Page 39 - Ukraine OUTLOOK 2024

If donor resolve falters and donor financing is not forthcoming, Ukraine’s defence and recovery will be at risk. To mitigate this risk and bolster Ukraine’s relationship with its partners, the UEPAC has proposed a broad “financing democracy” deal.
The Ukrainian Ministry of Finance defined the external financing need for 2024 at $41bn. For comparison, in 2022 Ukraine received $31bn in external economic aid, while seigniorage revenue from printing money amounted to almost $12bn; and in 2023 Ukraine expects to receive $43bn of aid while avoiding monetary financing/printing money.
Of the requested $41bn for 2024, $5.4bn is anticipated from the IMF, $8.5bn from the USA and $18bn from the EU. In December Kyiv announced the necessary funding had been reduced to $37.3bn following spending cuts.
However, the Minister of Finance admits that $29bn in financing for 2024 has not yet been confirmed. While the war and Russia’s aggression continues, analysts do not think it is reasonable to expect Ukraine’s financial needs to decline.
• 5.3 Plan B
Ukraine’s government is preparing a Plan B to fund its operations in case
international funding dries up in 2024, UBN reported on December 1. Due to the uncertainty over the provision of US and EU aid, the government is
actively working on a contingency plan to cope with reduced assistance.
The first stage of this contingency plan would allow the government to survive through at least the first quarter, and probably the first half, of 2024 without resorting to drastic measures like sequestration.
However, if the issue of financing remains unresolved, Ukraine will proceed to the second stage of its plan B that involves cutting certain programmes and reallocating tax revenues to address budget shortfalls.
The last resort, considered the third stage, would involve resorting to turning the printing presses on. This would entail increasing the money supply through methods such as central bank interventions. While this approach can inject funds into the economy, it would result in a reversal of the falling rates of inflation and a less stable exchange rate. It is worth noting that officials and economists view this option as highly unlikely and a measure of last resort.
Ukraine remains actively engaged in negotiations with its international partners, including the EU and the United States. Ukrainian officials express confidence that they will reach agreements that will secure increased funding for the 2024 budget. The government hopes for a positive response from its Western allies, which would alleviate the need to implement the contingency plan.
• 5.4 Debt
Following the restructuring of Eurobond payments in 2024, Ukraine may return to the external borrowing market in 2025-2026, Minister of Finance Serhiy Marchenko said in December.
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