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: War-torn Ukraine sets sights on additional IMF support not tied to its Fund quota

War-torn Ukraine has set its sights on additional support from the International Monetary Fund, which would not be tied to its IMF quota.

The office of Ukrainian Prime Minister Denys Shmyhal told MarketWatch that Kyiv values its cooperation with the IMF. “The IMF was among the first partners to provide emergency financing for our country after the full-scale Russian invasion,” it said, in an emailed statement. “We already received $1.4 billion this year.”

The IMF has decided to allocate another $1.4 billion, Shmyhal’s office said, noting that the Fund also set up an administrative account though which other countries can provide support to the embattled nation. Canada and Germany have transferred more than $1 billion through the account, according to the prime minister’s office.

Ukraine is also working on a long-term program with the IMF, which is planning an in-person mission to the country in October. “Ukraine expects that the total volume of funds under the new program will not be tied to our quota,” the Prime Minister’s Office said, in the statement. “We saw in the past such a possibility based on funding provided to some countries and expect that such practice will be applied to our situation now.”

See Now: As Ukraine claws back territory, the IMF is crucial to gaining more financial support from Kyiv’s allies, says National Bank chief

Quotas are described as the building blocks of the IMF’s financial and governance structure and are designated in Special Drawing Rights, an international reserve asset. As of July 29, 2022, a total of SDR 660.7 billion, equivalent to about $943 billion, have been allocated by the IMF. Ukraine’s quota is just over SDR 2 billion, according to the IMF’s website.

Kyrylo Shevchenko, governor of the National Bank of Ukraine, recently told Reuters that the country is aiming for an IMF loan of $15 billion to $20 billion by the end of 2022.

Last week Shevchenko told MarketWatch Ukraine is grateful for the $1.4 billion tranche of financial support the country received at the outbreak of the full-scale war.  “At the same time, it is important that Ukraine qualify for an upper-credit-tranche (UCT) level program,” he added, via email.

The upper-credit-tranche refers to credit available from the IMF above 25% of a country’s quota. Access to IMF credit is also permitted “substantially” over 100% of quota. The tranche typically involves agreement with the IMF on a series of macroeconomic measures, such as managing the budget and money supply and, potentially, structural measures, according to the Center for Global Development.

See Now: As Ukraine calls for more financial support, IMF plans in-person mission to war-torn country

Earlier this month, a joint assessment by the Ukrainian government, the European Commission and the World Bank estimated that the current cost of recovery and reconstruction in Ukraine is $349 billion. That figure is expected to grow as the war continues, they added.

Bloomberg reports that Gavin Gray has been appointed as the IMF’s new mission chief in Ukraine. Gray, who served as the fund’s mission chief in Iraq from 2018 to 2020, was set to take up his new role on Sept. 20, according to Bloomberg.

The World Bank is also in the spotlight amid Ukraine’s push for financial support. Last month the World Bank announced $4.5 billion in additional financing for Ukraine under its Public Expenditures for Administrative Capacity Endurance (PEACE) in Ukraine project. The package is comprised of a $4.5 billion grant provided by the U.S.

“The World Bank Group is working hard to support the continuation of essential government services,” it said, in a statement provided to MarketWatch last week. “We have mobilized $13 billion in emergency financing, including commitments and pledges to provide wages for hospital workers, government and school employees, pensions for the elderly, salaries for public servants, and social programs for the vulnerable.” Of that amount, $11 billion has been fully disbursed, according to the World Bank.

See Now: U.S. companies urged to invest in Ukraine as ‘massive’ reconstruction looms

Kyiv is also harnessing private equity to support the country’s reconstruction. On Monday U.S. private equity firm Horizon Capital announced the launch of the Horizon Capital Growth Fund IV, L.P., which will support tech and export-focused companies in Ukraine and Moldova. The Growth Fund raised $125 million as of its first close, according to Horizon Capital.

“With the launch of HCGF IV, Horizon Capital has achieved a record high first closing, reaching 50% of its $250 million target, and the highest first close result in the firm’s history,” said Horizon Capital, in a statement.

“Ukraine is open for business,” tweeted Andy Hunder, president of the American Chamber of Commerce in Ukraine, on Monday. “The fund will support visionary entrepreneurs who lead fast-growing technology and export-oriented companies in Ukraine.”

Last week Ukrainian President Volodymyr Zelensky met with BlackRock Inc.

CEO Larry Fink over video conference to discuss how the asset management giant could help drive investments into Ukraine. Zelensky and Fink discussed how BlackRock Financial Markets Advisory could provide pro bono advice to the Ukrainian government on setting up a reconstruction fund, according to a statement released by Zelensky’s office. The fund would support of the recovery of the Ukrainian economy, it said.

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