Aurelia Butler

The IMF’s executive board approved creation of the new account on Friday after the Canadian government proposed disbursing up to $1 billion Canadian dollars through the vehicle, which is to be administered by the IMF.The account will allow donors to provide grants and loans to help the Ukrainian government meet its balance of payments and budgetary needs and help stabilize its economy as it continues to defend against Russia’s deadly invasion.Russia calls its actions a “special military operation.””Donors will benefit from the IMF’s tested infrastructure to quickly deliver authenticated payments,” the IMF said.Going through the global lender will allow donations to Ukraine to be frozen in the event of a Russian takeover of power in Ukraine, experts say.Donors will deposit reserve currencies or Special Drawing Rights, the IMF’s own reserve currency, into the new account, which will then disburse these resources as grants or loans into Ukraine’s SDR account at the fund.Ukrainian Finance Minister Serhiy Marchenko last week said his government was seeking about 4 billion euros ($4.37 billion) in foreign financing in addition to the about 3 billion euros it has already received to deal with a budget shortfall.IMF staff last month said Ukraine’s economy was expected to contract by 10% in 2022 as a result of the invasion, but warned the outlook could worsen sharply if the conflict drags on.One source familiar with the plans said additional donations were expected for both the IMF account and a separate World Bank account set up for Ukraine during next week’s spring meetings of the two global financial institutions.The IMF in March also approved a $1.4 billion disbursement to Ukraine under its Rapid Financing Instrument.IMF staff continue to engage closely with the authorities on their emergency response to the economic dislocations brought about by the war in Ukraine, the fund said. More

Ukraine’s finance minister has made an appeal for immediate financial support of tens of billions of dollars to plug a gaping fiscal deficit caused by the Russian invasion. Government spending exceeded revenues by about $2.7bn in March and Ukraine expects the gap to expand to $5bn-$7bn a month in April and May because of the war. Ukraine’s gross domestic product was worth $164bn in 2021. “We are under great stress, in the very worst [financial] condition,” Sergii Marchenko said in an interview with the Financial Times. “Now it is a question of the survival of our country.”Meanwhile, signs that Russia is nearing a significant new offensive in eastern Ukraine have mounted as US defence officials reported that troops withdrawn from Kyiv and the surrounding areas were being resupplied and reinforced by the Kremlin for redeployment in the Donbas region. Although Ukrainian officials have reported escalating Russian bombing in the region already — including last week’s strike on the railway station in Kramatorsk that killed more than 50 civilians — a senior Pentagon official said the US did not believe “a new offensive has started”. As civilians flee, Ukrainian and Russian forces are moving in the other direction as they converge on the Donbas for what threatens to be the bloodiest fight of a war that is now in its seventh week.More from Ukraine: Energy: US president Joe Biden discussed India’s energy purchases from Russia with India prime minister Narendra Modi as Washington pressed New Delhi to take a tougher stance on Russia over the war in Ukraine.Austria: Chancellor Karl Nehammer said he had “no positive impression” of his talks with Russia president Vladimir Putin, after a last-ditch trip to Moscow yesterday to try to broker an end to the country’s invasion of Ukraine.Banking: Société Générale will take a €3.1bn hit after agreeing to exit Russia by selling Rosbank to an investment company founded by billionaire Vladimir Potanin.Saving Kyiv: Ukrainian forces won the battle for the country’s capital with the help of low-tech equipment such as gym mats that blocked thermal imaging, and Russian mistakes including failing to knock out Kyiv’s air defences.The making of an autocrat: On a visit to New York in 2003, Vladimir Putin pitched himself to investors as an economic reformer willing to engage western capitalists. But power and success changed him, writes Ruchir Sharma.Thanks for reading FirstFT Asia. Have feedback on today’s newsletter? Send it to [email protected] — Emily. Five more stories in the news1. Shanghai unveils limited easing of Covid lockdown The city yesterday unveiled plans for a limited easing of its strict coronavirus lockdown, as economic and social pressures mounted. The Chinese financial and industrial centre will divide compounds into three risk categories, with several thousand to have their lockdowns lifted if they report no cases for a two-week period.2. Elon Musk reverses decision on Twitter board Tesla boss Elon Musk will not join Twitter’s board of directors, reversing course just days after he became its biggest shareholder and was offered the seat. Parag Agrawal, the social media company’s chief executive, tweeted that Musk, who was due to be officially appointed to the board on Saturday, would no longer do so. Agrawal did not give any more details. 3. Pakistan’s parliament appoint new PM Pakistani lawmakers have voted to install opposition leader Shehbaz Sharif as prime minister, less than 48 hours after Imran Khan lost the premiership in a vote of no confidence early on Sunday. Go deeper: Sharif’s win marks the return to power and influence of the nation’s two main political dynasties.4. China approves new online games for first time in nearly a year Chinese regulators have approved new online games for the first time in nine months, in the first signs the government was easing its crackdown on the previously buoyant sector.5. Macron and Le Pen begin final sprint in French run-off Emmanuel Macron has started a frantic hunt for working-class votes in an attempt to ensure victory over far-right rival Marine Le Pen in the second and final round of the country’s presidential election on April 24.Opinion: We need to think about a Le Pen presidency, writes Gideon Rachman. France’s far-right candidate could still defeat Macron, plunging Nato and the EU into turmoil.The day aheadIndia economic data February industrial production figures are due, as well as March’s consumer price index data.Cosmonautics Day Today marks 61 years since Yuri Gagarin conducted the first human space flight on April 12, 1961.EU Equal Pay Day Today marks the day of the year up to which women need to work in order to earn the same salary as men during a full year of workWhat else we’re reading and listening to The Chinese companies trying to buy strategic islands Small businesses from China have scoured the globe for important strips of land. In dozens of cases examined by the Financial Times, mostly little-known Chinese investors have proposed taking long leases or have tried to buy large chunks of land, often in sensitive locations.

