By Andrea Shalal
WASHINGTON (Reuters) -The International Monetary Fund said on Friday its executive board approved Ukraine’s request for $1.3 billion in additional emergency funding to help sustain its economy as it battles Russia’s invasion.
The funds will come from a new emergency lending program to address food shortages approved by the IMF board last month. Ukraine also requested program monitoring with board involvement to strengthen the policy commitment and further catalyze donor support, the IMF said.
IMF Managing Director Kristalina Georgieva welcomed the decision on Twitter. “This is vital to help catalyze urgently needed donor support and help pave the way for a full-fledged fund program,” she said.
In a statement issued later, Georgieva said that member governments now supporting Ukraine financially have pledged to ensure that the country can service its existing debts to the Fund.
This gets around an IMF rule that requires borrowers to demonstrate debt sustainability – an assessment that would otherwise be unlikely given the uncertainties surrounding the war and Ukraine’s needs.
“The balance of probabilities suggests that there are higher risks of debt being unsustainable,” Georgieva said.
The IMF said Russia’s war against Ukraine which began on Feb. 24 had caused “tremendous human suffering and economic pain,” and forecast a 35% contraction in Ukraine’s gross domestic product in 2022.
Ukrainian President Volodymyr Zelenskiy thanked the IMF and said the money would go to Ukraine on Friday.
The IMF said the disbursement under its Rapid Financing Instrument was equivalent to 50% of Ukraine’s quota, and would help the country meet urgent balance of payment needs, including those caused by a large cereal export shortfall.
The additional financing would also play a catalytic role for further financial support from Ukraine’s other creditors and donors, the IMF said.
It said Ukrainian authorities deserved “considerable credit for having maintained an important degree of macro-financial stability in these extremely challenging circumstances.”
The board approved the funds – on top of $1.4 billion the IMF provided to Ukraine after the Russian invasion – following a meeting that lasted over 100 minutes, one source familiar with the decision said.
The source said Ukraine has received sufficient financial assurances from its global partners to meet the IMF’s debt sustainability requirements in order to qualify for further emergency funds.
IMF officials are due to meet with Ukrainian authorities in Washington next week during the annual meetings of the IMF and World Bank.
IMF staff will then travel to Vienna the following week for technical discussions with Ukrainian authorities about Ukraine’s budget plans and monetary policies, several sources familiar with the plans said.
IMF officials have praised the Ukrainian government and its central bank for their management of the economic shocks caused by Russia’s invasion of the country in February.
Ukrainian officials are pressing for additional, non-emergency funds under a full-fledged IMF lending program, but such a program could come later.
(Reporting by Andrea Shalal in WashingtonAdditional reporting by David Lawder in WashingtonEditing by David Gregorio and Matthew Lewis)