The International Monetary Fund (IMF), following the third revision of Ukraine’s EFF Extended Fund Facility program, still considers the baseline scenario as the end of active hostilities in 2024, however, in the updated negative scenario, where the assumption of a more intense war that will last into 2025 remains, the Fund has slightly improved the macro outlook.
“Assuming that the shock starts in the second quarter of 2024, the contraction of the economy reaches 4% in 2024, compared to growth of 3-4% in the baseline scenario. A longer and more intense war is expected to have a significant impact on economic sentiment, the rate of return of migrants, fiscal spending needs, and export capacity,” the IMF said in a submission published on its website.
According to its estimates, inflation in 2024 in such a negative scenario will also be higher – 10% compared to 8.5% in the baseline scenario.
At the same time, last December, after the second revision of the program, the IMF in the negative scenario for 2024 expected a decline in GDP by 5% with inflation of 11%.
As for 2025, the forecast of GDP growth and inflation in the negative scenario was kept at the same level – 0% and 8.5%, respectively, while in the baseline scenario the Fund expects economic growth of 6.5% with inflation of 7%.
In addition, the updated negative scenario significantly improved the estimate of the trade deficit for this year – by $5.8 bln to $33.1 bln ($28.7 bln in the base case), respectively, the NBU reserves will be reduced to $34.4 bln ($42.1 bln in the base case), not $32.4 bln, as expected in December.
In addition, the forecast of the state budget deficit has been raised by 1.4 percentage points (p.p.) to 17.6% of GDP (13.7% of GDP in the base case), while the estimate of the state debt has been reduced by 5.5 p.p.. – to 105.9% of GDP (94% of GDP in the base case).
“Given the reserve holdings, some intervention is expected to prevent excessive exchange rate volatility and inflation carryover. Unlike in the baseline scenario, in the downside scenario, inflation will take longer to return to the target level,” the materials said.
According to them, the estimate of the increase in donor funding compared to the baseline scenario was left unchanged at $140.6 billion versus $121.8 billion in the baseline scenario.
“If the severity of shocks takes the country beyond the downside scenario, additional measures may be required, and the authorities have the commitment and capacity to implement them. Repeated shocks beyond the downside scenario could force the authorities to take temporary unconventional measures,” the Fund also pointed out.
Depending on the size of the financing need, according to IMF experts, extraordinary measures that could further raise revenues (e.g. a solidarity tax as a complement to the personal income tax, and/or an additional tax on luxury goods, or excise taxes/levies) and mobilization of domestic bond financing on an even larger scale, as well as monetary financing within program parameters, may be needed. “The latter could include, if necessary, administrative measures requiring banks to hold government securities at a set amount or with a minimum holding period, possibly differentiating banks according to individual liquidity conditions. Secondary purchases of government bonds by the NBU could also support the primary market,” the Fund explained.
Instruments such as inflation- or exchange rate-linked bonds could also be considered, he said.
In addition, says MF, while the scope for fiscal tightening is limited, it will have to be considered as well, as ultimately spending in some categories depends on the inflow of external financing.
“Overall, the extensive discussions with the authorities on contingency plans during the Third Review reaffirm that the program remains credible even in the event of such a negative scenario. The authorities’ political commitment and track record, as well as renewed financial guarantees from international partners and expected debt relief, give confidence that even in this updated deterioration scenario, the program’s objectives of maintaining macroeconomic and financial stability and restoring debt sustainability in the future will be achieved,” the Fund concluded, noting that the authorities are prepared to take appropriate policy measures if necessary.
It is specified that in the fiscal sphere, the bulk of the adjustment will be done through fiscal measures that can be effectively and quickly implemented to increase revenues, while some expenditures should be made contingent on available financing.
“Temporary pressure on the managed floating exchange rate regime under the negative scenario may require the reintroduction of some of the exchange controls used earlier during the war,” the IMF also noted.
The materials note that the risks to both forecasts – both basic and negative – remain extremely significant and continue to develop against the background of prevailing uncertainty. Among the main risks, the Fund categorized the risks associated with a serious shortfall in external financing and/or the impact of a more intense and prolonged war. It is explained that shortages or prolonged delays in donor funding could require the authorities to take swift countermeasures to overcome liquidity pressures, which could weaken confidence and further dampen growth, and be potentially destabilizing if uncertainty lasts too long.
