan from the international financial institution.

Currently, Ukraine spends about 60 percent of its annual budget on the war with Russia and remains heavily dependent on Western financial aid to cover its military and social expenditures.

In 2023, the country received a $15.5 billion loan from the IMF under a program set to conclude in 2027. Last month, Kyiv requested an additional $8 billion financial package.

Bloomberg reported that negotiations over the new loan have stalled due to disagreements regarding exchange rate policy. The IMF believes that a controlled devaluation of the hryvnia could boost Ukraine’s budget revenues in local currency terms and ease fiscal pressure on the government.

However, sources within the National Bank of Ukraine have warned that such a move, given the country’s heavy reliance on foreign aid, would have limited economic benefit and could fuel inflation and public discontent.

The issue of the exchange rate was discussed during the IMF’s annual meeting in Washington this week, with further talks expected next month. The IMF has previously warned that Kyiv faces a widening fiscal gap and requires billions of dollars in additional aid to sustain the war effort. In this context, Ukraine has raised its estimated financial needs to about $65 billion and informed the European Union, its main financial backer. Brussels reportedly plans to cover a significant portion of this shortfall using profits generated from frozen assets of the Russian Central Bank.