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New Delhi: In order to strengthen the finances of Ukraine amid ongoing conflict with Russia, its western allies are reportedly pushing the ‘International Monetary Fund (IMF) to finalise plans for a multibillion-dollar lending programme.
The fund’s representatives are planning to meet Ukrainian officials in Warsaw in mid-February to advance discussions over a loan that could range from $14bn-$16bn, Financial Times quoted officials familiar with the talks as saying. The goal is to finalise it by the spring.
In a statement, IMF said last year that Russia’s invasion has inflicted terrible human and economic suffering on Ukraine and the country faces a winter of air strikes and rocket attacks against critical infrastructure.
The IMF’s management approved Ukraine’s request for Program Monitoring with Board Involvement–the first arrangement of its kind–to maintain economic stability and catalyze donor financing.
However, the EU has put forward EUR18bn in a package agreed upon between its member states in December last year to cover the financing gap. But the bloc and other major partners of Kyiv want international lenders to accelerate their efforts to provide further support.
“The expectation is that other international donors including other G7 and international financial institutions would cover the rest of the financing need,” Valdis Dombrovskis, European Commission executive vice-president told FT, during meetings in Kyiv.
He told the FT that an IMF programme for Ukraine would carry “a certain signalling effect” that “can trigger also further donor support”. The sooner the loan arrived the better, he added. “These are not circumstances in which the IMF would normally lend, so it is a positive step that they are actually working on a proper disbursing programme.”
“We have been supporting Ukraine since the onset of the war and are committed to keeping it going,” an IMF spokesperson told the FT. “We’re engaging closely with the Ukrainian authorities and hopefully move towards a fully-fledged programme as soon as feasible.”
Recently, a provision in the recently signed defence spending bill mandates that the United States work to ease Ukraine’s debt burden at the International Monetary Fund, which could create tensions at the world’s lender-of-last-resort over one of its biggest borrowers.
The National Defense Authorization Act requires American representatives to each global development bank, including the IMF, where the U.S. is the largest stakeholder, to use “the voice, vote, and influence ” of the U.S. in seeking to assemble a voting bloc of countries that would change each institution’s debt service relief policy regarding Ukraine.
Among other things, the U.S. is tasked with forcing the IMF to reexamine and potentially end its surcharge policy on Ukrainian loans. Surcharges are added fees on loans imposed on countries that are heavily indebted to the IMF.
The U.S. interest in changing the policy comes as it has distributed tens of billions for the Ukrainian military and humanitarian aid since the Russian invasion began in February. Most recently, Ukraine will receive $44.9 billion in aid from the U.S. as part of a $1.7 trillion government-wide spending bill.
With inputs from agencies.
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