Oleksandr Shchur, Member of the Management Board of JSC Ukreximbank

 

From 10 April to 18 April 2023, the annual spring meetings of the International Monetary Fund and the World Bank were held in Washington.

This year, participants included the heads of the IMF, World Bank, EBRD, and EIB along with finance ministers of the US, Canada, Japan, and France, together with senior European Union officials and more than 30 heads of international financial institutions.

The official delegation from Ukraine was represented by the Prime Minister, the Minister of Finance, and the Governor of the National Bank, with President Zelenskyy joining via video link. Ukreximbank, the leading corporate and investment bank of Ukraine, also joined the working meetings in Washington.

Global financial challenges and the Ukrainian agenda

The central global topics of April’s meetings were the fight against high consumer prices, development of the world economy, turbulence in the banking sector, consequences of climate change, and the danger of a debt crisis in poor countries.

As anticipated, Ukrainian issues were addressed separately within the framework of a dedicated "Ukrainian meeting". This is a new format that started last autumn, bringing together the managing director of the IMF, the head of the World Bank, and finance ministers of partner countries, as well as representatives of Ukraine’s financial and banking sectors.

The meeting focused on a number of key topics:

Elimination of weak points. The main issue raised at this meeting was the elimination of weaknesses in the previously applied unprecedented sanctions against russia to prevent the aggressor country from financing its military machine in Ukraine. As foreign financiers pointed out, despite thousands of imposed sanctions, russia is trying to reorient trade routes and acquire what it needs, in particular, for the war against Ukraine, through neighbouring countries or more lenient jurisdictions.

Support of Ukraine. International financial partners of Ukraine expressed that they are ready to support our country as much as necessary and are actively working on the architecture and mechanisms of this support. Funding for restoration of unprecedented destruction caused by russia in Ukraine can be done at the expense of the reparations fund and seized international assets of russia. However, the availability of these funding sources in the short term is questionable. Therefore, financial resources provided by international financial institutions remain almost the only reliable source of financing for reconstruction projects available now for urgent needs such as the restoration of energy or logistics infrastructure, exports, and critical imports.

The European Investment Bank, the European Bank for Reconstruction and Development, the United States Financial Development Corporation, and IFC demonstrated the greatest determination in supporting the private sector. These international financial institutions are taking steps to launch programs and products that will support Ukraine today and during the reconstruction period. In addition, some IFIs already have tools to do this and have approved limits for the current year.

In particular, the EBRD is preparing to open a new credit line for SMEs in Ukraine, the largest since the beginning of the full-scale invasion, worth tens of millions of euros. The relevant decision is expected before the end of May. Along with this, programs with a grant component are being actively considered, which will provide borrowers with timely access to financial resources.

Providing portfolio guarantees to Ukrainian partner banks is also a useful IFI initiative. This is an important step that will help Ukrainian banks better manage war risks when lending.

Expectations of Ukrainian business. Today, business in Ukraine needs to solve problems related to accessing available financial instruments. This is particularly true in terms of supporting exports.

During the round table "Banking products for the reconstruction of Ukraine" organised by Ukreximbank, corporate sector companies announced which banking and financial products, in what volumes, and on what terms are needed for business in 2023-2024.

Among the main needs is the establishment of effective export insurance and crediting systems, namely post-export financing and crediting within the framework of joint programs with IFIs.

Today, Ukreximbank strives to act as a connecting link between recovery funds, international financial institutions, the state, and business. Ukreximbank will continue to develop and implement joint target programs with international financial institutions for post-war recovery projects.

Economic expectations: World Bank and IMF forecasts for Ukraine and the world

In January, the International Monetary Fund and the World Bank worsened their forecasts regarding the prospects for the development of the world economy in 2023.

According to the forecasts of the World Bank, the global GDP will increase by only 1.7% during the current year. Previously, the World Bank anticipated a more significant increase of 3%. This would be the third-worst result in three decades following sharp drops in 2009 and 2020.

Meanwhile, the IMF worsened the global economic growth forecast for 2023 and 2024 - to 2.8% and 3% (from 2.9% and 3.1%, respectively). According to WB experts, high inflation, an increase in interest rates by financial regulators, reduction in the volume of investments, and disruption of supply chains due to the war in Ukraine will put further pressure on the global economy. In particular, the Fund pays attention to the wave of turbulence in global financial markets which was launched by the bankruptcy of the American Silicon Valley Bank, continuing the problems of the Swiss Credit Suisse, affiliated with UBS.

As for Ukraine, according to the updated forecast, Ukraine's economy will grow by 0.5% this year after falling by 29.2% in 2022, with further growth of 3.5% in 2024. In January, the World Bank expected faster growth: by 3.3% in 2023 and by 4.1% in 2024. The IMF, in its April report on Ukraine, forecast a 3% decline in GDP this year. At the same time, inflation is also forecast to decrease from 26.6% to 20.0% in 2023.