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COVID-19 and the War in Ukraine

The war in Ukraine has dealt a major blow to the global economy.

The war in Ukraine has dealt a major blow to the global economy.

The economic fallout from Russia’s invasion of Ukraine is another massive setback to the global economy. The toll on Ukraine is immense, but the impact stretches far beyond Ukraine’s borders. The severity of disruptions in commodity markets and to supply chains will weigh heavily on macro-financial stability and growth, adding to an already-complicated policy environment for countries still recovering from the COVID-19 pandemic.

Inflation, which had already been rising in many countries as a result of supply–demand imbalances and policy support during the pandemic, is likely to remain higher for longer. Financial conditions have also tightened significantly, putting pressure on a wide range of emerging market and developing economies—through higher borrowing costs and the risk of capital outflows.

The war in Ukraine may contribute to the dangerous divergence between advanced and emerging market and developing economies. More broadly, it risks fragmenting the global economy into geopolitical blocs with distinct technology standards, cross-border payment systems, and reserve currencies. Such a tectonic shift represents the most serious challenge to the rules-based system that has governed international and economic relations for the last 75 years, jeopardizing the gains made over the past several decades.


Stepping up

In response, the IMF has provided vital financing, real-time advice, capacity development, and support to its members.

$1.4 billion in emergency financing to Ukraine was approved in FY 2022, and—at the request of several IMF member countries—a special account was established that will provide donors with a secure vehicle for directing further financial assistance to Ukraine. Support for Ukraine’s heavily affected neighbors and member countries experiencing fragility or conflict is also underway.

IMF lending and a historic $650 billion allocation of SDRs helped provide much-needed liquidity to countries worldwide, many of which have limited fiscal space after the pandemic. More than $219 billion in loans to 92 countries has been approved since the onset of the pandemic. To facilitate access to emergency financing, increases to the cumulative access limits for the IMF’s emergency financing instruments were extended through the end of June 2023 (for details see Table 2.2).

One hundred twenty-six Article IV consultations, six Financial System Stability Assessments, and nearly 2,900 virtual technical visits were conducted during FY 2022. About 60 percent of the IMF’s technical assistance during the financial year was provided to fragile and conflict-affected states, low-income countries, and small states.

Figure 1.1

IMF Financial Support

(cumulative, billions of US dollars)

IMF lending has provided countries much-needed liquidity support.

Sources: IMF, Finance Department; and IMF, Strategy, Policy and Review Department.
Note: As of April 30, 2022. FCL = Flexible Credit Line; PLL = Precautionary and Liquidity Line; RCF = Rapid Credit Facility; RFI = Rapid Financing Instrument.
* Indicates both new programs and augmentation of existing programs.

As of April 2022, only

of people in low-income developing countries had been fully vaccinated, compared with

in advanced economies.

Global partnerships

In June 2021, the IMF joined forces with the World Bank, World Health Organization, and World Trade Organization to accelerate access to COVID-19 vaccines, therapeutics, and diagnostics. Led by the heads of the institutions, a task force was created to mobilize support and funding for a $50 billion proposal by the IMF staff to end the COVID pandemic. A global target was set to vaccinate at least 40 percent of the population in all countries by the end of 2021 and 70 percent by mid-2022.

To meet the target, the task force called on Group of Twenty (G20) countries to share more vaccine doses with low- and middle-income countries; provide financing, including grants and concessional financing; and remove all barriers to exports of inputs for finished vaccines, diagnostics, and therapeutics.

A global database and country-by-country data dashboards were set up to track and monitor progress toward targets and improve transparency. Access to essential tools for fighting COVID-19, nevertheless, remains very uneven. As of April 2022, only 7 percent of people in low-income developing countries had been fully vaccinated, compared with 73 percent in advanced economies. There are similar gaps in access to oxygen, treatments, and personal protective equipment.

Equipping developing economies to fight the pandemic and prepare for future health care needs is in everyone’s interest: no one is safe until everyone is safe. An updated plan shows that a modest $15 billion in grants in 2022 and $10 billion annually thereafter could greatly strengthen global health systems.

More recently, the IMF, World Bank, UN World Food Program, and World Trade Organization have called for urgent, coordinated action on food security and have appealed to countries to avoid restricting food or fertilizer exports.

In collaboration with partners, the IMF continues to champion global cooperation and multilateralism.

Governance reform

Progress toward governance reform and a timely and successful conclusion of the 16th General Review of Quotas are crucial for ensuring a strong, quota-based, and adequately resourced IMF. The review is expected to build on the 2010 agreement, including efforts to protect quotas and voting shares of the IMF’s poorest members. The current formula for determining quotas, which was approved in 2008 and has been used as a guide, will also be reviewed.