To allow donors to support Ukraine, the IMF created a managed account
WASHINGTON – Ukraine’s finance minister applauded the International Monetary Fund’s (IMF) establishment of a special new account to provide bilateral donors and international organisations a secure avenue to deliver financial resources to war-torn Ukraine on Monday.
The IMF’s executive board authorised the formation of the new account on Friday after the Canadian government suggested disbursing up to $1 billion Canadian dollars through the vehicle, which would be managed by the IMF.
Donors will be able to provide the Ukrainian government with grants and loans to assist it meet its balance of payments and budgetary responsibilities, as well as stabilise its economy, as it resists Russia’s deadly invasion.
Russia’s efforts are referred to as a “special military operation.”
“Donors will benefit from the IMF’s tried and true infrastructure for delivering validated payments rapidly,” the IMF stated.
Analysts believe that going via the international lender will allow donations to Ukraine to be halted in the event of a Russian takeover.
Donors will deposit reserve currencies or Special Drawing Rights, the IMF’s own reserve currency, into the new account, which will subsequently release the monies as grants or loans to Ukraine’s SDR account at the fund.
Ukraine’s finance minister, Serhiy Marchenko, revealed last week that his government is seeking an additional 4 billion euros ($4.37 billion) in external financing to augment the 3 billion euros it has already received to close a budget deficit.
Last month, IMF analysts estimated that the invasion would cause Ukraine’s GDP to collapse by 10% in 2022, but they also cautioned that the situation may drastically accelerate if the combat continues.
According to a source familiar with the preparations, more donations would be sent to the IMF account and a separate World Bank account set up for Ukraine during the two major financial agencies’ spring meetings next week.
The International Monetary Fund (IMF) approved a $1.4 billion loan to Ukraine under its Rapid Financing Instrument in March.
