US, EU move to curb Russian access to IMF finance

The United States and European Union officials are examining curbing Russia’s influence and access to finance at the International Monetary Fund as the global lender warned that the ongoing war and sanctions would have severe impact on the world economy.

“While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious,” Kristalina Georgieva, the IMF’s managing director, said.

“Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses. Should the conflict escalate, the economic damage would be all the more devastating,” she said.

The IMF said it expected to bring Ukraine’s request for $1.4 billion in emergency financing to its board for approval as early as next week and was in talks about funding options with authorities in neighbouring Moldova.

The US and EU, which account for the large majority of available counterparts in the IMF’s SDR transactions system, are worried that Russia, cut off from much of its $630 billion reserves, could have access to $17 billion in IMF reserves it received last year when the IMF boosted them to fight the Covid-19 pandemic.

The move to block Russia from accessing IMF finance would add to the pressure on Russia’s economy and financial system and also mark an important symbolic step, deepening Moscow’s international isolation.

— issacjohn@khaleejtimes.com