David Neef & Joaquin Magno
The International Monetary Fund (IMF), a prominent international organization responsible for global economic policy, has faced several challenges with the ongoing war in Ukraine. Though not an institution with the authority to condemn or militarily punish states for acts of aggression, the IMF plays a pivotal role in (1) financing aid for the Ukrainian people, (2) laying the groundwork for post-conflict reconstruction, and (3) acting as a deliberative space to discuss major economic shocks wrought by the war in Ukraine.
This article will analyze the IMF’s current actions and the major challenges that the war has posed for maintaining international economic stability. In doing so, we hope to establish the existing relevance of the IMF to the war in Ukraine, and the potential roles it can play in the future.
What is the IMF doing right now?
In March 2022, the IMF Executive Board approved $1 billion in emergency financing as a direct response to the invasion of Ukraine.[1] This disbursement under the Rapid Financing Instrument (RFI) is “equivalent to 50 percent of Ukraine’s quota in the IMF” and was allocated to help meet the country’s urgent balance of payment needs, to provide critical support in the short term, and to rebuild critical infrastructure.[2]
As of October 2022, the IMF has “disbursed $2.7 billion of its own resources to Ukraine [this year] through emergency financing, and channeled an additional $2.2 billion through [their] Administered Account.”[3] This injection of capital into the Ukrainian economy will facilitate crisis management in the country, and help maintain day-to-day stability amidst the military pressures of the war.[4]
Specifically, the IMF provided $1.4 billion in aid for Ukraine to address its balance of payments issues related to food insecurity, as the country is a massive exporter of grain.[5] Of note are issues surrounding Ukraine’s capacity to export grain through the Black Sea and access to fertilizer.[6] With the $1.4 billion stimulus, the IMF hopes to stabilize not only Ukraine’s food security, but also global food security. Moreover, with regard to the refugee crisis, the IMF contributed a 13-page report of policies, advocating for the safe and smooth integration of Ukrainian refugees into European labor markets.[7] Beyond funding and recommending policies, the IMF has yet to contribute to the EU or national efforts to house and integrate refugees.
Recently, Ukraine’s growing foreign debt has raised serious concerns. Although Ukraine’s creditors have approved a two-year debt freeze, the $20 billion in international bonds and unpaid loans will inevitably place strains on the government. Nevertheless, the short-term debt freeze will prove useful in stabilizing foreign cash flows into the country.[8] For now, the IMF has yet to confirm the details on how Ukraine is expected to repay its accumulated debts. The Fund recognizes that instability is inherent in the economy of the war-stricken country.[9] In the coming months, however, we will likely see more concrete responses from the IMF about potential debt repayments from the Ukrainian government[10]
Beyond its economic and financial remit, IMF officials have joined other international institutions in verbally condemning Russian aggression. As per Article I of the IMF’s Articles of Agreement, the IMF was founded with the expressed purpose to stabilize the international economy, promote international economic cooperation, and promote economic prosperity.[11] This was reinforced in a statement by the IMF Managing Director, Kristalina Georgrieva, where she called for an end to Russia’s invasion of Ukraine.[12] A verbal condemnation regarding international security coming from the IMF is a politically significant step, which may inform future IMF policy with regard to both Russia and Ukraine.
What role will the IMF play after the conflict?
The IMF’s most crucial role in the post-conflict period will be to support Ukraine’s efforts to rebuild the country. After conducting a proper damage assessment, the IMF has continually expressed their position of support for reconstruction efforts. Georgrieva likewise emphasized the IMF’s support for Ukraine to “shift from an emergency phase of economic management to a recovery phase.”[13]
With regard to the after-war period, potential penalties on Russia are already being discussed, courtesy of the IMF. Most recently, the Canadian Finance Minister, Chrystia Freeland, called for the Russian Federation to be ousted from the IMF and G-20, condemning the country’s actions for destabilizing international peace.[14] Another punitive measure that may be taken is the withdrawal of $17 billion worth of IMF funding given to Russia for its COVID–19 response. EU and IMF officials are concerned that Russia is embezzling this fund to fuel the war effort, effectively avoiding international sanctions. On these grounds, there may be just international cause to oust Russia from the IMF, but this would inevitably cause massive political backlash.[15]
Considering this, could we potentially see the IMF being more politically active in the realm of international conflicts? Although it is unclear how the Fund will be more active in the near future, its Executive Board has discussed strategies to strengthen IMF support to fragile and conflict affected states (FCS).[16] The Fund has published a strategy paper in response to the needs of member states.[17] Fragile and conflict affected states encompass roughly 1 billion people facing various challenges. These challenges are also “exacerbated by climate change, food insecurity, gender inequalities, and more recently by the economic repercussions of COVID-19”, which pose a serious threat to economic stability[18].