A dock in Honiara, the capital of the Solomon Islands. China Sam Enterprise Group proposed a 75-year lease of Tulagi Island and, later, a 75-year lease of land in Isabel for ‘naval and infrastructure’ projects for the People’s Liberation Army © Getty Images

Tech Tonic: Chips with everything In this week’s episode of podcast we have a detailed look into the semiconductor industry and Taiwan’s unique position as a bastion of computer-chip talent. James Kynge, the FT’s global China editor, looks into the unintended consequences of the race for semiconductor dominance. FT interview with Seoul’s mayor Oh Se-hoon, the mayor of Seoul, has admitted that South Korea’s reputation for opaque and heavy-handed regulation has hampered the city’s ability to lure business and investors quitting Hong Kong. Read the full interview here. Sibling rivalries, spousal squabbles — it’s great to be back in the office You can pick your friends but not your family, goes the saying. So too with work. Unless you own the company, you rarely get to choose your colleagues, writes Emma Jacobs.India just signed a trade deal — really India has signed a trade deal. This is not a drill. Repeat: India has signed a trade deal, writes Alan Beattie in his Trade Secrets newsletter This is not a drill. OK, so the deal, with Australia, is only an interim agreement, but the signed preferential deal, with a developed economy, is the first of its kind for India in more than a decade.Your feedbackThanks to readers who responded with their thoughts about John Lee entering the race to succeed Carrie Lam as Hong Kong’s next chief executive. Here’s what two FirstFT Asia readers in Hong Kong had to say. (Both preferred to remain anonymous for safety reasons.) “The celebration of getting rid of Carrie Lam was very short lived when people saw who the replacement will be. It’s also worth noting that almost everyone I have spoken to in the international community are saying this will be an accelerator for them leaving Hong Kong.” “As a long time resident of Hong Kong, I am hardly surprised by this development. It is part of the Chinese Communist party’s ‘long game’ takeover of Hong Kong. The Party allowed the incompetent Carrie Lam to remain in charge and reduce one of the world’s great cities to a laughing stock.” More

