WASHINGTON — Ukraine’s wartime economy cleared a major financing hurdle on Friday when the International Monetary Fund approved a $690 million tranche under its four-year lending program, even as it acknowledged that Kyiv had failed to meet one structural reform condition and dragged its feet on two others required by the end of March.
The disclosure, buried in an official IMF statement, marks the first public admission of slippage under Ukraine’s new $8.1 billion Extended Fund Facility — the program the Fund approved in February, replacing an exhausted $15.5 billion facility that had carried Kyiv through three years of war. All quantitative performance criteria and indicative targets for the first quarter were met, the IMF said, meaning Ukraine kept its fiscal numbers inside agreed limits. But the structural benchmarks — the legislative and institutional changes required alongside those numbers — told a more complicated story.
“All end-March quantitative performance criteria and indicative targets have been met,” the Fund said in its statement. “However, two structural benchmarks for the first quarter were implemented with a delay, and one has been missed.” The IMF and Ukrainian authorities agreed to a revised reform timeline, the statement said, paving the way for the Executive Board’s consideration of the disbursement, which would bring total payouts under the program to $2.2 billion.
The missed and delayed benchmarks go to a structural tension that has dogged Ukraine’s economic reform agenda since the war began: the government can maintain fiscal discipline in the abstract while the Verkhovna Rada resists the specific legislation that discipline requires. Three of the first-quarter benchmarks centred on tax reform, the governance of state-owned banks, and the appointment of a State Customs Service chief through a competitive process. Parliament did not adopt the required tax changes by the March deadline, and the customs appointment — central to the IMF’s longstanding campaign to clean up a service notorious for corruption — remained incomplete, according to Ukrainian media and parliamentary records.
The customs reform thread is worth following. The IMF has pressed Ukraine on the State Customs Service through successive programs, and the failure to appoint a competitive hire on schedule suggests the political friction in Kyiv around that institution has not eased. The Fund said in a statement earlier this year that reforming the customs service is “essential to tackle corruption and reduce tax evasion.”
The digital platform tax bill — covering platforms like Glovo, Bolt, and Uber that employ hundreds of thousands of Ukrainians outside the formal tax system — was passed by parliament in its final reading on June 9, three months late, according to the Verkhovna Rada. That passage appears to have been among the corrective measures the two sides agreed upon ahead of Friday’s staff-level deal. Tax changes related to international parcel imports and VAT registration for sole proprietors remained outstanding until close to the review deadline, with lawmakers adopting some provisions in a legislative sprint in April and early June.
IMF Mission Chief Gavin Gray led the review, arriving in Kyiv last month to begin the first formal assessment of the new program. Finance Minister Serhiy Marchenko acknowledged the difficulty of the process in a statement Friday, thanking the mission team “for the joint difficult work” and calling on Kyiv to sustain the momentum. “It is precisely consistency in decisions and the ability to work as a single team that allow us to move forward even in extremely difficult conditions,” Marchenko said, according to Ukrainian National News.
The Fund itself noted that macroeconomic stability had been broadly maintained “despite the continuation of Russia’s military operation in Ukraine,” though it projected GDP growth would slow to between 1.0 and 1.6 percent in 2026 and flagged “exceptionally high risks” tied to the protracted conflict. Ukraine’s $52 billion financing gap for the year is being covered through a combination of disbursements from EU facilities, the G7’s ERA mechanism, bilateral donors, and the IMF program itself.
The question the Friday approval leaves unanswered is how much slippage the Fund is prepared to absorb before it becomes a precedent. Ukraine’s debt obligations to the IMF have grown substantially as the war drags on, and the concessions required to keep each tranche flowing — revised timelines, waived conditions, extended reviews — carry their own institutional costs for a Fund that has staked its credibility on an unprecedented wartime lending model. The IMF changed its own rules to allow lending under “exceptionally high uncertainty” when it approved the first Ukraine program in 2023, acknowledging the impossibility of standard conditionality assessments in an active war zone.
That acknowledgment has not disappeared. It is, in fact, the structural condition under which every subsequent review operates. The missed benchmark is not a crisis — the IMF has waived or delayed conditions for Ukraine before, across nine tranches under the previous program. What it is, more precisely, is a data point about how much of the reform agenda Kyiv can actually execute while fighting a war, staffing a wartime government, and navigating a parliament whose political economy is shaped by the pressures of that conflict.
The second quarterly review, which will assess conditions through end-June, is scheduled for no earlier than September 1, the IMF said in its program memorandum. Whether the corrective measures agreed this week will be implemented on schedule — or whether the pattern of delays will reassert itself — is not yet knowable. What the Fund did on Friday was authorize a disbursement on the premise that it will be.
EH Internal: See also Ukraine swallows IMF’s $65 billion bill as EU scrambles for an asset-backed lifeline, and Ukraine’s Corruption Crisis Closes In on Zelenskyy.
