As Ukraine's economy shrinks, negotiations begin with the IMF for $1.67 billion

The International Monetary Fund (IMF) has initiated a new review process within the scope of the loan program for Ukraine, which is struggling to survive under war conditions.

A positive outcome of the talks could pave the way for the Kiev administration to access fresh financing of approximately $1.67 billion.

This process, which brings together the second and third evaluation phases of the four-year loan program, plays a vital role in maintaining the country's economic balance.

The cooperation with the IMF, which is Ukraine's chief international creditor, directly affects the securing of funds from other global partners in the ongoing war with Russia.

While official contacts between the Fund delegation and Ukrainian officials are carried out face to face in the cities of Lviv and Warsaw, some international experts participate in the talks online.

MEETINGS FOCUS ON BUDGET AND STRUCTURAL REFORMS

Priscilla Toffano, IMF's Permanent Representative in Ukraine, made a written statement regarding the review process.

Toffano, in the institution's official assessment, stated, "Negotiations will cover macroeconomic and fiscal policies as well as basic structural reforms."

Ukrainian Prime Minister Serhii Koretskiy pointed out the scope of the meeting agenda and stated that the 2027 budget and international financial assistance will also be discussed during the meetings.

Authorities emphasize that international financing flows will play a decisive role in closing the huge multi-billion dollar budget deficit predicted for next year.

FOUR YEARS OF WAR DRAWED THE COUNTRY'S ECONOMY INTO CONTRACTION

The Ukrainian economy, worn out by the war that has been going on for more than four years, is going through one of the most difficult periods in its history due to heavy damage to income-producing sectors and commercial enterprises.

The Russian army's recent intensified air attacks on commercial establishments, energy infrastructure and industrial facilities make the functioning of the production wheels difficult.

The country's economy entered a period of contraction under the influence of these developments.

Gross domestic product (GDP) in Ukraine decreased by 0.7 percent in the third quarter of the year compared to the same period last year.

The National Bank of Ukraine expects the economic contraction to be 0.4 percent in 2026.

While the inflation rate in the country is also rising rapidly, the annual consumer price increase is expected to reach 12.5 percent this year.

70 BILLION DOLLAR FINANCIAL DEFICIT

In addition to the economic contraction within the country, the deterioration in the foreign trade balance causes budget revenues to remain significantly below the targets.

While agricultural enterprises and the steel industry, which are Ukraine's main sources of foreign currency, are experiencing severe destruction, the blocking of export traffic through Black Sea ports restricts the flow of income.

Ukrainian officials state that the country will face a huge financing gap of approximately $70 billion next year due to current production and logistics losses.

The Kiev administration focused on the results of the technical negotiations carried out at the table with the IMF in order to close this deepening financial gap and keep the economy balanced.