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