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entirely financed by foreign borrowing.
International partners are expected to contribute $43bn in loans and grants, including $9bn from the EU, $5.4bn from the IMF, $2bn from the WB, and $27bn from the US and other creditors. Net external borrowing ($38 bn) will cover 47.4% of expenditures, with Ukraine’s own sources covering 52.6%, according to KSE.
Ukraine remains cut off from the international capital markets but has been able to raise limited amounts on its own domestic bond market. Issuances in 2024 are expected to match repayments ($10bn), with an average interest of 19%. But local debt issuance may increase next year if the economy continues to recover. In 2023, banks increased local bond holdings by $2bn (+15% y/y), individuals and entities by $0.9 bn (+24% y/y), while non-residents reduced their portfolio by $0.3bn (-17% y/y).
2.5 Germany prepares €1.4bn winter package for Ukraine
Germany is preparing a €1.4bn military winter package of aid for Ukraine as well as setting up a joint defence enterprise, German Chancellor Olaf Scholz announced during a German-Ukraine summit in Berlin on October 24.
The aid package will encompass a range of air defence systems, including Patriot, Iris-T6, Gepard, and more. Russia is expected to attack Ukraine’s energy infrastructure as it did last year during the long cold winter.
The government has already invested billions of dollars into its power sector to make repairs and beef up the air defence of power stations to protect them from Russian missiles. Ukraine’s Prime Minister Denys Shmyhal already announced in September that Ukraine is “ready” for the winter and all the necessary work has been completed.
Scholz highlighted that Germany's civil and military assistance to Ukraine since the start of the conflict has totalled €24bn, making it the second-largest donor after the United States.
In addition to the financial aid, a significant development is the collaboration between the German defence concern Rheinmetall and the Ukrainian defence industry to form a joint venture to make arms and repair existing ones. Rheinmetall is the maker of the powerful Leopard 2 main battle tank. The joint venture was formally registered on October 24.
Shmyhal said that the creation of this joint venture represents “a landmark event,” taking cooperation between the two nations to a new and deeper level. It will enable the construction of a “robust arsenal” for the free world through joint efforts. Ukraine has ambitions to become a major weapons manufacturer and be able to supply Europe with arms.
Scholz also proposed setting up a permanent support mechanism for Ukraine in the coming years, during the summit, which will be discussed in December’s EU summit.
"Already at the meeting of the European Council at the end of this week, we will confirm our joint will to provide financial support to Ukraine," said Scholz.
13 UKRAINE Country Report November 2023 www.intellinews.com