Seven months after Russia launched its devastating invasion of Ukraine, Kyiv’s dramatic counteroffensive is successfully clawing back territory in the Kharkiv region.
Ukraine’s recent battlefield successes mark the latest chapter in the war, which began when Russian troops invaded on Feb. 24. But as Europe’s biggest conflict since World War II rages on, Ukraine is pushing for more support from the International Monetary Fund.
On Sept. 13, Ukrainian president Volodymyr Zelensky tweeted about his discussions with IMF Managing Director Kristalina Georgieva. “Had a phone conversation with IMF Managing Director @KGeorgieva,” he wrote. “Thanked for the allocation of $1.4 billion of additional support. Discussed future cooperation to increase Ukraine’s financial stability.”
The $1.4 billion in support is being made through the IMF’s Rapid Financing Instrument, which is available to member countries facing an urgent balance-of-payments need.
“Excellent call with President @ZelenskyyUa,” Georgieva tweeted. “We discussed how @IMFNews can continue to back Ukraine and agreed to explore ways to ramp up our financial and policy engagement to Ukraine using all tools available to us.”
But Ukraine needs much more than $1.4 billion. In July, National Bank of Ukraine Governor Kyrylo Shevchenko told Reuters that the country is aiming for an IMF loan of $15 billion to $20 billion by the end of 2022.
“Ukraine faces a huge wartime budget deficit,” wrote Shevchenko in a recent opinion piece for the Financial Times. “This is inevitable for a country fighting a defensive war.”
Citing Ukraine’s finance ministry, Shevchenko wrote that to cover the deficit, the government needs at least $5 billion a month in funding. The central bank could issue money to help combat the deficit, but that would erode household savings, “deepen crisis trends” in the economy, fuel inflation and undermine social stability, Shevchenko said.
Ukraine is also an EU membership candidate, and Shevchenko noted that the group’s founding treaty prohibits national central banks from financing their governments. “Ukraine needs other sources of financial support for its economy,” he said.
So what is the next stage for Ukraine and the IMF?
“The IMF will soon start technical discussions with the Ukrainian authorities, starting with an in-person mission to assess the budget, which will be followed later in the year by closer engagement and monitoring of the full range of economic policies,” an IMF spokesperson told MarketWatch via email. “This will help lay the foundations for longer-term engagement and a potential full-fledged program.”
Bloomberg reports that Gavin Gray has been appointed as the IMF’s new mission chief in Ukraine. Gray, who served as the fund’s mission chief in Iraq from 2018 to 2020, was set to take up his new role on Sept. 20, according to Bloomberg.
Earlier this month, a joint assessment by the Ukrainian government, the European Commission and the World Bank estimated that the current cost of recovery and reconstruction in Ukraine is $349 billion. That figure is expected to grow as the war continues, they added.
Speaking at the Yalta European Strategy Conference in Kyiv earlier this month, Ukrainian Prime Minister Denys Shmyhal criticized the IMF for slow progress toward a new assistance package for the country. “After seeing leadership from the U.S. and Europe we have a quite passive attitude from the IMF,” he said, according to Bloomberg.
Reuters reported this week that Yuriy Butsa, Ukraine’s government commissioner for public debt management, is asking for bespoke packages of aid from the IMF and the World Bank worth tens of billions of dollars, which he wants to see implemented in the coming weeks.
Last month the World Bank announced $4.5 billion in additional financing for Ukraine under its Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine project. The package is comprised of a $4.5 billion grant provided by the U.S.
“The additional financing will contribute to sustaining the government’s administrative and service delivery capacity to exercise core functions at the national and regional levels,” the World Bank said in a statement. “Specifically, the project will help the Government of Ukraine to cover social payments, healthcare services, and pensions, which are essential for the well-being of the country’s citizens in mitigating the social and economic impacts of the war.”
The World Bank said it has mobilized nearly $13 billion in emergency financing for Ukraine.
MarketWatch has reached out to the World Bank with a request for comment on this story and has also reached to Butsa, Shmyhal and Shevchenko for comment.
While Ukraine pushes for more assistance from the IMF, most U.S. companies in the country are up and running, according to the American Chamber of Commerce in Ukraine.
Almost three-quarters of the member companies surveyed by the organization are fully operational, the Kyiv-based organization said in a statement released last month.
One of the highest-profile chamber members is McDonald’s Corp
In August the Associated Press reported that the fast-food giant is reopening some of its restaurants in Ukraine, a move that’s being welcomed on social media by Ukrainians, including Oleksandr Tkachenko, the country’s minister of culture and information policy.
Last month, the Kyiv School of Economics reported that the total cost to Ukraine’s economy from the damage to and destruction of residential and nonresidential buildings and infrastructure had reached $113.5 billion.