Russia’s invasion also causing economic damage to Ukraine

The waste and destruction of Russia’s unprovoked attack on Ukraine includes harm to an economy that was just emerging from the acute impacts of the covid pandemic.

On March 9, the IMF approved Ukraine’s request for a $1.4 billion loan under the Rapid Financing Instrument (RFI) facility. The RFI provides quick assistance to countries suffering from such events as a natural disaster or an armed conflict. While the fog of war makes forecasting difficult, IMF staff researchers currently expect Ukraine’s economy to contract by about 10 % this year.

By shifting to the new programme, Ukraine Stand-by Arrangement, which started in June 2020, was cancelled. Ukraine received about $700 million in SBA funding in November 2021 (BOFIT Weekly 47/2021). Ukraine borrowed $2.8 billion under its latest SBA program, which started in 2020.

Ukraine also needs money to cover its projected public sector deficit. The IMF puts the country’s financing needs this year at around $4.8 billion. With the country’s access to capital markets effectively shut down, many international financial and other institutions have announced various financial assistance packages for Ukraine. The World Bank, for example, announced on March 7 that it was loaning Ukraine $350 million. Japan also declared it was providing a $100 million loan, while the Netherlands and Sweden together came up with $139 million in guarantees. In addition to loans, many countries (with the UK being the largest donor) have gifted a total of $134 million to Ukraine.

On March 11, the EU granted Ukraine the first 300-million-euro (about $330 million) tranche of a 1.2-billion-euro loan under the EU’s Macro-Financial Assistance (MFA) programme. Ukraine is supposed to receive its second 300-million-euro MFA tranche this week.