Ukraine aims for $15-20 billion IMF loan by year-end

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LONDON: Ukraine aims to strike a deal for a $15-20 billion (RM66.8-89 billion) program with the International Monetary Fund (IMF) before the end of the year to help shore up its economy war-torn, said the governor of the country’s central bank. Kyrylo Shevchenko told Reuters.

Beaten by the Russian invasion launched on February 24, Ukraine faces a 35-45% economic contraction in 2022 and a monthly budget deficit of US$5 billion and is heavily dependent on foreign funding from its Western partners.

Shevchenko, 49, speaking during his visit to London, also said he hoped to agree a swap line with the Bank of England “within a few weeks”, although he did not did not specify the amount.

Kyiv had already submitted its request to the IMF, the governor said, and was now consulting with the fund on the new financing which he hoped would provide up to US$20 billion over two or three years in the form of confirmation agreement. (SBA) or an expanded financing mechanism (EFF).

It was the first time Ukraine had put a number on the new funding it needed from the Washington-based lender. A $20 billion program would be the IMF’s second largest currently active loan after Argentina.

“The IMF has always acted as Ukraine’s partner during the war,” Shevchenko told Reuters.

“My hope is to start the program this year.”

The central bank chief said a new program should provide measures that will help stabilize the economy. This could ensure a return to pre-war conditions, such as a flexible exchange rate, no limits on the currency market, a decrease in non-performing loans in the banking sector and a balanced fiscal policy.

The IMF’s latest loan to Ukraine was $1.4 billion in emergency financial support agreed in March – the equivalent of 50% of the country’s quota in the fund.

Separately, Kyiv is currently in talks with its international creditors on a debt payment freeze to ease its liquidity crunch.

The Central Bank of Ukraine already has a credit line of US$1 billion with the Central Bank of Poland.

Some relief in foreign exchange earnings and liquidity would also come from last week’s agreement between Moscow and Kyiv to allow safe passage for grain shipments to and from Ukrainian ports, which have been blocked by Russia since its invasion. .

However, these revenues and shipments would only seriously increase next year, when, according to the central bank’s “conservative” estimates, exports could reach 5 million tons per month and generate around $5 billion in 2023. Shevchenko said.

Speaking of the central bank’s intervention in currency markets as well as its bond-buying program, Shevchenko said both would continue for now, although the latter would cease as soon as the war ended.

“Providing monetary financing was the most painful decision of my life, but we realized it was necessary during the war,” Shevchenko said.

He added that operating in times of war has seen a whole new vocabulary arise, with expressions such as “war maturity” – a term to describe the duration of a debt instrument used in the context of the conflict.

“We see (this) as one of the biggest uncertainties,” he said. “Until the end of the war, we and the Ministry of Finance should work together to overcome all these challenges, using monetary finance and the internal debt market.” – Reuters

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