Whereas, as the war continues, defense spending needs could increase significantly due to mobilization and increased intensity of hostilities, which could negatively affect confidence and lead to financing gaps.
“In the event of serious negative shocks, the authorities may resort to suboptimal measures (e.g., accumulation of budgetary arrears and cuts in social spending). The negative sentiment that may arise from this could lead to social unrest,” indicated another IMF risk.
It is emphasized that the 2025 budget will need to take into account continued risks and allow for greater Ukrainian autonomy to meet priority expenditures. “While the baseline scenario expects the war to end by the end of 2024, significant needs for defense, reconstruction, social protection, and economic development are likely to remain. At the same time, external budgetary support, while still substantial, is expected to decline sharply. Thus, additional efforts to increase revenues will be required,” the Fund noted.
According to the updated program, while in 2023 external financing amounted to $42.5 billion, and this year it is projected at $38.1 billion, next year it is expected to drop to $22.9 billion.
Earlier, the Experts Club think tank released a video on how countries’ GDPs have been changing in recent years, more video analysis is available here –
PrJSC “Production Association “Stalkanat-Silur” (Odesa) ended 2023 with a net loss of UAH 720 thousand, while in 2022 it amounted to UAH 9.494 million.
According to the information for the annual general meeting of shareholders scheduled for April 18 this year, which will be held remotely, the company’s retained earnings at the end of last year amounted to UAH 102.193 million.
The shareholders will summarize the results of the year 2023, including reports from the CEO, the Supervisory Board and the auditor, and decide on covering losses from future periods’ profits. The company’s charter and bylaws will also be amended, and the election of members of the supervisory board will be held.
As reported earlier, the general meeting of shareholders held on September 3, 2021, decided to spin off Stalkanat-Silur and establish a new company, Stalkanat, with the transfer of some property, rights and obligations to it in accordance with the approved distribution balance sheet.
Stalkanat-Silur CEO Sergey Lavrinenko previously explained to Interfax-Ukraine that all shares in the newly created PrJSC Stalkanat are to be distributed among all shareholders of PrJSC Stalkanat-Silur. The shareholders agreed to spin off Stalkanat, which will take over the Odesa industrial site. In turn, Stalkanat-Silur will also be retained, with Silur located in the temporarily uncontrolled territory (Khartsyzsk, Donetsk Oblast) on its balance sheet.
PJSC PA “Stalkanat-Silur” (Odesa) previously had two branches – in Odesa and in Khartsyzsk, Donetsk region, on the oil and gas pipeline. On December 1, 2016, the company’s management officially announced the closure of the company’s branch in Khartsyzsk – the relevant announcement was published in the newspaper Uriadovyi Kurier. Later, the management of PJSC “PA “Stalkanat-Silur” announced the seizure of the company’s branch in Khartsyzsk on the tubing and sent a statement to the National Police.
According to the third quarter of 2023, David Nemyrovsky (Ukraine) owns 50.0001% of the shares of PJSC PAO Stalkanat-Silur, Anton Mikhalenko (Israel) owns 23.7%, and Maria Kondratyuk (Ukraine) owns 23.1%.
The authorized capital of PJSC Stalkanat-Silur currently amounts to UAH 8.346 million.
On Monday, March 25, in most of the southern and central regions there will be moderate, sometimes heavy rains during the day, in the western and northern regions there will be light rain, at night in some places with sleet, in the rest of the territory without precipitation, the Ukrainian Weather Center reports.
In the western regions, there will be fog in some places at night and in the morning. South wind with a shift to the north, 5-10 m/s.
The temperature at night will be 0-5° C, during the day 5-10° C, in the southeastern part 9-14°.
In Kyiv on Monday, there will be light rain in some places. The wind will be mostly north, 5-10 m/s. The temperature will be 1-3° Celsius at night and 8-10° Celsius during the day.
According to the Central Geophysical Observatory named after Borys Sreznevsky. Borys Sreznevsky Central Geophysical Observatory in Kyiv, on March 25, the highest daytime temperature was 20.3° in 1921, the lowest nighttime temperature was -14.3° in 1895.
