The International Monetary Fund (IMF) has approved a $15.6bn support package for Ukraine to assist with the conflict-hit country’s economic recovery, the fund has said.

The Russian invasion has devastated Ukraine’s economy, causing activity to contract by around 30 percent last year, destroying much of its capital stock and fuelling poverty, according to the IMF.

The 48-month Extended Fund Facility (EFF) programme approved by the fund’s board is worth roughly $15.6bn.

It forms the IMF’s portion of a $115bn overall support package comprised of debt relief, grants and loans by multilateral and bilateral institutions, the organisation confirmed in a press conference Friday.

The IMF recently changed its rules to allow loan programmes for countries facing “exceptionally high uncertainty”.

The new four-year programme aims to “anchor macroeconomic and financial stability as well as to undertake critical structural reforms as the war continues,” IMF Deputy Managing Director Gita Gopinath said in a statement.

Of the total amount approved by the IMF, $2.7bn is being made available to Ukraine immediately, with the rest of the funds due to be released over the next four years.

The more “ambitious structural reforms” to support sustained growth and post-war reconstruction, as well as facilitate Ukraine’s path to EU accession among other goals, will be left until active combat ends, she added.

The EFF loan is the first major financing programme approved by the IMF for a country involved in a large-scale war. Ukraine’s previous $5bn IMF programme expired last year.

“Russia’s invasion of Ukraine continues to have a devastating economic and social impact,” Gita Gopinath said.

Despite this, Ukrainian authorities “have nevertheless managed to maintain overall macroeconomic and financial stability, thanks to skilful policymaking and substantial external support,” she added.

At the same time, governance should be improved to enable long-term growth after the end of the war, the IMF said.

The programme also includes additional guarantees from some IMF members in the event that active combat continues beyond the current estimate of mid-2024.

If the current conflict were to continue into 2025, it would raise Ukraine’s financial needs from $115bn to around $140bn, said the IMF.

Kyiv had already agreed on the loan programme with international donors about two weeks ago. However, that agreement still had to be approved by the executive board.

Ukraine had sought the billion-dollar aid programme and months of negotiations preceded it.

Ukrainian President Volodymyr Zelenskyy welcomed the new funding.

“It is an important help in our fight against Russian aggression,” he wrote on Twitter. “Together, we support the Ukrainian economy. And we are moving forward to victory!”

The agreement is expected to help unleash large-scale financing for Ukraine from international donors and partners, including the World Bank and other lenders.

An IMF official said the $115bn package includes the IMF loan, $80bn in pledges for grants and loans from other countries and $20bn worth of debt relief commitments.

The IMF said that multiple stakeholders, including international financial institutions, private sector firms, and most of Ukraine’s official bilateral creditors and donors, are supporting a two-step debt treatment process for Ukraine that includes adequate financing assurances on debt relief and concessional financing during and after the programme.

“Risks to the EFF arrangement are exceptionally high,” Gopinath said. “The success of the program depends on the size, composition, and timing of external financing on concessional terms to help close fiscal and external financing gaps and restore debt sustainability on a forward-looking basis.”