As Ukraine demands more financial support, IMF plans in-person mission to war-torn country

Seven months after Russia launched its devastating invasion of Ukraine, Kyiv’s spectacular counter-offensive is succeeding in reclaiming territory in the Kharkiv region.

Ukraine’s recent battlefield successes mark the final chapter of the war, which began when Russian troops invaded on February 24. But as Europe’s biggest conflict since World War II rages, Ukraine is pushing for more support from the International Monetary Fund.

On September 13, Ukrainian President Volodymyr Zelensky tweeted his discussions with IMF Managing Director Kristalina Georgieva. “Had a phone conversation with IMF Managing Director @KGeorgieva,” he wrote. “Thank you for allocating $1.4 billion in additional support. We discussed future cooperation to increase Ukraine’s financial stability.

The $1.4 billion in assistance is being provided through the IMF’s Rapid Financing Instrument, which is made available to member countries facing urgent balance of payments needs.

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“Great call with President @ZelenskyyUa,” Georgieva tweeted. “We discussed how @IMFNews can continue to support Ukraine and agreed to explore ways to increase our financial and political engagement with Ukraine using all tools at our disposal.”

But Ukraine needs far more than $1.4 billion. In July, the Governor of the National Bank of Ukraine, Kyrylo Shevchenko, said Reuters that the country is aiming for an IMF loan of $15-20 billion by the end of 2022.

“Ukraine faces a huge wartime budget deficit,” Shevchenko wrote in a recent op-ed for the FinancialTimes. “It’s inevitable for a country that is waging a defensive war.”

Quoting Ukraine’s finance ministry, Shevchenko wrote that to cover the deficit, the government needed at least $5 billion in funding per month. The central bank could issue money to help tackle the deficit, but that would erode household savings, “aggravate crisis tendencies” in the economy, stoke inflation and undermine social stability, said Shevchenko.

Ukraine is also a candidate for EU membership, and Shevchenko noted that the group’s founding treaty prohibits national central banks from financing their governments. “Ukraine needs other sources of financial support for its economy,” he said.

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So what’s next for Ukraine and the IMF?

“The IMF will soon begin technical discussions with the Ukrainian authorities, starting with an in-person mission to assess the budget, which will be followed later in the year by closer engagement and monitoring of all economic policies” , said an IMF spokesman. says MarketWatch via email. “This will help lay the groundwork for a longer-term commitment and a potential full-fledged program.”

Bloomberg reports that Gavin Gray has been appointed as the new IMF mission chief in Ukraine. Gray, who served as the fund’s mission chief in Iraq from 2018 to 2020, was due to take up his new role on Sept. 20, according to Bloomberg.

Earlier this month, a joint assessment by the Government of Ukraine, the European Commission and the World Bank valued that the current cost of recovery and reconstruction in Ukraine is $349 billion. This figure is expected to increase as the war continues, they added.

Speaking at the Yalta European Strategy Conference in Kyiv earlier this month, Ukrainian Prime Minister Denys Shmyhal criticized the IMF for slow progress on a new aid program for the country. “After seeing the leadership of the United States and Europe, we have a fairly passive attitude from the IMF,” he said, according to Bloomberg.

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Reuters reported this week that Yuriy Butsa, Ukrainian government commissioner in charge of public debt management, is asking the IMF and the World Bank for tailor-made aid worth tens of billions of dollars, which he wants to see work in the coming weeks.

Last month the The World Bank announced $4.5 billion in additional funding for Ukraine under its Public Expenditure for Administrative Capacity Endurance (PEACE) project in Ukraine. The package includes a $4.5 billion grant provided by the United States

“The World Bank Group is working hard to support the maintenance of essential government services,” he said in a statement provided to MarketWatch. “We have mobilized $13 billion in emergency funding, including pledges and pledges to provide salaries for hospital workers, government workers and schools, pensions for the elderly, salaries for civil servants and social programs for vulnerable people. “Of this amount, $11 billion has been fully disbursed, according to the World Bank.

“In addition to this support, Ukraine needs urgent help to invest in immediate recovery needs – including urgent repairs to roads, bridges, housing, schools, clinics and energy infrastructure – to ensure that services can be provided and people can have warmth this winter,” he added. “The World Bank is creating a dedicated trust fund mechanism for Ukraine to channel resources to these and other urgent needs, and works with other development partners to prepare projects that can be funded and implemented quickly.

MarketWatch has reached out to Butsa, Shmyhal and Shevchenko with a request for comment on this story.

See also: As Ukraine celebrates its independence, American companies are operating in the country, according to the Kyiv-based American Chamber of Commerce

As Ukraine asks for more help from the IMF, most US businesses in the country are up and running, according to the American Chamber of Commerce in Ukraine.

Almost three-quarters of member companies surveyed by the organization are fully operational, the Kyiv-based organization said in a statement released last month.

One of the most prominent members of the chamber is McDonald’s Corp MCD,
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In August, the Associated Press reported that the fast-food giant was reopening some of its restaurants in Ukraine, a move hailed on social media by Ukrainians, including Ukraine’s Culture and Politics Minister Oleksandr Tkachenko. country information.

Last month, the Kyiv School of Economics reported that the total cost to the Ukrainian economy of the damage and destruction of residential and non-residential buildings and infrastructure reached $113.5 billion.

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