On Tuesday, March 26, moderate rain in the southern and central regions of Ukraine, light rain in the northern regions, and no precipitation in the rest of the country.
Wind of variable directions, 3-5 m / s. The temperature at night will be 0-5° Celsius, during the day 7-12°.
In Kyiv, on Tuesday, there will be light rain in some places. Wind of variable directions, 3-5 m/s. The temperature at night will be 3-5° C, during the day 8-10°.
Polish farmers continue to block the movement of Ukrainian trucks in three directions, at checkpoints “Yahodyn” and “Rava-Russkaya” cargo vehicles are not allowed to exit Ukraine, said the speaker of the State Border Service of Ukraine Andriy Demchenko.
“As of now there are three directions (blocking traffic), I remind you that before there were 6 checkpoints they blocked (Polish protesters). As of now – 3, if more substantially, these are checkpoints “Yagodin”, “Ugrinov”, as well as “Rava-Russkaya”. And in fact on the two largest of these three checkpoints – “Yahodyn” and “Rava-Russkaya”, Polish farmers do not pass cargo vehicles that follow from Ukraine at all”, – he said on air of the national telethon on Sunday.
According to the speaker of the State Border Service, these two checkpoints have recently recorded zero numbers on the exit from Ukraine, with about 500 trucks in queues.
Polish farmers, Ukrainian trucks, Yahodyn and Rava Russka Andriy Demchenko
In February this year, Ukrainian steelmakers increased steel production by 25.5% compared to the same period in 2023, up to 532 thousand tons from 424 thousand tons.
At the same time, Ukraine was ranked 22nd in the ranking of 71 countries that are global producers of this product by the World Steel Association (Worldsteel).
According to Worldsteel, in February, steel production increased in most of the top ten countries, except for the United States, Russia and South Korea, in February 2023.
Net sales of dollars by the National Bank of Ukraine (NBU) increased from $262.6 million last week to $680.4 million this week, which is in line with the figures at the very beginning of the year, according to the regulator.
According to the data, sales of foreign currency increased from $263.0 million to $680.9 million, while purchases remained at a meager level, although they increased slightly – from $0.37 million to $0.46 million.
The official hryvnia exchange rate weakened by almost 11 kopecks over the week, from 38.7998 UAH/$1 to 38.9075 UAH/$1. According to the regulator, the exchange rate declined in the first half of the week, reaching a historic low of 39.1399 UAH/$1 on Wednesday, after which it strengthened by 21 kopecks on Thursday and then by another 2 kopecks on Friday.
On the cash market, the hryvnia exchange rate weakened by 29 kopecks over the week. Unlike the interbank market, after strengthening from 39.31 UAH/$1 to 39.16 UAH/$1 on Thursday, it fell back to 39.30 UAH/$1 on Friday.
The dynamics of the negative balance between the volume of purchases and sales of foreign currency by the population corresponded to the fluctuations of the hryvnia at that time: from $15.4 million on Monday, it rose to $20.7 million on Wednesday.
As reported, on March 20, Ukraine received the first tranche of EUR4.5 billion from the EU under the Ukraine Facility program and $1.5 billion from Canada, while before that, all external revenues amounted to only $1.2 billion since the beginning of the year. In addition, on Friday night, the IMF Board of Directors approved the disbursement of the fourth tranche of $880 million under the EFF Extended Fund Facility program to Ukraine, which should arrive in two to three days, and on March 22, the budget received $230 million from Japan as part of the World Bank’s agricultural recovery project.
According to the National Bank’s forecasts, Ukraine may receive external financing worth $10 billion or even more from mid-March to the end of April, against the $37.3 billion in the state budget for the whole year.
At the same time, representatives of the National Bank noted at a press conference on March 14 that such irregular external financing would not lead to any shocks in the foreign exchange market.
In February, the NBU’s net sales fell to $1.50 billion from $2.53 billion in January, $3.55 billion in December, and $2.45 billion in November. However, due to low external support, international reserves declined by 3.8%, or $1.47 billion, to $37.05 billion in February after falling by 4.9%, or $1.98 billion in January.
In January, the National Bank lowered its forecast for Ukraine’s international reserves at the end of 2024 to $40.4 billion from $44.7 billion.
