The IMF on Saturday said the war in Ukraine is driving energy and grain prices higher, and has sent a wave of more than 1 million refugees to neighboring countries, while triggering unprecedented sanctions on Russia.
“While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious,” the IMF said in a statement after a board meeting chaired by IMF managing director Kristalina Georgieva.
“The ongoing war and associated sanctions will also have a severe impact on the global economy,” it said, adding that the crisis is adversely affecting inflation and economic activity when price pressures were already high.
Photo: EPA-EFE
Price shocks would be felt worldwide, and authorities should provide fiscal support for poorer households, for whom food and fuel make up a higher proportion of expenses, the IMF said, adding that the economic damage would increase if the war escalated.
Sweeping sanctions imposed on Russia by the US, European countries and others would have “a substantial impact on the global economy and financial markets, with significant spillovers to other countries,” the IMF said.
Central banks need to “carefully monitor the pass-through of rising international prices to domestic inflation, to calibrate appropriate responses,” it said.
Photo: Reuters
“This crisis will create complex policy trade-offs, further complicating the policy landscape as the world economy” recovers from the COVID-19 pandemic,” it said.
In addition to the human toll, Ukraine is experiencing substantial economic damage, with sea ports and airports closed and damaged, and many roads and bridges damaged or destroyed.
“While it is very difficult to assess financing needs precisely at this stage, it is clear that Ukraine will face significant recovery and reconstruction costs,” it said.
The global lender said that it expects to bring Ukraine’s request for US$1.4 billion in emergency financing to its board for approval as early as next week and is in discussions about funding options with the authorities in Moldova.
Ukraine also has US$2.2 billion available through June under an existing stand-by arrangement, the IMF said last week.
Moldova and other countries with close economic ties to Ukraine and Russia are at “particular risk” of scarcity and supply disruptions, the IMF said.
The IMF said that its staff are discussing funding options with Moldova, which has requested an augmentation and rephasing of its existing US$558 million IMF loan program to help meet the costs of the current crisis.
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