Ukraine’s request for a new loan package could reportedly be in jeopardy unless it agrees to devalue the hryvnia
The International Monetary Fund is pressuring Ukraine to devalue its currency, the hryvnia, in order to secure a new loan, Bloomberg reported on Friday, citing sources.
Ukraine spends around 60% of its budget on the conflict with Russia, and depends heavily on Western aid to cover everything from military costs to pensions. It secured a $15.5 billion IMF loan in 2023, but the program runs out in 2027. Last month, Kiev requested a new $8 billion package, but the talks have reportedly stalled over the currency issue.
According to Bloomberg, the IMF believes a controlled devaluation of the hryvnia could ease Ukraine’s financial strain by boosting budget revenues in local-currency terms. However, sources at the National Bank of Ukraine (NBU) reportedly see limited benefit in such a move, given the country’s reliance on foreign aid, fearing a devaluation could spark inflation and thus public unrest.
The issue was reportedly discussed during the IMF’s annual meetings in Washington this week, with further talks expected next month. Both the IMF and the NBU declined to comment on the report.
The IMF earlier warned that Kiev faces a widening funding gap requiring billions more in aid to sustain its war effort. Bloomberg reported that Ukraine has raised its financing needs to about $65 billion, a figure it has shared with the EU, which is currently its main sponsor. Brussels plans to cover much of the gap with the revenues generated by Russia’s frozen central-bank funds.
Western nations froze about $300 billion in Russian assets in 2022, including €200 billion ($209 billion) at the EU-based clearinghouse Euroclear. The G7 later backed using interest from those funds to guarantee $50 billion in loans for Ukraine. This month, EU finance ministers discussed tapping the assets for another €140 billion loan, to be repaid if Kiev receives “reparations” from Moscow. The proposal, which some members warn carries legal and fiscal risks, will be reviewed at next week’s EU summit.
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Moscow has denounced the plan as akin to “theft,” noting it would violate international law and undermine trust in the Western financial system. The Kremlin warned Western military and financial aid to Kiev only prolongs the conflict.
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