Page 47 - UKRRptNov23

The availability of war risk insurance changes the investment environment in Ukraine and attracts private investors. According to Minister of Economy Yulia Svyridenko, the M10 industrial park, with 140,000 square meters of space, is currently being built in Lviv. The new industrial park has six production and storage facility sites and more than 3,000 workplaces. The US backed Multilateral Investment Guarantee Agency (MIGA) issued a policy to a company that invested in the construction. It received guarantees against the risks of war and civil unrest for 10 years, for up to $9.1M. Also, the Polish export credit insurance corporation, KUKE, insures investors interested in reconstructing Ukraine. For over a year, KUKE was the only insurance organization in the EU that provided guarantees for selling goods to Ukraine. The insurance helped to increase exports from Poland to Ukraine by almost 55% last year. In addition, the DFC is currently working on several insurance applications for Ukrainian projects worth $200M. Governments of the G7 and G19 countries, the European Commission, the World Bank, export credit agencies, and state insurers are also ready to insure investments against war and political risks in Ukraine.
6.0 Public Sector 6.1 Budget
The 2024 budget draft aligns with the priorities of the 2023 budget, focusing on defence, security, and social protection. It relies on the Ministry of Economy's projections: 5% GDP growth, 14% inflation, and uses an average exchange rate of 41.4 UAH:$.
Revenue is expected to grow by 25.6% y/y to $41.1bn due to an optimistic economic outlook and reallocating military PIT to the state budget. This boosts PIT (personal income tax) revenues by 73.6% (+$3.2 bn) from 2023.
Defence and security expenses total $41 bn, 21.7% of GDP or 51.3% of total expenditures, in line with 8M2023 military spending. Continued military operations beyond August 2024 may require additional funding.
Deficit: The 2024 budget projects a $39bn deficit (20.4% of GDP), down from 27% in 2023.
Funding will come from international partners, with $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 own sources covering 52.6%.
Public debt is expected to reach 110.7% of GDP, up from 97% in 2023 and 78% in 2022, surpassing the "safe" limit for economic growth (64% for developing countries). Post-war fiscal consolidation will be challenging, so the government may negotiate debt restructuring in 2024, given the two-year deferral period for payments on Eurobonds and GDP-linked warrants under the terms of the restructuring conducted in August 2022 will expire.
Domestic bond issuance in 2024 matches repayments ($10bn), with an average interest of 19%. Local debt issuance may increase, as foreign market
47 UKRAINE Country Report November 2023 www.intellinews.com