Struggles with Economic Assistance Amidst War
Kyiv, the capital of Ukraine, has heavily relied on economic assistance from Western countries to sustain itself during Russia’s ongoing war. Since the full-scale invasion by Russia in February 2022, Ukraine has received more than $68.5 billion in budgetary support, as per finance ministry data.
Financial Challenges in 2024
However, the year 2024 poses a significant challenge for Ukraine as it faces uncertainty over the sources of financial assistance. Currently, Ukraine allocates all its revenue towards defense and the army, while Western aid largely covers budgetary sector overheads. In the next year, the government will require additional injections of financial support to distribute social payments, wages, and pensions to millions of Ukrainians.
Expectations for Covering the Budget Deficit
The government projects a budget deficit of around $43 billion in 2024 and plans to mitigate it through domestic borrowing and financial aid from its Western partners. Previously, finance ministry officials anticipated receiving $41 billion in international aid next year. However, concerns arise regarding the uncertain provision of this financing.
European Union’s Ukraine Facility
In the summer, the European Union introduced the Ukraine Facility, a multi-year support package valued at €50 billion ($54.8 billion) to be implemented until 2027. Ukrainian officials aspire to secure €18 billion in budgetary support from this facility in 2024 to cover the upcoming year’s budget gap. However, discussions have been delayed until January, causing apprehension among Ukrainian and EU leaders.
U.S. Aid and Funding Issues
Kyiv has also requested $8.5 billion in aid from the United States to address its budget deficit. President Joe Biden’s administration initially proposed an allocation of nearly $106 billion for Ukraine, Israel, and U.S. border security. However, the package was rejected by House Republicans, and its passage remains uncertain, causing further delays in securing financial support.
Importance of IMF Cooperation
For Ukraine’s macroeconomic and financial stability, cooperation with the International Monetary Fund (IMF) holds significant importance. The IMF has already approved a $900 million disbursement for Ukraine this year, bringing the total funding to $4.5 billion. In 2024, the government hopes to receive $5.4 billion from the IMF, with each tranche linked to specific reform targets and economic indicators. Additionally, Ukraine expects around $1.5 billion from other international financial institutions, including the World Bank.
Exploring Multiple Financial Support Packages
Apart from the EU and the U.S., Ukraine has secured financial support packages from Britain and Japan for 2024. Furthermore, negotiations are underway with the governments of Canada, Norway, South Korea, and other countries to secure additional funds. By diversifying its funding sources and collaborating with international partners, Kyiv aims to address its budgetary challenges and ensure financial stability amidst Russia’s ongoing war.