IMF approves $1.4bn in emergency funding to Ukraine

Washington-based lender expects financial assistance to serve as catalyst for other financing

The International Monetary Fund in Washington has said the Ukraine-Russia conflict will have a 'severe impact' on the global economy. AFP

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The International Monetary Fund's board approved $1.4 billion in emergency funding support to Ukraine on Wednesday.

The assistance was extended under the Washington-based lender's rapid financing instrument (RFI) to help meet urgent financing needs and mitigate the economic impact of the conflict with Russia.

The outlook for the country "is subject to extraordinary uncertainty", the IMF said, and "the economic consequences are already very serious".

The conflict has created more than two million refugees in just 13 days and could have a "severe impact" on the global economy, according to the multi-lateral lender.

The disbursement of funds is equivalent to 50 per cent of Ukraine’s quota in the IMF and will help meet the country's balance of payment needs. The assistance will address short-term needs and help usher in financing from other partners.

Ukrainian authorities "have expressed their intent to work with the IMF to design an appropriate economic programme aimed at rehabilitation and growth, when conditions permit", the fund said.

"The tragic loss of life, huge refugee flows, and immense destruction of infrastructure and productive capacity is causing severe human suffering and will lead to a deep recession this year. Financing needs are large, urgent, and could rise significantly as the war continues," IMF managing director Kristalina Georgieva said.

Ukrainian authorities have introduced administrative measures and capital controls to preserve the availability of foreign exchange reserves and reduce uncertainty regarding the exchange rate, Ms Georgieva said.

The country's central bank, the National Bank of Ukraine, has created a new liquidity facility and introduced other regulatory measures to ensure financial stability. Cash withdrawal limits have been imposed and fiscal policy has focused on ensuring priority payments, while the country has met all its current debt obligations.

"Against this extraordinary background, the IMF has approved critical financial support," Ms Georgieva said. "This should be instrumental in catalysing the large-scale mobilisation of additional concessional financing that will be required to help fill the financing gap and mitigate the economic impacts of the war."

Once the conflict is over and an assessment of the damage is completed, additional support will probably be needed to support reconstruction efforts, she said.