A $2 billion IFC program designed to ramp up support for Ukraine’s private sector and boost economic resilience amid Russia’s invasion of Ukraine is receiving new financial support from the Netherlands and Switzerland, IFC has said.
“The Netherlands will be providing $43 million to support Ukraine’s agricultural sector and ensure emergency liquidity for private companies in critical agri-related industries. Switzerland will provide $11 million to support Ukraine’s small-scale farmers,” IFC said in the press release.
IFC said that Ukraine’s private sector generated up to 70% of gross domestic product before Russia’s invasion and provided crucial jobs, goods, and services. In spite of one in five micro and smaller business closing (as of mid-April 2022), the sector continues maintaining strategic exports and providing taxes.
The private sector will also have a crucial role to play in the country’s reconstruction efforts, estimated at $411 billion as of February 2023 – far more than government and donors can muster alone, the corporation said.
“A strong private sector is essential to help Ukraine’s economy recover and support reconstruction efforts. We welcome the contributions made by the Netherlands and Switzerland and their strong support for Ukraine. Ukraine’s economy remains on life support, and we will continue working with other development partners to provide the guarantees and grants the private sector needs,” IFC’s Managing Director Makhtar Diop said in the press release.
IFC recalled that IFC’s $2 billion Economic Resilience Action (ERA) response package includes finance from IFC’s own account working alongside guarantees and concessional finance (or grants) from donor governments. It complements efforts IFC has made with its own capital to support the private sector in Ukraine without donor support. As of April 2023, IFC’s outstanding portfolio was nearly $300 million to private companies and financial institutions in Ukraine.
IFC expects to be able to leverage these donor funds from the Netherlands and Switzerland between 3-4 times, meaning these contributions can potentially support over $200 million of financing.
Prime Minister of Ukraine Denys Shmyhal, following the results of the Spring Meetings in Washington (the United States), announced that Ukraine would receive additional support of more than $5 billion from France, Germany, and the UK.
“Following the results of negotiations with the finance ministers of the G7 countries at the Spring Meetings, we received assurances of additional support of more than $5 billion for Ukraine. In particular, we agreed on additional support packages with France, Germany, and the UK,” Shmyhal told reporters at a briefing in Washington.
According to him, Switzerland will also provide Ukraine with CHF 1.8 billion over the next six years. And Denmark, in turn, creates a special fund and plans to fill it with EUR 1 billion.
In addition, Spain, Ireland, Japan, Lithuania, Latvia, Iceland, and the Netherlands will provide additional support to Ukraine.
“All this will help win and ensure the resilience of our economy,” the Ukrainian prime minister said.
As reported, Shmyhal met with the finance ministers of the UK, Germany, and France on the sidelines of the Spring Meetings in Washington. At the meeting, the head of government raised issues of financial support for Ukraine and interaction within the Multi-agency Donor Coordination Platform.
Germany will provide more than EUR 3 billion in additional funding this year and more than EUR 5 billion in long-term defense support.
France also plans to provide EUR 2 billion as part of long-term financing.
Ukraine’s First Deputy Foreign Minister Emine Japarova will visit New Delhi next week to discuss, among other things, providing additional humanitarian aid, The Hindu reported, citing diplomatic sources.
“Ukraine has requested additional humanitarian aid from India, including pharmaceuticals, medical equipment and energy equipment to repair energy infrastructure damaged during the war, and both sides are expected to discuss providing such support,” the report said.
Japarova is also expected to extend an invitation to Indian Prime Minister Narendra Modi to visit Kiev.
Diplomatic sources said final arrangements are still being discussed, but confirmed that Emine Japarova, the first deputy foreign minister, is expected to arrive in Delhi on Monday and hold an interagency dialogue and meet with media and think tanks in the capital to enlist Ukraine’s support in India,” the report noted.
The board of directors of the International Monetary Fund (IMF) on Friday approved a four-year, SDR11.6 billion ($15.6 billion) extended EFF program as part of a total support package for Ukraine of $115 billion, the Fund said in a statement.
“The Ukraine program (for 2023-2027), supported by the EFF, aims to anchor policies to maintain fiscal, external, price and financial stability and support economic recovery, while improving governance and strengthening institutions to promote long-term growth in the context of post-war recovery and Ukraine’s path to the EU,” the IMF said.
The Fund specified that the decision of the board of directors allows for immediate disbursement of about SDR2 billion (or $2.7 billion).
IMF mission chief Gavin Gray clarified to reporters that the first review of the program is expected in June-July this year, the second by the end of October, possibly in early November, and from 2024 will be quarterly.
According to the release, EFF approval is expected to attract large-scale concessional financing from international donors and Ukraine’s partners to help resolve Ukraine’s balance of payments problem, achieve medium-term external viability and restore debt sustainability on a prospective basis in both baseline and negative scenarios.
The IMF notes that in view of the exceptionally high uncertainty faced by Ukraine, the EFF program envisages a two-stage approach. In the first phase of the program, scheduled for 2023-2024, the focus will be on three goals. These include, among others, strengthening the 2023 budget and supporting revenue mobilization, including by avoiding new measures that could undermine tax revenues.
