The IMF board approved the creation of the new account on Friday after the Canadian government offered to disburse up to C$1 billion through the vehicle, which will 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 budget needs and stabilize its economy as it continues to defend itself against Russia’s deadly invasion.
Russia describes its actions as a “special military operation”.
“Donors will benefit from the IMF’s proven infrastructure to make fast, authenticated payments,” the IMF said.
Going through the world creditor will freeze donations to Ukraine in the event of a Russian takeover in Ukraine, according to experts.
Donors will deposit reserve currency or special drawing rights, the IMF’s own reserve currency, into the new account, which will then disburse these resources as grants or loans to Ukraine’s SDR account with the fund. .
Last week, Ukraine’s Finance Minister Serhiy Marchenko said his government was seeking about 4 billion euros ($4.37 billion) in foreign funding on top of the roughly 3 billion euros it has already received to meet a budget deficit.
Last month, IMF staff said Ukraine’s economy was expected to shrink by 10% in 2022 due to the invasion, but warned the outlook could worsen sharply if the conflict drags on.
A source familiar with the plans said additional donations were expected both on behalf of the IMF and a separate World Bank account set up for Ukraine at spring meetings of the two global financial institutions next week.
In March, the IMF also approved a disbursement of $1.4 billion to Ukraine under its Rapid Financing Instrument.
IMF staff continues to work closely with the authorities on their emergency response to the economic upheaval caused by the war in Ukraine, the Fund said.