IMF urges continued reforms in Ukraine, sees lower growth in Russia

By Andrea Shalal

WASHINGTON (Reuters) -The International Monetary Fund urged Ukraine on Thursday to stick to its economic reforms and national revenue strategy as its battle against Russia's invasion continues, and said the Russian economy was now slowing sharply.

IMF spokeswoman Julie Kozack told a regular briefing that recent developments in Russia suggested its economic growth could be lower than the 1.5% projected by the IMF in April. She said the global lender would update its forecast in July.

Kozack said the slowdown in the Russian economy reflected cyclical factors after last year's overheating, lower oil prices and the impact of tighter Western sanctions imposed over Russia's war in Ukraine.

U.S. President Donald Trump said on Thursday he would speak by phone with Russian President Vladimir Putin, while a Ukrainian source told Reuters Trump might speak with Ukrainian President Volodymyr Zelenskiy on Friday.

In recent weeks, Russia has amassed forces and despite heavy losses has advanced in rural areas of Ukraine, while stepping up drone and missile strikes on Kyiv and other cities, amid signs that Washington's support for Ukraine's war effort is faltering.

So far, Trump's efforts to broker a ceasefire in the full-scale invasion launched by Russia in 2022 have fallen short.

The IMF on Monday completed its eighth review of Ukraine's $15.5 billion, four-year support program, paving the way for a disbursement of an additional $500 million to the country that will bring total disbursements to $10.6 billion.

Kozack said the review found that Ukraine's economy remained resilient, but that the IMF had also warned of ongoing and "exceptionally high" risks to the country's outlook.

Restoring fiscal stability in Ukraine would require a "sustained and decisive effort" to boost revenues, including through modernizing the country's tax and customs system, and steps to reduce tax evasion, she said.

The ninth review will take place toward the end of the year and be combined with the 10th review, she said, after Ukraine requested a re-phasing to better match its financing needs.

The IMF this week maintained its 2025 economic growth forecast of 2–3 percent for Ukraine, citing lower gas production and weaker agricultural exports. Kyiv will need a supplementary budget for 2025, given pressures from the war, it said.

Kozack also told reporters that Russia's economy by contrast "is rapidly slowing and ... risks are rising". Russian inflation remains high, although the IMF still expects it to come down and decline over time.

(Reporting by Andrea Shalal and David Lawder; Editing by Chizu Nomiyama, Mark Heinrich, Alexandra Hudson)