13 Dec 2024 14:30

Necessary to cut Ukraine's dependence on internal financing - finance minister

MOSCOW. Dec 13 (Interfax) - The Ukrainian Finance Ministry will take steps in 2025 to try to stabilize borrowing on the internal market to pay off the current debt, as this market's deficit financing potential has almost been exhausted, Finance Minister Sergei Marchenko said.

"There should be a trend toward lower dependence on internal financing, as it is no longer as useful as it was at the start of the crisis [...]," Ukrainian media quoted Marchenko as saying at a discussion organized by the Center for Economic Strategy on Thursday.

Next year's amount of borrowing in absolute terms will not be smaller than in 2024, but it is unreasonable to increase it any further, he said.

"If there are liquidity problems, we'll assess to what extent it is critical," he said.

When commenting on key tendencies of the budget process as a whole since the start of the crisis, Marchenko said that each passing year will boost the government's ability to better plan the budget. Thus, Ukraine's budget was amended just once in 2024, three times in 2023, and more often in 2022, he said.

"We have enough funds to maintain the same pace and the campaign that we have in 2024," he said.

Ukraine's dependence on external financing will remain at nearly the same level as it was in the past two years, i.e. at up to $40 billion, though its ratio to GDP has gradually been shrinking, Marchenko said.

"We are adding expenditures quite cautiously and are not increasing expenditures other than spending on the Defense Forces and pensions. We are not going to raise wages either, which means that there is a certain freeze on social expenditures," he said.

As reported, 2024 state budget amendments adopted allocate a further UAH 216 billion to be raised on the government bond market to finance the budget deficit by the end of the year with borrowing raised to UAH 742.02 billion and redemptions at UAH 386.01 billion. According to the Finance Ministry, the actual volume of internal borrowing will probably be smaller due to an increase in external financing.

The government's draft 2025 state budget calls for the placement of UAH 579.22 billion of government bonds and redemptions of UAH 561.98 billion. There are also plans raise $38.4 billion in external funding and to finance UAH 1.876 trillion of the budget deficit with this.