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May 16, 2022
Ukraine and International Financial Institutions
Russia’s war against Ukraine has devastated the Ukrainian
stability. A primary activity of the IMF is providing
economy and is having widespread repercussions in Europe
financial assistance to countries during economic crisis,
and around the world. While the economic impact is largest
whether induced (e.g., poor management, inappropriate
in Ukraine, neighboring countries are suffering from trade
policies) or the result of external shocks. Ukraine has been
disruptions; higher food, energy, and commodity prices;
the recipient of IMF programs since 2015. Prior to Russia’s
and an influx of refugees. The World Bank, the
2022 invasion, the IMF had a $5 billion loan in place for
International Monetary Fund (IMF), and other international
Ukraine, which had been extended through June 2022. The
financial institutions (IFIs) are providing emergency
lending program was approved in June 2020 to help
assistance to Ukraine and neighboring countries and are
Ukrainian authorities address the Coronavirus Disease 2019
developing short- and medium-term assistance strategies.
(COVID-19) pandemic and implement various economic
The United States government is supporting these efforts
reforms.
through U.S. leadership at the IFIs and through additional
bilateral contributions. On April 28, the Biden
Following the February 2022 invasion, Ukraine cancelled
Administration requested new FY2022 funding for IFIs as
its preexisting program and sought rapid IMF emergency
part of an emergency supplemental budget request for
assistance. On March 8, 2022, the IMF approved a $1.4
Ukraine, which was incorporated in H.R. 7691, which
billion assistance package to help Ukraine cope with the
passed the House on May 10.
economic shock of the Russian attack. In contrast to the
IMF’s traditional lending, the March 2022 funding is
Background: Economic Outlook
through an IMF Rapid Financing Instrument (RFI), which
in Ukraine
provides faster assistance at lower interest rates to meet an
According to the World Bank, Ukraine’s economy is
urgent crisis. The IMF’s executive board statement on the
expected to shrink by an estimated 45.1% this year (Table
new funding expressed the board’s “strong support for the
1). The IMF estimates that Ukraine needs around $4.8
Ukrainian people.”
billion by the end of 2022. Economic reconstruction, once
the war ends, will require substantially more funds over the
In addition to IMF lending, Ukraine is utilizing its
next several years. Also of concern is Ukraine’s external
allocation of Special Drawing Rights (SDRs), international
debt, which stood at $57 billion at the end of 2021. This
reserve assets created by the IMF to supplement Ukrainian
included $13.4 billion owed to the IMF, $6.5 billion to
official foreign exchange reserves. As part of a $650 billion
bilateral official creditors (including $41.5 million to the
global allocation of SDRs in August 2021, Ukraine
United States), and $22.7 million in Eurobonds.
received $2.7 billion; Ukraine largely depleted these funds
between August and December 2021.
Table 1. Ukraine: Selected Economic
Indicators
At the request of Canada, and with the support of the
Annual percentage change, unless noted
United States, the IMF established on April 8 a special
account to allow individual countries to donate resources
2020
2021e
2022f
(either as grants or loans) that would be disbursed into
Ukraine’s account at the IMF. The so-called “administered
Real GDP Growth
-3.8
3.4
-45.1
account” is designed to allow interested countries to pool
Inflation
5.0
10.0
15.0
and channel resources to help Ukraine meet balance-of-
payments and budget needs arising from the war and
Debt (% of GDP)
60.4
50.7
90.7
support macroeconomic stability, while taking advantage of
Exports (Goods and Services)
-5.8
-10.4
-80.0
the IMF’s expertise and capacity. Canada has indicated that
it will offer up to CA$1 billion ($795 million) in loan
Imports (Goods and Services)
-6.4
12.7
-70.0
resources for Ukraine, which would be disbursed through
Upper Middle Income Poverty
2.5
1.8
19.8
the account in its current federal budget.
Rate ($5.5 a day in 2011)
Another IMF option to support Ukraine and economies
Source: World Bank, Europe and Central Asia Economic Update,
affected by the crisis is the new Resilience and
Spring 2022.
Sustainability Trust (RST). The RST was created in spring
Note: e: expected, f: forecast.
2021 in order to “help low-income and vulnerable middle-
income countries address longer-term structural challenges
Selected IMF Activities
that pose macroeconomic risks, including climate change
The IMF is the major intergovernmental organization
and pandemics.”
dedicated to international monetary cooperation and
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Ukraine and International Financial Institutions
In August 2021, IMF members approved a $650 billion
Selected European Bank for
allocation of SDRs that were allocated to member states
Reconstruction and Development
based on their quota in the institution. The United States
Activities
and other advanced economies have the option to reallocate
The European Bank for Reconstruction and Development
their SDRs to trust funds such as the RST or the Poverty
(EBRD) was founded in 1991 to support the transition of
Reduction and Growth Trust (PRGT, another IMF fund
the former Soviet and eastern European economies to
focused on grants and low-interest loans to the poorest
market-based economies. The EBRD announced a €2
countries), where they can be utilized to fund assistance for
billion (about $2.2 billion) support package for the
low-income or crisis-afflicted countries. The RST, which
Ukrainian private sector on March 9. According the Bank,
the IMF hopes will reach $50 billion, was created explicitly
funding will be made available to support Ukrainian
as a vehicle to channel unused SDRs.
