The IMF’s executive board approved a long-delayed $700m disbursement to Ukraine on Monday, propping up the war-torn country amid fears that Russia was plotting a deeper invasion.
The newly arriving funds mark a second tranche from a $5bn Stand-By Arrangement programme agreed in the spring of 2020 to help Ukraine cope with the pandemic. It follows a $2.7bn IMF allocation of special drawing rights (SDR) extended to Ukraine this summer, as well as €600m in EU financing provided last month.
“Ukraine’s IMF-supported economic programme aims to help the authorities address the effects of the Covid-19 shock, sustain the economic recovery, and move ahead on important structural reforms to reduce key vulnerabilities,” the fund said late on Monday.
Arrival of these funds, as well as extension of the IMF programme through to June 2022, provides a critical and timely financial cushion for Kyiv.
US and European officials have sounded alarm bells this month over a mushrooming build-up of 90,000-114,000 Russian troops near the country’s borders. They, along with Ukrainian officials, warn that Moscow could be plotting a deeper invasion after annexing the Crimean peninsula in 2014 and fomenting a proxy separatist war in the eastern Donbas region that has claimed some 14,000 lives.
Multibillion-dollar financial backing from the IMF, World Bank and other international financial institutions, as well as the US and EU, has been critical to shoring up Ukraine since Russia began its aggressive policies.
The IMF tranche was delayed for about a year by a combination of foot-dragging on reforms by President Volodymyr Zelensky’s administration and a constitutional court ruling last autumn initiated by pro-Russian parties that threatened to neuter newly established anti-corruption institutions.
Recent legislation adopted by Zelensky’s ruling majority in parliament addressed the IMF’s concerns by improving independence of both anti-corruption bodies and the central bank.
Attending the Halifax International Security Forum this weekend, Oleksiy Danylov, Ukraine’s national security chief, called on the US, EU and other western backers to strengthen military assistance and other forms of support for Kyiv while warning that Russian president Vladimir Putin “understands only the language of force”.
“By drawing troops to the Ukrainian border, Russia is trying to aggravate the security situation in the region as much as possible to raise stakes at future talks at the table,” he added.