IMF finds it difficult to assess Ukraine's financing needs, to consider Kyiv's request for $1.4 bln next week
Ukraine, in addition to human casualties, has already suffered significant economic damage due to military aggression and it is already clear that the country will face significant costs for restoration and reconstruction, the International Monetary Fund (IMF) said in a statement on Saturday following the results of a review held by the Executive Board the day before situation in Ukraine.
"Sea ports and airports are closed and have been damaged, and many roads and bridges have been damaged or destroyed. While it is very difficult to assess financing needs precisely at this stage, it is already clear that Ukraine will face significant recovery and reconstruction costs," the document says.
"Ukraine has already requested emergency financing of $1.4 billion under the IMF's Rapid Financing Instrument. Staff anticipates bringing this request to the Executive Board for consideration as early as next week," the Fund reaffirmed the planned date for the adoption of the relevant decision.
According to the IMF, while the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious.
"Energy and commodity prices – including wheat and other grains – have surged, adding to inflationary pressures from supply chain disruptions and the rebound from the COVID‑19 pandemic. Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses," the Fund said.
"Should the conflict escalate, the economic damage would be all the more devastating. The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries," it said.
"This crisis will create complex policy tradeoffs, further complicating the policy landscape as the world economy recovers from the pandemic crisis," the IMF said.
"The sanctions announced against the Central Bank of the Russian Federation will severely restrict its access to international reserves to support its currency and financial system. International sanctions on Russia's banking system and the exclusion of a number of banks from SWIFT have significantly disrupted Russia's ability to receive payments for exports, pay for imports and engage in cross-border financial transactions. While it is too early to foresee the full impact of these sanctions, we have already seen a sharp mark-down in asset prices as well as the ruble exchange rate," the IMF said.
The Fund believes that countries with very close economic ties to Ukraine and Russia are particularly at risk of shortages and disruptions in supplies and are suffering the most from the growing influx of refugees, who have already exceeded 1 million.
The IMF said that Moldova has requested an expansion and modification of an existing IMF-supported program to help cover costs related to the current crisis, and Fund staff are actively discussing options with the Moldovan authorities.
The IMF said it would advise member countries on how to recalibrate their macroeconomic policies to deal with a range of spillovers, including trade disruptions, food and commodity prices, and financial markets.
"The IMF will continue to assess the evolving situation, and provide timely policy advice, financial support, and technical assistance to our member countries as needed, in close collaboration with our international partners," the document says.