The IMF’s FCS Strategy ensures support for authorities in conflict-ridden countries so that better macroeconomic outcomes can be achieved.[19] Second, it rolls out Country Engagement Strategies (CES)across FCS to (1) help identify significant factors of fragility and conflict, (2) support the integration of surveillance, capacity development, and lending programs, (3) inform program design and conditionality, as well as, (4) foster the dialogue with country authorities and partners.[20] Third, it utilizes IMF modalities of engagement and analyticsto better address the macro-critical implications of fragility and conflict drivers. Last but not least, it serves to enhance partnerships and cooperation among developmental, humanitarian, peace, and security actors.[21]
To conclude, when it comes to the war in Ukraine, international economic organizations are not silent. Whether by providing financial aid, improving food security, or contributing to broader international condemnation, the IMF certainly has a role to play both during the Ukraine conflict and in its aftermath. With inflationary pressures and Ukraine’s growing debt burden affecting Ukraine and the wider international economy, the IMF ought to have a massive presence in fulfilling its proposed roles – furthering international monetary cooperation, encouraging the expansion of trade and growth, and discouraging policies that harm prosperity.
[1] “IMF Executive Board Approves US$ 1.4 Billion in Emergency Financing Support to Ukraine.” IMF, March 9, 2022.
[2] Ibid.
[3] IMF (n 1)
[4] IMF (n 1)
[5] “IMF Executive Board Approves a New Food Shock Window and an Enhanced Staff-Monitored Program with Board Involvement.” IMF, October 5, 2022. https://www.imf.org/en/News/Articles/2022/10/05/pr22335-imf-approves-a-new-food-shock-window-and-an-enhanced-staff-monitored-program.
[6] Husain, Arif. “The Ukraine War Is Deepening Global Food Insecurity – What Can Be Done?” United States Institute of Peace, May 16, 2022. https://www.usip.org/publications/2022/05/ukraine-war-deepening-global-food-insecurity-what-can-be-done.
[7] Amaglobeli, David, and Nicolo Bird. “Policies to Address the Refugee Crisis in Europe Related to Russia’s Invasion of Ukraine.” IMF. IMF Notes, September 8, 2022. https://www.imf.org/en/Publications/IMF-Notes/Issues/2022/09/08/Policies-to-Address-the-Refugee-Crisis-in-Europe-Related-to-Russias-Invasion-of-Ukraine-522662.
[8] Campos, Rodrigo, Jorgelina Do Rosario, and Karin Strohecker. “Ukraine’s Creditors Agree 2-Year Freeze on $20 Billion Overseas Debt.” Reuters. Thomson Reuters, August 12, 2022. https://www.reuters.com/markets/europe/ukraines-creditors-agree-two-year-payment-freeze-almost-20-billion-international-2022-08-10/.
[9] “IMF Executive Board Approves US$ 1.3 Billion in Emergency Financing Support to Ukraine.” IMF. IMF Press Release, October 7, 2022. https://www.imf.org/en/News/Articles/2022/10/07/pr22343-imf-approves-emergency-financing-support-to-ukraine.
[10] Vieira, Luiz. “Annual Meetings 2022 Wrap up: As the World Runs out of Time, Bwis Fail to Provide Clear Vision and Bold Actions.” Bretton Woods Project, October 19, 2022. https://www.brettonwoodsproject.org/2022/10/annual-meetings-2022-wrap-up-as-the-world-runs-out-of-time-bwis-fail-to-provide-clear-vision-and-bold-actions/.
[11] “Articles of Agreement.” Articles of Agreement of the International Monetary Fund. Accessed November 21, 2022. https://www.imf.org/external/pubs/ft/aa/.
[12] Georgieva, Kristalina. “Remarks by the IMF’s Managing Director Kristalina Georgieva at the Second Ministerial Roundtable Discussion for Support to Ukraine.” IMF, October 12, 2022. https://www.imf.org/en/News/Articles/2022/10/12/sp-md-remarks-at-the-ukraine-ministerial-roundtable.
[13] Strupczewski, Jan, and Francesco Guarascio. “Exclusive: Eu May Curb Russia’s Rights in IMF.” Reuters. Thomson Reuters, March 4, 2022. https://www.reuters.com/markets/europe/exclusive-eu-considering-curbing-russias-rights-imf-over-invasion-sources-2022-03-04/.
[14] Thanthong-Knight, Randy. “Canada Wants ‘Arsonist’ Russia to Be Barred from IMF and G-20.” Bloomberg.com. Bloomberg, October 14, 2022. https://www.bloomberg.com/news/articles/2022-10-14/canada-wants-arsonist-russia-to-be-barred-from-imf-and-g-20?srnd=premium&sref=KQPtNSUL&leadSource=uverify+wall.
[15] Strupczewski, Jan, and Francesco Guarascio. “Exclusive: Eu May Curb Russia’s Rights in IMF.” Reuters. Thomson Reuters, March 4, 2022. https://www.reuters.com/markets/europe/exclusive-eu-considering-curbing-russias-rights-imf-over-invasion-sources-2022-03-04/
[16] Rep. IMF POLICY PAPER IMF STRATEGY FOR FRAGILE AND CONFLICT- AFFECTED STATES (FCS). Washington D.C.: International Monetary Fund, 2022.
