The Executive Board of the International Monetary Fund (IMF) at night on March 9 approved a disbursement of $1.4 billion (SDR 1,005.9 million) under the Rapid Financing Instrument (RFI) for Ukraine to help meet urgent financing needs and mitigate the economic impact of the war.

"This disbursement under the RFI, equivalent to 50 percent of Ukraine's quota in the IMF, will help meet urgent balance of payment needs arising from the impacts of the ongoing war and will provide critical support in the short term while playing a catalytic role for financing from other partners," the IMF said in the press release.

According to the press release, the Ukrainian authorities have canceled the Stand-by Arrangement (SBA) and the authorities have expressed their intent to work with the IMF to design an appropriate economic program aimed at rehabilitation and growth, when conditions permit. The authorities intend to remain in close consultation with staff as they continue to design and implement effective crisis mitigation measures.

"The Russian military invasion of Ukraine has been responsible for a massive humanitarian and economic crisis. The tragic loss of life, huge refugee flows, and immense destruction of infrastructure and productive capacity is causing severe human suffering and will lead to a deep recession this year. Financing needs are large, urgent, and could rise significantly as the war continues," IMF Managing Director Kristalina Georgieva said.

She said that the emergency policy response of the Ukrainian authorities has been remarkable. Administrative and capital controls have been introduced to preserve the availability of foreign exchange reserves and reduce uncertainty regarding the exchange rate. To further support financial stability, the National Bank of Ukraine has established a new liquidity facility and introduced regulatory forbearance measures. While cash withdrawal limits have been imposed, cashless transactions have not been limited. Fiscal policy has focused on ensuring priority payments. Ukraine has stayed current on all debt obligations, she said.

"Against this extraordinary background, the IMF has approved critical financial support. This should be instrumental in catalyzing the large-scale mobilization of additional concessional financing that will be required to help fill the financing gap and mitigate the economic impacts of the war. Once the war is over and a proper damage assessment can be performed, additional large support is likely to be needed to support reconstruction efforts," Georgieva said.

The Fund expresses its deepest sympathy to the Ukrainian people in these extraordinarily difficult times and will remain closely engaged with the Ukrainian authorities, she said.

In June 2020, the IMF approved the SBA for Kyiv with a total volume of about $5 billion, immediately allocating the first tranche of financing in the amount of $2.1 billion. Four reviews of the implementation of the benchmarks of the program were scheduled to provide the remaining four tranches. However, the agreed schedule was violated, and funding was suspended for a long time due to Ukraine's failure to meet a number of obligations. Only in November 2021, the IMF provided Ukraine with the second tranche in the amount of SDR 500 million in the equivalent of $699 million and decided to extend the program until June 2022.

The updated program provided for two more reviews, as a result of which Ukraine could receive the third and fourth tranches – SDR 500 (about $700 million) and SDR 1.1 billion, respectively.

The IMF mission led by Ivanna Vladkova Hollar began discussions with the Ukrainian authorities on the second review of the SBA on February 23, the day before Russia's full-scale aggression.