The International Monetary Fund and Ukraine have agreed on a $15.6 billion loan package aimed at bolstering government finances, which have been sapped by Russia’s invasion. The deal would mark the first IMF loan to a country currently at war.
Richard T. Clark is a political scientist who studies policymaking at the International Monetary Fund (IMF) and World Bank. Given the IMF’s prior hesitance to give to countries at war, he says the question at hand, is why the agreement came now rather than earlier in the crisis.
Clark says: “The IMF, as a rule, does not lend to countries with unsustainable debt burdens and there is a significant amount of uncertainty about the sustainability of Ukrainian debt.
“To get around this, the IMF’s Executive Board approved a reform last week enabling the Fund to lend to countries with debt problems, so long as creditors provide assurances that the debt is sustainable. In this case, that meant the U.S. and EU as Ukraine’s primary creditors, signaling a willingness to restructure existing debt, provide additional financing, or offer debt relief in the future. This reform, like the loan, was only possible because of the G5’s control over the IMF and their intense, unified interest in backing Ukraine against the Russian threat.
“On the timing of the loan, my sense is that the U.S. and its allies pushed for an IMF loan rather than additional rounds of bilateral support because the Ukrainian war effort is increasingly politicized domestically.
“Financing Ukraine through multilateral institutions like the IMF offers Western leaders political cover and enables them to rely on the mobilization of existing financing possessed by the Fund rather than additional rounds of domestic finance that would require a legislative fight.”
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