The four-year extended funding program (Extended Fund Facility - EFF) amounting USD 17.5 bn poses the core element of the plan of the Finance Ministry of Ukraine aimed to stabilize the Ukrainian economy and to return it on the growth track starting from 2016.
The EFF, which was approved by the Executive Board of the IMF on March 11, 2015, replaces the IMF Stand-by program approved for Ukraine on April 30, 2014.
The EFF is designed to increase the reserves of the Ukrainian National Bank, to stop the exodus of capital, to enhance the measures taken by the Ukrainian government to stabilize the country’s balance of payments as well as to help Ukraine overcome structural problems in its economy by implementing overdue reforms.
Within the EFF framework Ukraine has already finalized a number of substantial changes in the energy and banking sector as well as changes aimed to increase the independence of the National Bank, to remedy the public finances, to reform the sector of state-owned companies as well as to counteract corruption. Legislative steps taken in these areas are, among others, as follows: the Law of Ukraine on the capacity development of the National Bank of Ukraine (541-VIII, June 18, 2015) which contributed largely to the enhanced independence and efficiency of the National Bank; the Law of Ukraine «On the natural gas market» (329-VIII, April 09, 2015) protecting customers’ rights and creating equality for all market players; the Law of Ukraine “On the Deposit Guarantee Fund” (515-VIII, June 16, 2015) enhancing the protection of customers’ rights and granting easier access to deposits at problem banks; amendments to the Law of Ukraine "On prevention of corruption" obliging public servants to provide full information on their income and property.
Having accomplished these measures, the Government of Ukraine received the first two EFF tranches amounting USD 6.7 bn in total. The first tranche of USD 5 bn was granted in March 2015 and was used to finance the acute budgetary needs and to increase the currency reserves of the National Bank. That enabled Ukraine to double its currency reserves from almost USD 5 bn to almost USD 10 bn). The second tranche of USD 1.7 bn was granted in August 2015 was used completely to increase the currency reserves of the National Bank and thus to additionally stabilize the situation on the currency market.
Cooperation with the IMF in accordance with the EFF is also a condition for Ukraine to receive further bilateral and multilateral international financial aid amounting more than USD 7.2 bn in the next year and a half.
The main facts on the EFF:
• the annual interest rate on the EFF loan is 3.05%. Just to compare: from 2010 till 2013 Ukraine actively took loans under the average interest rate of 8% p.a.;
• the loan is granted for 10 years, in the first 5.5 years special preferential conditions are applied;
• payments to serve the loan debt shall be effected every quarter of a year.