War-torn Ukraine aims for additional IMF support untied to Fund quota

War-torn Ukraine has set its sights on additional support from the International Monetary Fund, which would not be tied to its IMF quota.

Ukrainian Prime Minister Denys Shmyhal’s office told MarketWatch that Kyiv appreciates its cooperation with the IMF. “The IMF was among the first partners to provide emergency financing to our country after the full-scale Russian invasion,” he said in an emailed statement. “We have already received $1.4 billion this year.”

The IMF has decided to allocate an additional $1.4 billion, Shmyhal’s office said, noting that the Fund has also created an administrative account through which other countries can lend support to the beleaguered nation. Canada and Germany have transferred more than $1 billion through the account, according to the Prime Minister’s Office.

Ukraine is also working on a long-term program with the IMF, which includes an in-person mission to the country in October. “Ukraine expects that the total volume of funds under the new program will not be tied to our quota,” the prime minister’s office said in the statement. “We have seen such a possibility in the past based on the funding provided to certain countries and we expect such a practice to be applied to our situation now.”

See now: As Ukraine reclaims territory, IMF crucial to secure more financial support from Kyiv allies, says National Bank chief

Quotas are described as the building blocks of the IMF’s financial and governance structure and are referred to as special drawing rights, an international reserve asset. As of July 29, 2022, a total of 660.7 billion SDRs, or approximately $943 billion, have been allocated by the IMF. Ukraine’s quota is just over SDR 2 billion, according to the IMF website.

Kyrylo Shevchenko, governor of the National Bank of Ukraine, recently told Reuters that the country was targeting an IMF loan of $15-20 billion by the end of 2022.

Last week, Shevchenko told MarketWatch that Ukraine was grateful for the $1.4 billion tranche of financial support the country received at the start of the full-scale war. “At the same time, it is important that Ukraine qualifies for a higher level credit tranche (UCT) program,” he added via email.

Upper credit tranche refers to credit available from the IMF above 25 percent of a country’s quota. Access to IMF credit is also allowed “substantially” beyond 100 percent of quota. The tranche typically involves agreement with the IMF on a range of macroeconomic measures, such as budget and money supply management and, possibly, structural measures, according to the Center for Global Development.

See now: As Ukraine asks for more financial support, IMF plans in-person mission to war-torn country

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. This figure is expected to increase as the war continues, they added.

Bloomberg reports that Gavin Gray has been named the new IMF mission chief in Ukraine. Gray, who served as the fund’s mission chief in Iraq from 2018 to 2020, was due to take up his new role on Sept. 20, according to Bloomberg.

The World Bank is also in the spotlight amid Ukraine’s push for financial support. Last month, the World Bank announced $4.5 billion in additional funding for Ukraine as part of its Public Expenditure for Administrative Capacity Endurance (PEACE) project in Ukraine. The package includes a $4.5 billion grant provided by the United States

“The World Bank Group is working hard to support the maintenance of essential government services,” he said in a statement provided to MarketWatch last week. “We have mobilized $13 billion in emergency funding, including pledges and pledges to provide salaries for hospital workers, government workers and schools, pensions for the elderly, salaries for civil servants and social programs for vulnerable people.” Of this amount, $11 billion has been fully disbursed, according to the World Bank.

See now: US companies urged to invest in Ukraine as ‘massive’ reconstruction looms

Kyiv is also calling on private equity to support the country’s reconstruction. On Monday, US private equity firm Horizon Capital announced the launch of Horizon Capital Growth Fund IV, LP, which will support technology and export-oriented companies in Ukraine and Moldova. The growth fund raised $125 million on its first close, according to Horizon Capital.

“With the launch of HCGF IV, Horizon Capital achieved a record first close, reaching 50% of its $250 million goal, and the highest first closing result in company history,” said Horizon Capital, in a press release.

“Ukraine is open for business,” Andy Hunder, president of the American Chamber of Commerce in Ukraine, tweeted on Monday. “The fund will support visionary entrepreneurs leading fast-growing, export-focused technology businesses in Ukraine.”

Last week Ukrainian President Volodymyr Zelensky met with BlackRock Inc. BLK,
CEO Larry Fink during a videoconference to discuss how the asset management giant could help boost investment in Ukraine. Zelensky and Fink discussed how BlackRock Financial Markets Advisory could provide pro bono advice to the Ukrainian government on establishing a reconstruction fund, according to a statement from Zelensky’s office. The fund would support the recovery of Ukraine’s economy, he said.

About Meredith Campagna

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