In addition, it is about sustainable disinflation and exchange rate stability, including by maintaining sufficient foreign exchange reserves, and promoting long-term financial stability, including by preparing a more in-depth assessment of the banking sector and further strengthening the independence of the central bank.
“Independent and effective anti-corruption institutions will help reduce corruption risks during martial law and build public and donor confidence in future reconstruction,” the Fund adds.
He also noted that the first phase of the program will protect social spending.
“The second phase of the program will shift the focus to more ambitious structural reforms to strengthen macroeconomic stability, support early post-war recovery, and enhance resilience and higher long-term growth, including in the context of Ukraine’s EU accession goals,” the IMF pointed out.
According to the release, Ukraine is expected to return to its pre-war policy fundamentals, mainly a flexible exchange rate and inflation targeting, while improving productivity and competitiveness, strengthening institutions and addressing financial and energy sector vulnerabilities.
In addition, fiscal policy will focus on critical structural reforms to guarantee medium-term revenues by implementing a national revenue strategy, along with improving public financial management and introducing public investment management reforms to support postwar recovery.
“The risks to the EFF program are exceptionally high. The success of the program depends on the size, composition and timing of concessional external financing to help close the budget deficit and external financing and restore debt sustainability on a forward-looking basis under baseline and negative scenarios,” said First Deputy Managing Director Gita Gopinath.
IMF Chief of Mission Gavin Gray specified that besides $15.6 billion from the Fund, the support package implies $80 billion from multilateral and bilateral donors, of which $20 billion in grants and $60 billion in concessional loans, as well as another $20 billion in deferred external debt payments.
According to him, the baseline scenario assumes the completion (winding down) of the war in mid-2024, while the negative scenario – by the end of 2025 with an increase in financing needs up to $240 billion.
At the same time, the IMF representative stressed that the program provides additional guarantees from a number of shareholders of the Fund, as preferred creditors, in particular the G7 countries, Belgium, Lithuania, the Netherlands, Poland, Slovakia and Spain.
Slovak Prime Minister Eduard Heger, Croatian Prime Minister Andrej Plenković and Slovenian Prime Minister Robert Golob have arrived in Kiev, where they will participate in a summit to mark the anniversary of the liberation of Buča. Slovak Prime Minister Heger arrived in Ukraine on Friday and will meet with President Vladimir Zelenski, the Slovakian news agency TASR reported.
Along with Heger, Slovak Defense Minister Jaroslav Nagy arrived in Ukraine. The time and place of the meeting are not disclosed in advance for security reasons.
According to Heger, Zelenski invited him to visit Ukraine in a telephone conversation after Slovakia approved the transfer of MiG-29 fighter jets to Ukraine.
For his part, Nagy is scheduled to meet with his Ukrainian counterpart Alexey Reznikov during the day.
In addition, Croatian Prime Minister Andrej Plenkovic arrived in Kyiv on Friday morning. He is scheduled to meet with Zelensky, Prime Minister Denis Shmygal and Chairman of the Verkhovna Rada Ruslan Stefanchuk. Also with the Croatian prime minister arrived Minister of Veterans Affairs Tomo Medved.
According to the Croatian government’s website, together with Zelenski, Heger, Golob and Moldovan President Maia Sandu, they will take part in a summit on “Bucha – Russian Responsibility for Crimes in Ukraine” in Kiev to mark the anniversary of the liberation of Bucha (Kiev region). A joint press conference will follow.
This is Plenkovic’s second visit to Ukraine since the Russian aggression began on February 24, 2022. Last May, he met with the Ukrainian leadership in Kiev and visited Irpen and Bucha.
The Slovenian newspaper Delo, for its part, reported on the arrival of Slovenian Prime Minister Robert Golob in Kiev on Friday. He also intends to meet with Zelenskyy.
For the Slovenian prime minister, this is his first visit to Ukraine since coming to power. His goal is to reaffirm his support for Ukraine, which has been a victim of Russian aggression since last February.
Golob will also be received by Shmygal and Stefančuk .
Chairman of the Verkhovna Rada Ruslan Stefanchuk will pay an official visit to the United Kingdom of Great Britain and Northern Ireland on 27-28 March.
According to the press service of the Verkhovna Rada, the program of the visit includes meetings with members of the British parliament. In particular, Stefanchuk will communicate with Speaker of the House of Commons Lindsey Goyle and Lord Speaker of the House of Lords D.F. McFaul, members of both Houses of Parliament, representatives of the UK-Ukraine Friendship Group and the Conservatives as Friends of Ukraine initiative group.
A number of bilateral meetings are also planned: with British Prime Minister Rishi Sunak and former British Prime Minister, MP Boris Johnson.
During the visit, a memorandum of understanding will be signed between the offices of the Verkhovna Rada and the House of Commons of the Parliament of the United Kingdom of Great Britain and Northern Ireland.
