FILE PHOTO: Ukraine's President Volodymyr Zelenskiy speaks with Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva via videolink, as Russia's attack on Ukraine continues, in Kyiv, Ukraine May 20, 2022. Ukrainian Presidential Press Service/Handout via REUTERS
WASHINGTON (Reuters) - The International Monetary Fund on Friday said it reached a staff-level agreement with Ukraine, setting the stage for talks on a full loan program that would support Kyiv's economy and its bid to join the European Union.
The IMF said the agreement on the first and final review of a Program Monitoring with Board Involvement (PMB) was subject to IMF management approval and showed positive results.
"Performance under the PMB has been strong. Due to the joint efforts of the government ... and the National Bank of Ukraine, all end-December quantitative and indicative targets have been met, as have all five end-January structural benchmarks," the IMF said in a statement.
Ukraine is seeking an IMF program of up to $20 billion. As Russia's invasion enters its second year, it faces an estimated total external financing need of $40-$57 billion in 2023.
Among benchmarks met under the policy monitoring arrangement were the government's submission to parliament of draft tax laws aimed at increasing revenues and steps by the Finance Ministry to address arrears, the IMF said.
The Fund said that Ukraine's economy contracted by 30% in 2022, shrinking less than initially forecast, while inflation has begun to decelerate. But Ukraine's near-term economic outlook had deteriorated due to Russian attacks on critical infrastructure.
"However... a gradual economic recovery is expected through the course of the year," the IMF said.
(Reporting by Andrea Shalal and David Lawder; writing by Paul Grant; editing by Susan Heavey and John Stonestreet)
