IMF chief: Ukraine’s economic recovery depends on extra allied aid

Photo: Getty Images

The head of the IMF Kristalina Georgieva (photo) has urged Ukraine’s allies to rapidly unlock tens of billions of dollars for the country, as she warned delays in providing the extra funding would jeopardise Kyiv’s tentative economic recovery, ‘The Financial Times’ reports.

Kyiv can manage a likely short-term funding gap of “a couple of months,” said Kristalina Georgieva in an interview, praising the authorities after they had “revitalised the economy”, tamed inflation and strengthened Ukraine’s tax base.

But with the US and EU still haggling over financing packages for the country, she said Ukraine’s economic revival would be endangered if it is forced to “adjust” to an absence of fresh financial support. Further delays could force Kyiv to return to destabilising policies such as printing money, as it did a few months after Russia’s invasion last year.

“What is important is not to prolong this period, because then it would put more pressure on Ukraine to adjust . . .  right at the time when the country has turned towards better prospects for the economy,” said Georgieva during a visit to South Korea.

“Work will continue in the US and Europe [on the aid packages]. Ultimately, I remain optimistic they will secure the funding.”

Ukraine needs $41bn in budgetary support from its allies next year, according to a budget passed last month. It is counting on $18bn from the EU, $8.5bn from the US, $5.4bn from the IMF, $1.5bn from other development banks and $1bn from the UK.

The US Congress failed to approve a $60bn funding package even after President Volodymyr Zelenskyy travelled to the capital to lobby lawmakers. EU leaders at a Brussels also summit failed to strike a deal on a long-planned €50bn, four-year funding plan for Ukraine after Hungary’s premier Viktor Orbán vetoed the proposal.

If a deal is not struck on the extra money, Ukraine’s finance ministry could be forced to take harsh action to fill a financing gap.

In an assessment this month, the IMF found that Ukraine’s macroeconomic indicators had been “stronger than expected,” as it lifted its growth projection for 2023 to 4.5 per cent, with an expansion of 3-4 per cent predicted in 2024. Georgieva said inflation, which peaked at 26 per cent at the end of last year but has fallen back to 5.5 per cent, was “under wraps”.

Georgieva said Ukraine had done its part to earn the support of its friends. “They have taken tough actions to keep macroeconomic and financial stability. The IMF has done its part, we have engaged very deeply with Ukraine. We need Ukraine’s partners to do their part — both the US and Europe.”

read more in our Telegram-channel https://t.me/The_International_Affairs