“The ongoing war and associated sanctions will also have a serious impact on the world economy,” he warned, noting that the crisis is creating an adverse impact on inflation and economic activity at a time when price pressures are already elevated.
The agency indicated that price shocks will be felt around the world and that the authorities will have to provide fiscal support to poor households, for which food and fuel constitute a greater proportion of expenses, adding that the economic damage will increase. if the war escalates.
The extensive sanctions imposed on Russia by the United States, European countries and other nations will also have “a substantial impact on the world economy and financial markets, with significant repercussions in other countries.” In addition to the number of victims, Ukraine is suffering significant economic damage, with seaports and airports closed and damaged, and many roads and bridges affected or destroyed.
“Although it is very difficult to accurately assess financing needs at this stage, it is already clear that Ukraine will have to face significant recovery and reconstruction costs,” he said.
The Board is expected to consider Ukraine’s request for $1.4 billion in emergency funding as early as next week. Ukraine also has $2.2 billion available through June under a stand-by arrangement, the IMF reported last week.
The history of Ukraine and the IMF
Ukraine is the third debtor for the international organization managed by Kristalina Georgieva, with a current loan of about $11.6 billion; and with absolutely meticulous compliance during the years it is in force. With the conflict unleashed by the Russian invasion of Ukrainian territory, the current standby is put at risk, and the possibilities that Ukraine can now fulfill in a timely manner with the promised settlements. Ukraine adds 5%, and, after Argentina and Egypt (the latter with a debt of US$17,000 million), is the third largest debtor to the organization.
The current agreement between the state and the agency was signed in December 2019, and must be renegotiated to extend it for an extra period of time; in negotiations that had already begun to cross between the government of Volodimir Zelenski and the leadership of Kristalina Georgieva. However, with this new extension of the loan, Ukraine will be indebted a little more with the organization, although it has not yet reached the second position of debtors.
At the time of signing, the managing director of the IMF had pointed out that the Fund had found “impressive progress” made by the Ukrainian government in recent months “in promoting reforms and continuing sound economic policies.” At the signing, the Ukrainian head of state described the conversation with Georgieva and the IMF as “constructive”, and pointed out that “the new cooperation program with the International Monetary Fund will aim to accelerate economic growth, actively eradicate corruption and increase the well-being of all Ukrainians.”
In early September, the National Bank of Ukraine reported that the country’s government had fully settled its debt to the IMF under the 2014 Stand-By Agreement; with which he renewed his credits with the agency, in this case without prior liabilities.
The curiosity of the agreement is that at the time of being debated by the IMF board, it had the full support of the United States, the European Union countries and even China. However, it had received the negative vote from Russia; who questioned in December 2019 the numbers of the Ukrainian economy and, fundamentally, the destination that he would give to that money. Russia was already accusing in these times that the dollars contributed by the IMF were going to be used to release foreign currency to acquire weapons.
The government of Vladimir Putin could not stop the granting of the new Stand By in force, since it holds 2.7% of the shares in the IMF. The vote in favor climbed to 96%, with the endorsement of the United States, Germany, Japan, Canada, the United Kingdom, Italy, France, China, the Arab countries and the Latin American and African countries.
Source: Ambito
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