Financial support commitments undertaken by Ukraine’s partners and the actual allocation of funds are still very different, which creates a liquidity problem and the threat of further monetary financing of the state budget deficit by the National Bank with all the negative consequences for inflation, exchange rate and macro stability, Finance Minister Sergei Marchenko said.
“You know perfectly well that there is a huge difference between commitments and payments… The first quarter of 2023 is the most problematic for us right now… Even a huge amount of commitments will not help us in the first quarter of 2023 (if these funds are not provided),” he said in Wednesday at the discussion “War in Ukraine: Financing the Victory” organized by the think tank Bruegel.
The day before in Berlin, at the International Expert Conference on the Reconstruction of Ukraine, the minister said that Ukraine’s fiscal and quasi-fiscal financing needs in the first quarter of 2023 are estimated at $11.4 billion. Of these, $4.2 billion is for gas purchases: January – $1.9 billion, February – $1.4 billion and March – $0.9 billion.
In total, the financing needs are: January – $4 billion, February – $4.1 billion and March – $3.3 billion, the Finance Minister’s presentation said. According to it, in the remaining months of 2023, they are estimated from $2.1 billion in August to $3.9 billion in June, for a total of $37.9 billion.
Marchenko recalled that in April 2022, it was agreed with international partners that the monthly gap in Ukraine this year is estimated at $5 billion a month, but the actual payment of funds is far from this figure. “For example, in April there were only $1.7 billion, in May – only $1.5 billion, in June – $4.4 billion, in July – $1.7 billion, in August – $4.7 billion, in September – about $2 billion.” , – stated the head of the Ministry of Finance.
According to him, if by the end of this year the EU’s macro-financial assistance (about EUR3 billion – IF) and the funds announced by the United States ($7.5 billion – IF) are allocated, then the Ministry of Finance will feel comfortable.
“But again, this does not mean that we will be able to cover all our expenses before the end of the year. It only means that we can manage the liquidity gap … we are able to meet critical expenses, while other expenses can be deferred,” Marchenko said.
He recalled that for 2023, the Ministry of Finance estimates the need for additional external financing of socially necessary budgetary spending in the amount of $3-3.5 billion, excluding emergency recovery costs, the likelihood of an increase in the background of the latest record Russian strikes on civilian infrastructure.
According to the minister, the commitments to allocate EUR 1.5 billion per month by the European Union in 2023 and EUR 18 billion in total for the year, which were taken the day before by the President of the European Commission Ursula von der Leyen, make it possible to assume a solution to this problem.
“But again, it is important for us to plan ahead. It is not yet clear whether we will be able to use this money in the first quarter of 2023,” Marchenko said.
He said that he discussed this issue at a meeting with the Minister of Finance of Germany, with the ministers of other countries.
“If you are ready to support Ukraine, please do it faster, because while you spend some time creating a solution, we do not have time. January is just around the corner, and January is not covered,” the head of the Ministry of Finance stressed.
He added that he expects to be connected to US funding. “But again, it’s not clear to me when the money can be paid, and if not, we have to find other options, we’ll look at another perspective, perhaps with bilateral creditors, etc. That’s why predictability is so important,” Marchenko added.
