Kiev is facing a $9.5 billion hole in its budget and a potential issue with an IMF bailout
FILE PHOTO: Ukrainian hryvnia and euro banknotes. © bartoshd / Getty Images
The EU may provide only half of the $19 billion that the Ukrainian government was expecting to cover its budget deficit next year, a top official has said.
The looming budget deficit was predicted on Wednesday by Ukrainian Deputy Economy Minister Aleksey Sobolev during a television interview. He was commenting on progress with efforts to secure $53 billion in EU support over the next four years, while warning that the country faces a significant shortfall in funding from a vitally important Western backer.
Kiev has earmarked $41 billion of that sum to cover its financial shortfall, the senior official noted. Ukraine’s draft 2024 budget includes $19 billion in funding from the EU.
Sobolev was discussing the so-called ‘Ukraine plan’, a proposal relating to recovery projects, economic reforms and other policies that it’s required to implement before the EU commits to providing assistance under the ‘Ukraine Facility’ program.
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The European Commission intends to monitor how Kiev follows the roadmap before releasing tranches of funding.
The possible blow to the Ukrainian budget may have repercussions for other forms of foreign assistance, RBC Ukraine outlet reported on Wednesday. The International Monetary Fund (IMF) will be watching Kiev’s finances in relation to its own support.
The next IMF loan, which amounts to $900 million, should be approved by its management in December, Ukrainian officials told the outlet. The organization used to be Ukraine’s primary foreign lender, whose position served as a benchmark for other parties. But due to the extraordinary amount of assistance that Western nations have sent to Kiev to help it fight Russia, the IMF is now guided by financial injections by the US and the EU.
“Without those sources of funds, the IMF will not have certainty that the nation would cover its needs,” a Ukrainian source familiar with the negotiation process explained. “This may undermine the approval of the next tranche. And unless the issue is resolved before December, the [IMF] executive board will not come to a positive decision.”
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Kiev’s chances of securing all of the funds promised to it by the White House have been undermined by opposition to the spending in the US House of Representatives. Last month, Republican lawmakers pushed to remove all aid for Ukraine from a 45-day stopgap spending bill.
The chamber currently has no speaker, as the narrow GOP majority struggles to replace Kevin McCarthy. He was ousted after allegedly conspiring with Democrats to ensure the continuation of aid to Ukraine.
Earlier this month, Russian President Vladimir Putin noted that the Ukrainian economy and government remained afloat only thanks to Western payments, which he estimated at between $4 billion and $5 billion per month.
“As soon as they are stopped – that’s it, in a week everything will fall,” he predicted.
