The International Monetary Fund, the international lender of last resort, announced last week that it reached a staff-level agreement to provide Ukraine with a $15.6 billion loan to make sure the country can continue its fight with Russia for years to come.
Gavin Gray, the IMF’s mission chief to Ukraine, said, “The overarching goals of the authorities’ program are to sustain economic and financial stability in circumstances of exceptionally high uncertainty, restore debt sustainability, and support Ukraine’s recovery on the path toward EU accession in the post-war period.”
He said the funding is possible thanks to “strong financing assurances [that] are expected from donors, including the G7 and EU.”
Ukrainian President Volodymyr Zelensky requested $55 billion in October to cover an expected $38 billion budget gap in 2023. His call for the loan as Ukraine’s GDP fell more than 30 percent last year.
Ukraine’s finance ministry embraced the IMF’s announcement and said the funding will help “to mobilize financing from Ukraine’s international partners, as well as to maintain macro-financial stability and ensure the path to post-war reconstruction after Ukrainian victory in the war against the aggressor.”
TRENDPOST: The Trends Journal has reported that the IMF loaned a record amount in 2022 to aid troubled countries, at least five of which already are in default with more on the brink. (See “IMF LENDS RECORD AMOUNT WITH MORE TO COME,” 4 Oct 2022.)
The costs of caring for COVID patients, of the Ukraine war and resulting Western sanctions, inflation, and climbing interest rates have forced more than 35 countries to seek IMF bailouts, we reported.
The IMF is known to impose stringent terms on nations it lends to, leading to public protests over government cuts to public subsidies of food and fuel, among other austerities.
But the usual rules don’t apply to Ukraine. Al Jazeera noted that the IMF announced last week that it changed a key rule for its loan programs to accommodate countries facing “exceptionally high uncertainty.”
The Express Tribune reported that the IMF approved the massive loan to Kyiv as Pakistan struggles with “tough conditionalities.”
Pakistan barely averted default last week and has been in negotiations with the IMF for months to obtain a $6.5 billion bailout program. Pakistan had to commit to slashing expenditures and other onerous steps to receive the funding.
NPR’s Scott Simon said in a recent interview at George Washington University that the loan for Ukraine was politically motivated.
“You know, a rule of banking lending is simple. War poses a risk to the lender, including the IMF, and so they have not done that. This rule change was obviously, you know, politically motivated,” he said. “They basically said they can now lend—there’s a new loan program—for countries facing exceptionally high uncertainty. Now, Ukraine was not mentioned at all in this rule change, but clearly, it is targeted for exactly this loan.”