Ukraine needs money to resist the Russian military offensive. It needs it to buy weapons, rebuild its bombed energy infrastructure, pay pensions to war widows, and all this while its tax revenues are stagnating. Several agreements, signed in recent weeks with the International Monetary Fund (IMF) and private creditors, will give it some breathing space to get through the coming months.
With the intensification of Russian strikes on energy infrastructure, Ukraine's GDP growth is expected to be no more than 3.5%, down from 5.3% in 2023. The budget deficit is expected to continue widening to $43 billion (€38.8 million), from 3.6% of GDP in 2021 to 27% in 2023. The country now relies on foreign aid for almost half of its budget.
The IMF's technical green light, announced on September 10, for the payment of a new tranche of aid of $1.1 billion, which still needs to be approved by the institution's board of directors, will replenish the country's coffers. Of the $15.6 billion in loans promised by the IMF in March 2023, $7.6 billion has already been disbursed.
Support from private creditors
Compared to the $100 billion in international aid received by Ukraine since the start of the war in February 2022, this new payment is less important for its amount than for the reassuring signal it sends about the state of the country's economy. Certainly, the institution's economists who were on a trip to kyiv in early September warn against “exceptionally high risks” on the horizon, and anticipate the country of“increase its tax revenues in 2025 and beyond”of “fight the underground economy”, as well as tax evasion. But at the same time they welcome the government's efforts to “support financial and macroeconomic stability”.
“Strong armies must be supported by strong economies”, Ukrainian Finance Minister Sergiy Marchenko keeps repeating. On September 3, the government presented a bill to the Kiev parliament to increase a series of taxes, including the military tax. Rejected by just one vote, the bill must be amended before being presented again.
With Washington's aid suspended pending the outcome of the US elections next November, and the G7 countries still negotiating the terms of a $50 billion loan, secured by the €260 billion of Russian assets frozen in Europe, Ukraine is seeking to strengthen the support of private creditors.
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Source: Lemonde