companies through several mechanisms, such as deferred
loans, liquidity support, and trade finance. Additional
The Biden Administration is requesting legislative authority
assistance is expected to follow, including assistance for
to lend up to $21 billion of U.S. SDRs to the RST and the
relocating Ukrainian companies and rebuilding the
PRGT. The Administration had requested the necessary
Ukrainian economy once the war ends.
authorizations last year, but they were not included in the
FY2022 Consolidated Appropriations Act (P.L. 117-103),
Ukraine is one of the EBRD’s largest borrowers, with
although $102 million was appropriated for the PRGT.
cumulative lending of more than €16 billion ($17.58
billion) in 511 projects since 1996, including more than €1
Selected World Bank Activities
billion ($1.2 billion) in 2021. The Biden Administration is
The World Bank focuses on poverty alleviation and
requesting $500 million for the EBRD in the FY2022
economic development. On March 7, 2022, it approved a
supplemental request (H.R. 7691).
$489 million supplemental budget support package for
Ukraine, called Financing of Recovery from Economic
Issues for Congress
Emergency in Ukraine (FREE Ukraine). The package
Members of Congress have considered legislation related to
comprises a supplemental loan for $350 million and
Ukraine and IFIs in recent months. For example, H.R. 7081,
guarantees in the amount of $139 million; the board is also
the Ukraine Comprehensive Debt Relief Act, would direct
mobilizing grant financing of $134 million and parallel
(1) U.S. representatives at the IFIs to support the immediate
financing of $100 million, resulting in total mobilized
suspension of Ukraine’s debt payments; (2) the Secretaries
support of $723 million. According to the World Bank, the
of the Treasury and State to help coordinate comprehensive
funds will help the government provide critical services to
debt relief for Ukraine from government and commercial
the Ukrainian people, including wages for hospital workers,
creditors; and (3) U.S. representatives to support
pensions for the elderly, and social programs for the
concessional financial assistance for Ukraine at the IFIs.
vulnerable. This package is in addition to the 11 ongoing
World Bank projects in Ukraine, in areas such as energy,
Looking ahead, some Members might also seek legislation
education, and transportation networks.
to shield Ukraine from holdout creditors; this approach was
used for Iraq in 2003 under an executive order. Members
The World Bank also established a multidonor trust fund
might also consider supporting greater financial assistance
(MDTF) in March 2022 to facilitate channeling grant
for neighboring countries to help with the refugee inflows
resources from donors to Ukraine, with contributions from
and to mitigate the economic contagion from the conflict.
Denmark, Iceland, Latvia, Lithuania, and the United
Kingdom. On April 20, the Biden Administration
Members may also debate efforts to isolate Russia at the
announced that through the U.S. Agency for International
IFIs. For example, H.R. 6891, the Isolate Russian
Development (USAID), the U.S. government is set to
Government Officials Act of 2022, if passed, would require
contribute $500 million to the MDTF. In addition, Japan is
the United States to lead efforts to exclude Russian
linking $100 million in parallel, bilateral financing to the
government officials from IFI meetings. On March 1,
World Bank support package.
EBRD directors began procedures to suspend Russia’s and
Belarus’s access to EBRD finance, and on April 4, EBRD
At the World Bank’s spring 2022 meetings, the Bank
members approved an operational suspension of Russia’s
outlined a two-pronged short- and medium-term crisis
access to EBRD resources. This required approval of
response measure related to Ukraine. Between April and
members holding three-quarters of EBRD voting power and
July 2022, the Bank intends to prioritize an initial crisis
two-thirds of all members. Going further, a senior European
response with total commitments of around $50 billion. The
official, for example, told Reuters that “there is on ongoing
response will include “increasing support to (1) Ukraine,
discussion to kick Russia out of all international financial
(2) countries hosting refugees from Ukraine, and (3) the
institutions.” Such actions, some argue, would have little
wider developing world to address crisis impacts on the
benefit to Ukraine and could undermine the institutions’
poor and vulnerable.” The Bank is also considering a 15-
ability to operate constructively in Russia if there is a
month loan package of around $170 billion (through June
change of government in the future.
2023). In addition to addressing the impacts of the war, the
Bank is responding to the food and fuel price shocks, and
Martin A. Weiss, Specialist in International Trade and
disruptions to trade, supply chains, and foreign direct
Finance
investment (FDI); the COVID-19 pandemic; and climate.
IF12107
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Ukraine and International Financial Institutions
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