Ukraine will push for unprecedented, bespoke packages from the International Monetary Fund (IMF) and the World Bank worth tens of billions of dollars in coming weeks to shore up its war-torn finances, the top debt management chief told Reuters. from the country.
This month’s estimate is that the Ukrainian budget will face a deficit of $38 billion next year, money that will need to come from Western and multilateral supporters or else be printed.
These Western and multilateral supporters are already expected to provide around $20 billion this year.
The IMF appears poised to give a boost by allowing countries penalized by global food price rises — a group that includes Ukraine — to pull more money out of its main line of fast-track financing.
Kiev’s goal, however, is a complete IMF program that provides enough money and security to keep it going for years to come.
“We have a very heated debate with the IMF about what the preconditions for that would be,” said Yuriy Butsa, the government’s commissioner for public debt management. He explains that uncertainty about the duration and impact of the war on the country’s economy made it difficult to agree on parameters with the Fund.
“I’m not sure the standard IMF tools are really designed for this kind of situation,” he added.
“They probably need to introduce some creative thinking.” He pointed out that the last time Europe saw a war of this magnitude, the IMF had not been created.
Recovery or survival fund
Ukraine’s biggest source of funding is its own central bank, which has had to print the equivalent of more than $10 billion in hryvnia.
“If we’re not there in terms of funding, we’re going to have to rely on monetary funding like this year,” Butsa said. “We will have a lot of problems after the war to solve, we don’t want to create another one like hyperinflation to fight.”
Inflation in the country is currently around 23%.
Post-war reconstruction costs also mount.
They are already estimated by the World Bank at more than $350 billion, but the government wants $17 billion to be made available quickly to repair key infrastructure so that millions of people who fled the war can return.
Butsa said he is in discussions with the World Bank about a special tool for this money that others, including private donors, can also contribute to.
The government is photographing the damage so donors can choose which projects their money will go to.
“We call this the (rapid recovery) survival fund,” he said.
“It’s really very crucial for us to be quick about it because there are cities where it’s not safe to live in the winter because there’s no central heating.”
Source: CNN Brasil
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