Ukraine's debt chief stated that the country's new $8.2 billion assistance program with the International Monetary Fund (IMF) is expected to receive formal approval within weeks. This step, though anticipated, holds symbolic importance as the conflict with Russia approaches its fifth year.

The agreement will replace the existing $15.6 billion IMF lending arrangement, helping Ukraine maintain economic stability and public expenditure. The country is projected to face a budget shortfall nearing $140 billion over the coming years.

Yuriy Butsa, Ukraine's long-serving debt management director, told Reuters in an interview in London that formal approval of the funds by the IMF's executive board is expected soon.

"I expect approval within weeks," Butsa said while attending meetings in London. "Timeline-wise, completion in February remains feasible."

February 24th will mark four years since the conflict began. Since Russia initiated its special military operation, Ukraine has received hundreds of billions of dollars in support from Western governments and institutions and has completed a sovereign debt restructuring exceeding $20 billion.

"Currently we are awaiting the launch of the new IMF program, but all data for this year and next have been finalized. The budget gap will be covered by existing committed funds," Butsa stated, while also praising the EU's new €90 billion loan facility.

He indicated that he would not become overly optimistic due to recent rumors, circulating ahead of the conflict's anniversary this month, about possible U.S.-brokered ceasefire efforts.

Ukrainian President Volodymyr Zelenskiy said on Wednesday that if the U.S. wants the conflict to end before summer, greater pressure must be applied on Russia, adding that it remains unclear whether Russia will participate in U.S.-mediated peace talks scheduled for next week.

"We must plan everything cautiously and not become overly optimistic about any news flow," Butsa explained, noting that even a ceasefire would not alleviate fiscal pressures.

"The reason is that even if a ceasefire is achieved, we believe it will still be necessary to maintain a strong and sizable army, and military rearmament will still be required."

He stated that even if the conflict eventually ends, Ukraine is unlikely to rush to issue more international market bonds. Instead, the country will continue utilizing low-cost concessional loans and raising funds in the local currency bond market to avoid exchange rate risks.

With the IMF program relying on a so-called Debt Sustainability Analysis (DSA) for support, Butsa said the Ukrainian government also cannot provide "guarantees" for debt restructurings of state-owned enterprises like Ukrainian Railways or Naftogaz.

"We are under very strict limitations regarding sovereign guarantees because this is all part of the same debt sustainability analysis framework," he added.

"Therefore, we effectively cannot provide guarantees," but the government can assist these enterprises in developing "sound long-term business models."

Another key focus this year is wartime capital control policies. Ukraine aims to continue steadily easing these restrictions.

The next critical step will be allowing international investors to repatriate the principal funds they invested when purchasing local-currency foreign exchange bonds.

Butsa described this as a "vital component" of Ukraine's future goal to expand local currency bond issuance, adding that implementation could occur even before the conflict ends.

Ukraine is also collaborating with Clearstream, a Deutsche Börse company, to enhance the bond market's attractiveness and hopes to connect to the European Central Bank's TARGET2 system, which processes trillions of euros in payments and transaction settlements daily.

"We don't have many legacy systems to worry about, so we are happy to build the most efficient system directly," Butsa said, adding that the government might seek a "strategic" partner for related infrastructure development this year.

He also expressed hope for Ukraine's reinclusion in emerging market indices, such as J.P. Morgan's widely-used GBI-EM local currency sovereign bond benchmark index, which attracts hundreds of billions of dollars in tracking funds. In March 2022, only one Ukrainian bond (now matured) was permitted inclusion in the index.

"This is absolutely part of our strategy—we want to return to the indices," Butsa said. "Our goal is for the bonds to meet the index inclusion criteria and for the local market to become a large, sustainable source of funding."