From Isaac Anumihe, Abuja
As Russia intensifies its onslaught against Ukraine, International Monetary Fund (IMF), at the weekend, raised alarm for the survival of Ukraine, saying that the country requires over $5 billion urgently to survive the war.
Speaking on the need to garner support for Ukraine, the Managing Director, Kristalina Georgieva, said that IMF estimates that over the next 2 to 3 months some $5 billion a month may be needed simply to allow the government and the economy to continue to operate in the midst of the war.
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To this extent, she called for more external financing —especially concessional funding and fast-disbursing grants.
Without additional support, IMF, noted, the great efforts made by the Ukrainian authorities to maintain macroeconomic and financial stability—in the face of enormous shocks and terrible circumstances—will become even harder to sustain.
According to Georgieva, while the focus now is very much on the priority of keeping the government and economy functioning, members also need to prepare for the future—and they know that reconstruction needs will be massive.
“It is right to start this conversation early, so the prospects of a vibrant economy are a source of inspiration for the Ukrainian people at their most difficult times” she said, adding that the Russia’s invasion of Ukraine is first and foremost a human tragedy that has brought unimaginable human suffering to ordinary men, women and children.
“Thousands have been killed or injured. Millions have been forced from their homes. They are foremost in our thoughts.
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“It is also devastating for the Ukrainian economy. The losses of physical infrastructure and human capital are already huge and will lead to a deep recession this year. On Tuesday last week, the IMF published its World Economic Outlook that projects Ukraine’s Gross Domestic Products (GDP) to shrink by almost 40 percentage points.
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“This underlines the importance of our shared determination to help the government and people of Ukraine meet the steep economic challenges they face” the MD, noted
Georgieva disclosed that IMF played a major part two weeks into the war by granting Ukraine $1.4 billion.
“The IMF has played its part—through a $1.4 billion Rapid Financing Instrument that was agreed less than two weeks after the invasion. And last week, we established an Administered Account for Ukraine that will provide donors with a secure vehicle to direct financial assistance to Ukraine. Here, I would like to thank Canada, whose recent federal budget proposed up to CAD 1 billion be disbursed to Ukraine through the Administered Account.
“It is financing like this—together with careful controls on cross-border operations since February 24—that has kept the central bank’s foreign exchange reserves stable relative to the pre-war level. On the fiscal side, it has supplemented domestic revenues without excessive recourse to monetary financing.
But as important as these macroeconomic outcomes are, we should not be lulled into a sense that the biggest challenges are over.
“This brings me to my final point —the needs now are huge, and the needs ahead will be greater still.
For as long as the war continues, demands on the budget will mount, especially as spending on security and conflict-related compensation inexorably rise.
“Reserves will come under pressure. Capital outflows will increase with the relaxation of import restrictions necessary to allow the economy to reopen, while inflows shrink due to the likely decline in exports—particularly agricultural exports—in the face of damage inflicted on key infrastructure and the blockade of some of the export routes” IMF, explained.