IMF, Ukraine reach deal that would give it access to some $1.1 billion

WASHINGTON (Reuters) -The International Monetary Fund said on Tuesday it had reached a preliminary agreement with Ukraine that would give the war-torn country access to about $1.1 billion in financial assistance.

The agreement follows what Kyiv said on Tuesday were "difficult" talks and is subject to approval by the fund's executive board, which the IMF said in a statement is expected to happen in "coming weeks".

The IMF is a key international lender to Kyiv and its four-year $15.6 billion programme is a crucial part of a bigger global economic support package to Ukraine as it gears up for a third winter trying to fend off Russia's full-scale invasion.

"Russia's war in Ukraine continues to have a devastating impact on the country and its people," Gavin Gray, who led the IMF's monitoring mission to Kyiv for the fifth review of the lending programme, said in a statement.

"Skillful policymaking, the adaptability of households and firms, and robust external financing has helped support macroeconomic and financial stability."

The IMF, however, said that the risks to Ukraine "remain exceptionally high" with an economic slowdown expected due to the impact of the war on labour market and Russia's continued attacks on the energy infrastructure, among other factors.

Kyiv is spending about 60% of its total budget to fund its army and relies heavily on financial support from its Western partners to pay pensions and wages to public sector employees and finance social and humanitarian spending.

Ukraine has received about $98 billion in financial aid from its Western partners since the start of the war, finance ministry data showed.

The IMF urged the Kyiv government, which President Volodymyr Zelenskiy reshuffled last week, to "respect financing constraints and debt sustainability objectives" in the 2025 budget and look for ways to increase domestic revenues.

The government has said previously it plans to raise taxes and has already implemented other fiscal measures, including increasing import and excise duties .

Ukraine also won an agreement from bondholders to restructure and write down its debt.

(Reporting by Jasper Ward; Wrtiting by Jasper Ward and Lidia KellyEditing by Christopher Cushing and Miral Fahmy)