The IMF has opened an account to channel funds from donors to Ukraine, as nations opposed to Russia’s invasion seek to exert further pressure on Moscow.
The account, which was approved by the lender’s board of directors on Friday evening, will receive grants and loans “aimed at assisting Ukraine to meet its balance of payments and budgetary needs and help stabilise its economy”, the IMF said in a statement.
The aid, which will be disbursed directly into Ukraine’s account at the fund, can be denominated in either reserve currencies or special drawing rights, a form of reserve asset that in effect constitutes newly minted money.
“Donors will benefit from the IMF’s tested infrastructure to quickly deliver authenticated payments,” the fund added.
Canada’s government proposed up to $795mn to be allotted to the account as part of its latest federal budget, the fund said, an amount that is available for use by any other members as well as intergovernmental organisations who seek to “use it as a vehicle to provide financial assistance” to Ukraine.
The IMF said last month that it was working with bilateral donors who had asked it to set up an instrument through which they could channel resources to support Ukraine, in the form of grants and loans.
“Ukraine is desperately in need of the cash,” said Timothy Ash, senior sovereign strategist at BlueBay Asset Management. “Tax receipts have collapsed due to the war. They have a huge financing hole and the west needs to really step up to fill it or they will be forced to revert to [National Bank of Ukraine] financing, which will obviously be inflationary and will put pressure on the hryvnia.”
In early March the IMF approved an emergency loan of $1.4bn to Ukraine under its Rapid Financing Instrument, which has already been disbursed.
Ukraine’s finance ministry said this week that, in addition to the $1.4bn loan from the IMF, it had received a loan of €1.2bn from the EU, of which half had been disbursed, and a support package worth $3bn from the World Bank, of which $350mn had been disbursed. The World Bank has mobilised an additional $575mn from member countries in the form of grants and loan guarantees.
The European Bank for Reconstruction and Development announced a €2bn “resilience package” for Ukraine last month, and the European Investment Bank has provided a €639mn aid package. France, Italy and Canada have provided additional aid of about $940mn.
Last month, the US Congress approved $13.6bn of military and humanitarian assistance for Ukraine.
There have been repeated calls for rich countries to use their IMF reserve assets to support Ukraine, of which the IMF made an allocation worth $650bn last August as part of its response to the coronavirus pandemic.
SDRs are allocated to the IMF’s 190 member countries roughly in line with their share of the global economy. Countries in the G7 group of the world’s richest economies received about $290bn. Ukraine received $2.65bn.
Members of the G7 promised to channel $100bn of their SDRs to countries in greater need, although only about $60bn had been committed by 13 countries in the form of loans when Russia launched its latest attack in February.