Securing a new $5 billion loan from the IMF will help reassure Ukraine’s other creditors that the war-torn country’s macroeconomic situation was under control, chief economic adviser to President Volodymyr Zelensky told Reuters on Friday.
Advisor Oleg Ustenko said fresh financing from the International Monetary Fund for about 18 months could serve as an anchor for a larger $15 billion-$20 billion package.
He said Ukrainian officials had been in touch with the global lender about a possible request, adding that the target should go ahead as soon as possible.
The IMF declined to comment.
The governor of Ukraine’s central bank, Kyrillo Shevchenko, told Reuters he was seeking more than $20 billion from the IMF over two or three years – an amount that would put Ukraine well on “extraordinary access” to the fund. . limit” to lend.
The sheer size of that request triggered intense debate within the IMF as it would also have raised questions about the stability of Ukraine’s debt.
Following Russia’s invasion of Ukraine’s Crimea region, a financial package agreed in 2015 at https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr15107 prepared a revised plan Will go , which included $17.5 billion in IMF funding, but helped leverage a total of $40 billion in funding.
“An IMF program of $5 billion would be in line with earlier funding levels and could be a catalyst for funding from other sources, including the European Union, (US) Treasury and other individual countries,” Ustenko told Reuters.
Ukraine’s previous $5 billion loan program was canceled in March after the IMF approved $1.4 billion in emergency financing with certain conditions in the early weeks of Russia’s invasion.
The Ukrainian authorities promised to work with the Fund to prepare a new economic program “aimed at rehabilitation and development, when conditions permit.”
Ukraine, grappling with the internal displacement of nearly 7 million people by Russia’s invasion of February 24, is scrambling to marshal resources to cope with energy shortages, rising inflation, and a worsening humanitarian crisis as winter approaches .
Economists say it faces a 35%-45% economic contraction and a monthly fiscal shortfall of $5 billion in 2022, with only a third of the some $29 billion in Western aid pledges materializing.
This week, Ukraine’s foreign creditors backed its request for a two-year moratorium on payments of about $20 billion in international bonds, but Ukraine still has to pay $$ in principal payments on former IMF loans starting in mid-September. 635 million will have to be made.
Ustenko said Ukraine hopes to move quickly with talks with the IMF to reach a preliminary agreement before those payments become due.
Proponents of the new program argue that Ukraine has made good progress in tackling the deficit and eradicating pre-war corruption, and that the new borrowing will allow it to stabilize the economy. But critics say a bigger new loan could put the fund at risk, as Russia could still win the war and refuse to repay Ukraine’s debt.
Mark Sobel, the US president of the OMFIF financial policy think tank and former senior Treasury official, said the fund was established as a “first responder to severe systemic global economic crises” and was designed to help Ukraine pay pensions and other obligations. Must work to help. ,
Martin Muehlisen, the former IMF strategy chief now affiliated with the Atlantic Council, said the $5 billion loan would also raise debt stability questions amid the war and set a worrying precedent, shifting it clearly to Western priorities.
“The IMF was used for strategic purposes by the US and its allies during the Cold War. Closer to the political objectives of the West could be said to realign the fund, but it took the IMF to become a truly global organization. Will fight with Akanksha.” Muhlsen said.
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