The International Monetary Fund (IMF) anticipates that foreign direct investment in Ukraine will reach 5% of GDP, indicating that the country's post-war recovery will only begin in 2026-2027. This information is based on the IMF's March statement regarding the approval of another $880 million tranche.
"A clue to when the IMF assumes war will be more or less over in Ukraine - FDI picks up to 5% of GDP from 2026-2027.. (The so-called post-war reconstruction to begin). I.e. not expecting it to end any time soon," noted Yevgenia Sleptsova, Senior Economist at Oxford Economics.
According to the IMF's forecast, foreign investments in 2024 will amount to 2.2% of Ukraine's GDP, down from 2.4% in 2023 and 0.1% in 2022. Before the full-scale invasion in 2021, foreign investments were at 3.8% of GDP.
IMF Managing Director Kristalina Georgieva warned in mid-December that without financial assistance from Western countries, Ukraine, with its current budget deficit of $41 billion, would only last "a couple of months" before being forced to resort to "destabilizing policies," namely, resorting to money printing, which could lead to hyperinflation and destabilize the country's financial system.
In February 2024, the US Senate blocked a bill providing over $60 billion in aid to Ukraine. In turn, the EU approved assistance of €50 billion until 2027 in the form of loans and non-repayable grants.
As part of a four-year Extended Fund Facility (EFF) agreement with Ukraine, the IMF provides the country access to financing of 11.6 billion SDR (Special Drawing Rights), equivalent to $15.6 billion. The agreement, approved in March 2023, is part of a $122 billion international support package for Ukraine until early 2027.
However, IMF assistance comes in the form of loans, and in 2024, Ukraine must repay the IMF nearly $2 billion for servicing previously provided loans. Peak repayments occur in March and September, with Kyiv having to pay $705.5 million each time. It is likely that a significant portion of the $880 million received from the fund in March will be immediately returned to the IMF as payments on old loans.
