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IMF / Managing Director’s Remarks on Ukraine

Release Date: 10 Mar 2022

A downward revision of the IMF’s global growth projections is expected next month with the release of the World Economic Outlook during 2022’s Spring Meetings. The IMF’s Managing Director announced today, Thursday March 10th,2022 in a closed virtual press briefing.

Georgieva said that the IMF was created during war to support rebirth and reconstruction, thus it will continue supporting the Ukrainian government as they serve their people.

On the other hand, the unprecedented sanctions imposed on Russia are causing abrupt economic contraction and pushing the Russian economy into deep recession. The impact of these measures will be felt across the global economy and financial markets, with significant spillovers to other countries.

Yesterday, the IMF Board approved Ukraine’s request for $1.4 billion in new emergency financing—disbursing immediately—to meet immediate needs. This is on top of $2.7 billion in SDRs issued to Ukraine in last year’s general allocation, and the $700 million disbursed in December under our existing program.

She stressed that the new funding to Ukraine is not an end point.

“Many thanks to all of you for joining us today to reflect on the dramatic consequences of Russia's invasion of Ukraine—first and foremost, in Ukraine itself, but also in the region and the world. And I would take those in turn, starting from Ukraine.

You all see the horrific toll on people, loss of lives, human suffering, massive increase in refugees.

But there is also a significant economic toll.

Already damages on infrastructure are massive. We have shortages of food, medicine; in some parts of the country, electricity running short. And the most valuable part of Ukraine's richness—its human capital—is leaving in numbers we have not seen in Europe since the Second World War.

Even if hostilities were to end right now, the recovery and reconstruction costs are already massive.

President Zelensky, in our phone call, actually zeroed in on that, calling on the Fund to be ready to help mobilize financing and work with others for the rebuilding of the country.

IMF staff has been in constant contact with their Ukrainian counterparts from February 24th onward. And they have provided for Ukraine, two very important support functions: one, work with Ukraine on crisis management measures that the central bank and the finance authorities have swiftly introduced; and two, coming up with a very swift response to the request for emergency financing. Yesterday, our Board approved it, $1.4 billion, and one minute to close of business yesterday, this money was disbursed in Ukraine's SDR account.

This comes on top of the 2.7 billion in SDR allocation issued to Ukraine [as part of last year’s general allocation to all members]. They came in so handy right now. And the $700 million we disbursed in December under our, at that point, existing program.

We have been very impressed by the determination of the Ukrainian authorities. My colleagues were telling me that as they are discussing matters, they can hear the air raid sirens. And yet, work goes on.

Of course, we stand ready to do more. As the conditions in the country evolve, we will do our best to be of service.

Let me now turn to the impact on the region—starting from Russia. Unprecedented sanctions have led to abrupt contraction of the Russian economy, moving into a deep recession. We are mindful that massive currency depreciation is driving inflation up. It is denting severely the purchasing power and standard of living for a vast majority of the Russian population.

Spillovers to neighboring countries are also significant—in particular countries that are more closely integrated with the Ukrainian and the Russian economies. The main channels of these spillovers to the neighborhood—Central Asia, the Caucuses, Moldova, the Baltic countries—are trade, the interruption in remittances, and influx of refugees. And that is demonstrably affecting the outlook for the immediate neighborhood.

Let me express my respect for all the countries that are receiving Ukrainian refugees—mostly women and children, many elderly—for what they have done to cushion the tragedy that they are experiencing. And we need to be aware that the number is now 2.1 million, but it can get much higher.

Not surprisingly, some of the countries in the neighborhood are already discussing with us, possibly, the need of support. More specifically, Moldova, that has a program with the Fund and is asking for an augmentation of this program.

We work very closely with our partners—with the World Bank and other institutions—to make sure that the response is as effective as possible.

Let me now talk about the spillovers globally, for the rest of the world. The economic fallout of the war is being transmitted through three key channels.

First, and most impactful, higher commodity prices.

Second, impact on reducing real income because also of inflation, and how that reflects in the real economy.

And three, the impact on financial conditions and business confidence.

So let me elaborate a bit on these three transmission channels. The surging prices for energy and other commodities—wheat, corn, metals, inputs for fertilizers, semiconductors—they are coming in many countries on top of already high inflation and are causing grave concern in so many places around the world. It’s especially dangerous for families that are living in poverty, for whom food and fuel are a higher proportion of their expenses.

When we look at the real economy, clearly we see contraction in trade, but also a dent on consumer confidence and purchasing power.

And that takes me to the third and also quite significant channel, financial conditions and business confidence. Financial conditions have been already tightening in many countries with this pressure from especially oil and gas prices.

On inflation, we may see those tightening measures go faster and go further. And that is obviously mostly worrisome for countries that are in a tight place to begin with. And particularly troubling for emerging markets that may see the combined impact of a dent on business confidence and tightening conditions putting them in a more troubled place.

So to sum it up, we have tragic impact of the war on Ukraine. We have contraction on a significant basis in Russia. And we see the likely impact on our World Economic Outlook. We will come up with, next month, a downward revision of our growth projections.

So we got through a crisis like no other with the pandemic. And we are now in an even more shocking territory. The unthinkable happened—we have a war in Europe.” said Georgieva.

To watch the full press briefing, click here.

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