The IMF Executive Board has completed the eighth review of its $15.6bn, four-year Extended Fund Facility (EFF) program for Ukraine, authorizing a ninth loan tranche of $0.4bn. This brings total gross disbursements under the program to $10.6bn.

The State Statistics Service reported provisional real GDP growth of 0.9% y-o-y and 0.7% q-o-q (s/a non-annualized) in 1Q25, following -0.1% y-o-y in 4Q24.

Industrial production (IP) declined by 6.4% y-o-y in April, broadly unchanged from March, keeping the 4M25 contraction at -6.1% y-o-y, in line with the 1Q25 pace. Meanwhile, construction output fell by 21% y-o-y in April, slightly better than the 29% drop in March but still widening the 4M25 decline to -13% y-o-y (vs. -11% in 1Q25).

Ukraine’s direct and guaranteed public debt stood at $181bn as of end-May, up 0.6% m-o-m and 9.0% YTD.

Key highlights: Russian weekly territorial gains slowed further, remaining limited mostly to Donetsk region, as advances in Sumy region stopped. The tempo of Russian ground assaults fell to the lowest level since April. Ongoing prisoner exchanges keep the window for diplomacy open, but the prospects for tangible steps towards de-escalation remain dim as Russia continues to press its battlefield advantage. Russia extended its campaign of mass aerial assaults on civilian infrastructure, with June drone launches topping 5,000, a new high.

Fitch Ratings downgraded Ferrexpo’s Long-Term Issuer Default Rating (IDR) to CCC- from CCC+, citing a significant deterioration in operating liquidity and continued negative free cash flow following the suspension of VAT refunds earlier this year.

Ukraine’s merchandise trade deficit provisionally narrowed to $2.8bn in May from $3.0bn in April and $3.5bn in March. Monthly exports rose by 8.3% m-o-m to $3.6bn (+7.6% y-o-y), offsetting a 2.0% m-o-m increase in imports to $6.5bn (+15% y-o-y).

Ukraine’s iron ore exports totaled 13.5 Mt in 5M25 (-13% y-o-y), implying a 10% m-o-m decline in May to 2.4 Mt (-23% y-o-y). In value terms, iron ore exports reached $1.1bn in 5M25 (-21% y-o-y), with May exports down 12% m-o-m to $181m (-24% y-o-y). Steel exports fell by 8.3% y-o-y to 1.5 Mt in 5M25, implying a 6.0% m-o-m drop in May to 306 kt (-15% y-o-y). In value terms, steel exports stood at $0.9bn in 5M25 (-12% y-o-y), with May’s value down 2.3% m-o-m to $186m (-13% y-o-y).

NATO leaders agreed at a summit concluded yesterday to count the military assistance their countries provide to Ukraine towards their new annual defense spending target of 5% of GDP. According to the Hague summit declaration, “Allies reaffirm their enduring sovereign commitments to provide support to Ukraine [and] will include direct contributions towards Ukraine’s defense and its defense industry when calculating Allies’ defense spending.” The statement cited “the long-term threat posed by Russia to Euro-Atlantic security” among the reasons behind NATO members’ commitment to increase their defense spending.

The Cabinet of Ministers has approved amendments to the 2025 budget law, proposing to increase security and defense outlays by UAH 412bn ($9.2bn at the budgeted annual average exchange rate of UAH 45.0: USD). The budget proposal increases the headline central budget spending target by UAH 397bn to UAH 4,365bn ($97bn) and revenue target by UAH 148bn to UAH 2,475bn, implying a central budget deficit target of UAH 1,890bn ($42bn) or 22% of GDP, up UAH 249bn ($5.5bn) relative to the current version.

The Ministry of Finance placed UAH 28bn ($663m) of hryvnia-denominated bonds at primary auctions in June, issuing no FX-denominated paper. MinFin also held a third switch auction earlier this month, exchanging UAH 8.5bn of benchmark bonds maturing in August 2025 for benchmark bonds due in April 2029. With UAH 41bn ($977m) of UAH bonds redeemed this month (no FX bond redemptions), MinFin is finishing June with a net repayment of $319m, down from a net placement of $520m in May (accounting for prior bonds switches). In 1H25, MinFin has redeemed $0.7bn net, as opposed to a net placement of $1.2bn in 1H24. The aggregate rollover rate stood at 73% in June (vs. 212% in May) and 82% YTD.

The arbitration tribunal in Zurich ordered Gazprom to pay $1.37bn for gas transit services provided by Naftogaz to Gazprom under the 2019 gas transit contract along with legal fees and penalties. Naftogaz has formally requested the payment.

The National Bank of Ukraine has revised its balance of payment statistics for 2024 and 1Q25, widening the 2024 headline current account (CA) deficit by $2.2bn to $15.9bn and 1Q25 gap by $1.1bn to $6.9bn. The financial and capital account surplus, including IMF financing, was revised higher accordingly, up $2.2bn to $18.8bn in 2024 and up $1.1bn to $5.1bn in 1Q25.

The supervisory board of Ukrenergo unanimously elected a new CEO, appointing Vitaly Zaichenko, the company’s chief dispatcher and member of its management board, to the post.

Energy Minister German Galushchenko said Ukraine would need to import at least 4.6 bcm of gas this year, of which 2.9 bcm has already been contracted and fully financed. He also defended the Public Service Obligation (PSO) regime mandating Naftogaz to supply gas to gas-fired power producers, saying this was necessary to mitigate electricity shortages.

Key highlights: Russian territorial gains dropped for the third consecutive week despite relentless assaults. Ukraine stopped Russian advances in Sumy region, but Russian gains in Donetsk continued. Russian aerial assaults pose a growing threat away from the front lines, with Kyiv enduring a mass drone and missile attack for the second consecutive weekend.