Ukraine, IMF agree on $15.6 bn loan package.

 

The conflict between Russia and Ukraine had major ramification for the global economy. According to many reports, it was known that the reason for the present condition was the Ukraine’s exit from the Soviet Union who tie with the west. The first blow to the Russia-Ukraine was the Orange Revolution which took place in winter 2004.As of the separation the dissolution of Soviet Union occurs, which led to the creation of North Atlantic Treaty Organization (NATO). As a result, Ukraine showed interest to join in NATO, which Russian President perceives as a threat to Russia’s power in the east. This led to the current scenario.

In order to increase the government finances that were strained by Russian Invasion the IMF agreed on a $15.6 bn loan package to support Ukraine’s vision of pursuing strong economic policies and fighting corruption. The Russian-Ukraine war took off on 24 February 2022 as a means to stop Ukrainian attacks on the two breakaway regions of Donetsk and Lugansk, which Moscow recognized as Sovereign states.

The package helps to mobilize financing from Ukraine’s international partners and provide a path for the reconstruction of Ukraine after the victory in war. the total programme is planned for four years in which the first 12-18 months focuses on closing Ukraine’s massive budget deficit and to ease printing of money. the main focus will be on supporting Ukraine’s bid for EU membership. The reason behind the contribution made by IMF goes back to the history of Ukraine’s substantial contribution to the EU and the group of seven major democracies. This agreement may possess the chance to help Ukraine in mobilizing large scale concessional financing from international donors. IMF says that Ukraine demonstrates a high commitment to healthy economic policies and met all the agreed upon goals during a preliminary consultation. The help provided by IMF would be a great help for the Ukraine in the aspects of finance as well as infrastructure. Easing up of printing money would help to fund people’s, state salaries and basic services may make things worse by fueling inflation and destabilizing the currency.

The second phase focuses on more expansive reform to entrench macroeconomic stability, stability, support recovery and early reconstruction, and enhance resilience and higher long-term growth, including in the context of Ukraine’s EU accession goals. They also look forward to stabilizing their exchange rate and inflation targeting regime. This IMF fund will help them to recover from the severe damages that had caused by the war to their critical infrastructure.