The government has already managed to negotiate almost 5 billion euros in loans and 360 million euros in grants.
Ukraine and the IMF are working on a new support program. This will be a non-standard tool in the history of the Fund, which has never been used before. What is the essence of the new program needed to restore the country after the war with Russia? According to Finance Minister Sergei Marchenko, shortfalls from customs alone reach 90%. The budget needs emergency support for the army and protected items — social payments and salaries.
In just a few weeks of March, the government managed to agree on obtaining loans for almost 5 billion euros and grants for 360 million euros. Part of this money has already been transferred to the accounts of the National Bank and the Ministry of Finance.
In addition, financial guarantees are expected from the United States for the issuance of Eurobonds. Initially, it was about $1 billion, but Marchenko announced the need to increase the amount. This money is still not enough. There is no official data on the damage from the war yet, but the government calls the sums of several hundred billion dollars and the loss of half of the country's GDP already now.
The authorities have already revised the terms of cooperation with the main creditor — the International Monetary Fund. The current Stand-by financing program, which was supposed to end in June, was closed ahead of schedule in early March. Instead, the Fund provided emergency assistance in the amount of $1.4 billion. These funds were used to cover the state budget deficit.
Now work has begun on another tool — a new program that will provide additional support to Ukraine. This will be a completely new instrument for the IMF, which has never been used before. Its essence lies in the fact that the member countries of the Fund will transfer part of their reserve funds previously received from the IMF in favor of Ukraine.
In an interview with RBC-Ukraine, Sergey Marchenko said that he had already held a number of negotiations with the finance ministers G-7 countries and the Netherlands, and they are ready to join such a program.
Where are the reserves for Ukraine?
In 2021, the IMF distributed an additional issue of special drawing rights (SDR) worth $650 billion among all member countries of the Fund. This was done to support economies affected by COVID-19.
The funds were distributed in proportion to the quotas of the countries in the organization. Ukraine, having a 0.43% quota, received $2.7 billion. Many developed countries, with much larger quotas, did not use the funds, and they actually remained frozen for them.
And now Ukraine has offered these countries to transfer part of these funds to support and restore the economy, which suffered from military operations. So far, there is no specifics on the new program from the government. «It's too early to talk about a clear configuration. Question under discussion», — Marchenko said.
The total amount of unused funds from distribution by countries with which Ukraine has already negotiated exceeds $250 billion.
Germany within the framework of the distribution can dispose of 34 billion dollars, Italy — 20 billion, Canada — 14 billion US — 107 billion, France — 26 billion, Japan — 40 billion, the Netherlands — 11 billion
Ukraine is unlikely to receive the full amount in the end. However, even if it is possible to agree on a partial transfer, this will be quite tangible support. And most importantly, this money will not need to be returned, although they will be listed as credit.
«You don't have to repay them. You only need to pay for the conversion usage. Yes, in fact it will be non-refundable money», — Marchenko said.
The IMF confirms that work on a new tool to support Ukraine is underway, but also does not provide details.
«We are also working with bilateral donors who have asked the Fund to create and manage a vehicle through which they can direct their resources to support Ukraine. This «IMF-managed account» provide a means to pool loans and/or grants from interested donors to meet Ukraine's emergency balance of payments needs while maintaining macroeconomic stability «, — reported on the IMF website.
A recent IMF report spoke of the creation of a trust fund to support Ukraine. What kind of fund it is, with what and how it will work, the IMF does not specify. Sources in financial circles said the fund and the new program could be directly linked. It is in the trust fund that funds for Ukraine can be concentrated, and it will manage money as needed for Ukraine.
Such an instrument is non-standard for the IMF and has never been used before. Therefore, its creation will take some time. But after the end of the war, Ukraine intends to continue working with the IMF under standard support programs.
«The authorities have announced their intention to work with the IMF in developing an appropriate economic program aimed at recovery and growth, as soon as allow conditions», — reported to the IMF.