Financing of the state budget of Ukraine from partner countries
One scenario foresees lack of US support
After the European Commission voted unanimously on February 1, 2024 for the Ukraine Facility program worth 50 billion euros, in 2024 Ukraine will be able to receive 18 billion euros to support macro-financial stability, and the lack of financial assistance from the United States will no longer be so critical.
The fiscal gap in the budget will be about UAH 1.3 trillion ($32.2 billion at the rate set in the budget - UAH/USD 40.7). In such conditions, the main risk this year remains the possibility of a reduction in budget support (including the expected 400 UAH billion of grants) from our international partners, which risks increasing the budget deficit to more than 1.7 UAH trillion.
The main risk this year remains the same - a reduction in US support for Ukraine (both military and direct funding in the form of grants). At the same time, despite the continued partial political uncertainty in the EU regarding support for Ukraine at the end of 2023, on February 1, 2024, the Ukraine Facility program for 50 billion euros was unanimously adopted. This means that in 2024 Ukraine will be able to receive 18 billion euros to support macro-financial stability (which is almost comparable to the level of 2023). This means the lack of financial assistance from the United States will not be so critical in 2024.
The policy of the Ministry of Finance in 2024 can develop according to several scenarios:
Maintaining external funding at the 2023 level (or a slight increase, including through the transfer to Ukraine of taxes on income from confiscated Russian assets by EU countries and the UK). This will allow the Ministry of Finance to avoid increasing the tax burden on businesses. It will also be possible to avoid a return to direct emissions by the National Bank and maintain the NBU target for consumer inflation.
The unwillingness of the United States to support Ukraine (inability of Congress to approve a support package for Ukraine due to the lack of consensus between Democrats and Republicans before the end of the presidential elections in November 2024).
In this case, we will not receive grant funding from the United States in the amount of about 420 UAH billion, or about $10 billion. And the expected amount of external revenues from allies decreases from $42 to $32 billion. However, it is expected that unplanned own revenues of budgetary institutions will still arrive (about UAH 650 billion), which will create the potential to compensate for the defense budget without a sharp reduction in other socially significant expenses.