Ukraine’s finance minister has made an appeal for immediate financial support of tens of billions of dollars to plug a gaping fiscal deficit caused by the Russian invasion.Government spending exceeded revenues by about $2.7bn in March and Ukraine expects the gap to expand to $5bn-$7bn a month in April and May because of the war. Ukraine’s gross domestic product was worth $164bn in 2021. “We are under great stress, in the very worst [financial] condition,” Sergii Marchenko said in an interview with the Financial Times. “Now it is a question of the survival of our country.”“If you want us to continue fighting this war, to win this war . . . then help us.” Marchenko painted a grim picture of the damage to Ukraine’s economy inflicted by Russia’s full-scale invasion in late February. Damage to civilian and military infrastructure was estimated at $270bn so far, he said, with nearly 7,000 residential buildings damaged or destroyed.

Though Ukraine has received significant military aid to help defend itself against Russia, the government wants its western partners to grant financial aid and to approve emergency lending from the IMF and World Bank. About 30 per cent of Ukrainian businesses had ceased all activities and 45 per cent were working at reduced capacity, he said. Electricity consumption was down 35 per cent. Trade had collapsed, with exports halving between February and March and imports falling by more than two-thirds. The Kyiv School of Economics on Monday estimated total economic losses from the war at up to $600bn.Marchenko demanded that Russia pay reparations for “the destruction of private and public property” during the war and said Kyiv had assembled an international legal team to lodge claims against Moscow.But the priority was short-term finance. As Ukraine tries to limit its budget shortfall, the government had already made spending cuts of more than $6bn, but it was not enough, the minister said.“We can cut some spending, but it can’t cover the gap,” he said. Sergii Marchenko, Ukraine’s finance minister: ‘A lot of politicians advise us to talk about [debt] restructuring but that is not our policy’ © Ministry of Finance of UkraineRevenues were running at just over half of the prewar level, he added. The budget deficit in 2022, forecast at 3.5 per cent of GDP before Russia’s invasion, would run to “many multiples” of that depending on the duration of the war, he said.The government continued to meet its core obligations of paying public-sector salaries and pensions and servicing its debts, he said. The country made a $292mn payment last month on a dollar-denominated eurobond maturing in September and would continue to meet its obligations to avoid default or restructuring, he added.“A lot of politicians advise us to talk about restructuring but that is not our policy,” he said. Ukraine wanted to be able to access both concessional and commercial financing, and to be able to continue to issue external debt. The government was in discussions with the US to secure guarantees to enable it to issue sovereign bonds at rates of interest below those currently demanded by the market, which were “far higher than optimal for us to borrow now”, he said.The IMF said on Friday that it had opened an account to channel grants and loans to Ukraine to help it “meet its balance of payments and budgetary needs and help stabilise its economy”. 

Marchenko called on rich countries to use the account to channel funds they received from the IMF last August, when it made a $650bn allocation of its special drawing rights or SDRs, a form of reserve asset that is the equivalent of newly minted money. The allocation was intended to help countries cope with the economic impact of coronavirus.Members of the G7 group of the world’s largest economies received about $290bn in the allocation shared among the IMF’s 190 member countries, roughly in line with their share of global output. Marchenko urged rich countries to donate or lend between 5 and 10 per cent of their allocations to Ukraine’s war effort through the new IMF account. “That allocation was not used, a lot of countries just parked it,” he said. “It is probably the easiest [form of support].”Last month, the US Congress approved $13.6bn in military and humanitarian aid to Ukraine and other countries affected by the war. While Marchenko welcomed this, he said Ukraine would “not receive a cent” as it would be provided in the form of direct aid rather than in cash. “This is not direct budgetary support. We cannot use it to fill the deficit,” he said. More