[17] Ibid.
[18] International Monetary Fund (n 16)
[19] International Monetary Fund (n 16)
[20] International Monetary Fund (n 16)
[21] International Monetary Fund (n 16)
Sources
“IMF Executive Board Approves US$ 1.4 Billion in Emergency Financing Support to Ukraine.” IMF, March 9, 2022. https://www.imf.org/en/News/Articles/2022/03/09/pr2269-ukraine-imf-executive-board-approves-usd-billion-in-emergency-financing-support-to-ukraine.
“IMF Executive Board Approves a New Food Shock Window and an Enhanced Staff-Monitored Program with Board Involvement.” IMF, October 5, 2022. https://www.imf.org/en/News/Articles/2022/10/05/pr22335-imf-approves-a-new-food-shock-window-and-an-enhanced-staff-monitored-program.
Georgieva, Kristalina. “Remarks by the IMF’s Managing Director Kristalina Georgieva at the Second Ministerial Roundtable Discussion for Support to Ukraine.” IMF, October 12, 2022. https://www.imf.org/en/News/Articles/2022/10/12/sp-md-remarks-at-the-ukraine-ministerial-roundtable.
Delivery, As Prepared for. “Remarks of the Managing Director at the International Expert Conference on the Recovery, Reconstruction and Modernization of Ukraine.” IMF, October 25, 2022. https://www.imf.org/en/News/Articles/2022/10/25/sp-md-remarks-at-the-international-expert-conference-on-recovery-of-ukraine.
Rep. IMF POLICY PAPER IMF STRATEGY FOR FRAGILE AND CONFLICT- AFFECTED STATES (FCS). Washington D.C.: International Monetary Fund, 2022
Lawyer, David, and Andrea Shalal. “Explainer: Ousting Russia from WTO, IMF Would Mark End of an Era.” Reuters. Thomson Reuters, March 9, 2022. https://www.reuters.com/markets/asia/ousting-russia-wto-imf-would-mark-end-an-era-2022-03-09/.
Strupczewski, Jan, and Francesco Guarascio. “Exclusive: Eu May Curb Russia’s Rights in IMF.” Reuters. Thomson Reuters, March 4, 2022. https://www.reuters.com/markets/europe/exclusive-eu-considering-curbing-russias-rights-imf-over-invasion-sources-2022-03-04/.
“Articles of Agreement.” Articles of Agreement of the International Monetary Fund. Accessed November 21, 2022. https://www.imf.org/external/pubs/ft/aa/.
Vieira, Luiz. “Annual Meetings 2022 Wrap up: As the World Runs out of Time, Bwis Fail to Provide Clear Vision and Bold Actions.” Bretton Woods Project, October 19, 2022. https://www.brettonwoodsproject.org/2022/10/annual-meetings-2022-wrap-up-as-the-world-runs-out-of-time-bwis-fail-to-provide-clear-vision-and-bold-actions/.
Campos, Rodrigo, Jorgelina Do Rosario, and Karin Strohecker. “Ukraine’s Creditors Agree 2-Year Freeze on $20 Billion Overseas Debt.” Reuters. Thomson Reuters, August 12, 2022. https://www.reuters.com/markets/europe/ukraines-creditors-agree-two-year-payment-freeze-almost-20-billion-international-2022-08-10/.
Husain, Arif. “The Ukraine War Is Deepening Global Food Insecurity – What Can Be Done?” United States Institute of Peace, May 16, 2022. https://www.usip.org/publications/2022/05/ukraine-war-deepening-global-food-insecurity-what-can-be-done.
Thanthong-Knight, Randy. “Canada Wants ‘Arsonist’ Russia to Be Barred from IMF and G-20.” Bloomberg.com. Bloomberg, October 14, 2022. https://www.bloomberg.com/news/articles/2022-10-14/canada-wants-arsonist-russia-to-be-barred-from-imf-and-g-20?srnd=premium&sref=KQPtNSUL&leadSource=uverify+wall.
“IMF Executive Board Approves US$ 1.3 Billion in Emergency Financing Support to Ukraine.” IMF. IMF Press Release, October 7, 2022. https://www.imf.org/en/News/Articles/2022/10/07/pr22343-imf-approves-emergency-financing-support-to-ukraine.
Amaglobeli, David, and Nicolo Bird. “Policies to Address the Refugee Crisis in Europe Related to Russia’s Invasion of Ukraine.” IMF. IMF Notes, September 8, 2022. https://www.imf.org/en/Publications/IMF-Notes/Issues/2022/09/08/Policies-to-Address-the-Refugee-Crisis-in-Europe-Related-to-Russias-Invasion-of-Ukraine-522662.