By Andrea Shalal
KYIV, Jan 15 (Reuters) - International Monetary Fund chief Kristalina Georgieva met with top Ukrainian officials in Kyiv in a surprise visit on Thursday, telling Reuters she expected to send a new $8.1 billion lending program to the Fund's board for approval in coming weeks.
Georgieva, who met with Ukrainian President Volodymyr Zelenskiy and others in the frozen capital, said in an interview that the program would help to unlock funds from other institutions for the war-torn country.
During the trip, kept secret until her arrival on a special VIP train before dawn, she honored fallen soldiers and inspected energy infrastructure hit by Russian strikes, weeks before the fourth anniversary of Moscow's full-scale invasion on February 24.
Georgieva said the situation in Ukraine had clearly worsened since officials signed a preliminary lending agreement in November, but the thrust of the program's requirements would remain the same.
The day before her visit, Zelenskiy declared a state of emergency to accelerate work on power supplies disrupted by fierce Russian attacks. Repairs to thousands of apartment blocks have been complicated by frigid weather, with night-time temperatures dipping close to minus-20 Celsius (minus-4 Fahrenheit).
"I came in February 2023 and at that time it was difficult for the country, it was difficult for the economy, it was difficult for the people. But nothing like today," she said. "What impresses me is how functional the city is and how strong people withstand the terrible cost of war."
Georgieva said she came to ensure that Ukraine could still implement the November preliminary agreement despite the "unusually harsh times." She said Ukrainian officials assured her that they remained committed to moving ahead.
Still, she said, the IMF recognized the need for flexibility under the changed circumstances. Georgieva said she told the Ukrainian authorities that they had to move forward on the removal of a value-added tax exemption for consumer goods, which has run into domestic resistance. But she said the IMF would require only that the measure was introduced - not passed by parliament - before the new program could be approved.
"On the VAT exemptions, we made it very clear that this has to happen," she said, "We have to move it forward and the question is not whether. The question is how we do it, how we get the level of support from the parliament."
Georgieva said the IMF would assess which measures agreed in November were easily implemented and which needed to be "calibrated" more carefully. For instance, she said the Fund was looking at giving Ukraine a year to drum up support in parliament for passage of the VAT measure.
GEORGIEVA HONORS FALLEN SOLDIERS
Ukraine's top central banker, Andriy Pyshnyi, greeted Georgieva at her first stop, St. Michael's Golden-Domed Monastery in a square in central Kyiv. They placed flowers at a memorial wall bearing portraits of thousands of Ukrainian soldiers killed since 2014 while fighting Russia.
"I think the rest of the world doesn't quite understand that this pain for Ukraine didn't start with the invasion four years ago," she said. "When Ukrainians are defending their right to keep the country together, it is because they have had so much blood and tears."
Georgieva met separately with Pyshnyi, Prime Minister Yulia Svyrydenko and Finance Minister Serhii Marchenko before meeting President Volodymyr Zelenskiy during her whirlwind one-day visit. She also met with business executives and investors.
The IMF chief, who grew up in Bulgaria, has a personal connection with Ukraine. Her brother, whose wife is Ukrainian, was in Kharkiv, the country's second-largest city, when Russia invaded.
Svyrydenko welcomed Georgieva's continued engagement, posting on X that her presence was "an important signal of support for Ukraine."
"Her visit comes at a particularly difficult moment for our energy sector, amid unprecedented Russian attacks and the coldest winter in 20 years," she said, adding that she had shown the IMF chief damage from Russian strikes at one of Kyiv's major energy facilities.
WAR HAS HIT ECONOMY HARD
The preliminary agreement reached between the IMF and Ukraine in November would provide budget support for four years, contingent on several actions, including shoring up financing assurances, enacting a 2026 budget and broadening the tax base. Approval of the funding is critical, given estimated shortfalls of around $136.5 billion through 2029 due to the ongoing war.
While Ukrainian authorities have agreed to accelerate efforts to prevent tax evasion and avoidance, the IMF is not counting on higher revenues until 2027, an IMF official said.
Ukraine has passed the 2026 budget and last month bolstered its donor support when European Union leaders agreed to lend it 90 billion euros ($105 billion) for two years. Ukraine must only service the loan if Russia pays reparations after the war ends, which means it will not pose a burden on the budget.
It also completed a restructuring of $2.6 billion in growth-linked debt, averting a potential cost of up to $20 billion through 2041.
The new IMF program will replace its four-year $15.5 billion program, of which some $10.6 billion has been disbursed and which had assumed the war would end in 2025.
The new preliminary agreement assumes the war will end this year but includes a "downside scenario" that the war winds down slowly and does not end until 2028.
Following her visit to Ukraine, Georgieva will travel to Rome on Saturday for an audience with Pope Leo XIV, her first meeting with the new pontiff. That will be followed by Liechtenstein on Sunday and then Davos, Switzerland, for the World Economic Forum, IMF spokeswoman Julie Kozack told reporters in Washington. Georgieva will also stop in Brussels on her way back to Washington.
(Reporting by Andrea Shalal; Additional reporting by Olena Harmash in Kyiv and David Lawder in Washington; Editing by Bernadette Baum, Andrea Ricci and Edmund Klamann)
