Ukrainian budget deficit hardest to cover in Q1 2023 - finance minister
MOSCOW. Oct 27 (Interfax) - The financial support obligations undertaken by Ukraine's foreign partners and the real amount of funding that has been disbursed thus far differ substantially, which produces a problem of liquidity and might prompt the National Bank to continue the monetary financing of the budget deficit, with all the negative implications for inflation, the exchange rate, and macroeconomic stability, Ukrainian Finance Minister Sergei Marchenko said.
"There's a huge difference between obligations and [real] payments," Ukrainian media quoted Marchenko as saying during debates organized by the Bruegel think tank.
"The first quarter of 2023 is the most problematic one for us now [...] Even the huge number of obligations won't help us in the first quarter of 2023 [unless the funding is provided]," he said.
Speaking at an international expert conference on Ukraine's recovery in Berlin on Wednesday, Marchenko said Ukraine's fiscal and quasi-fiscal financing needs in the first quarter of 2023 have been estimated at $11.4 billion. This sum includes $4.2 billion needed for buying natural gas, including $1.9 billion in January, $1.4 billion in February, and $0.9 billion in March.
Ukraine's overall financing needs in the first quarter of 2023 amount to $4 billion in January, $4.1 billion in February, and $3.3 billion in March, Marchenko said in his presentation. Ukraine's needs for financing in the rest of the year were estimated at $37.9 billion, a monthly sum ranging from $2.1 billion in August to $3.9 billion in June.
Ukraine reached agreement with its international partners in April 2022 on estimating its monthly budget gap at $5 billion, while the real funding provided to the country has been far from that figure, he said.
"For instance, only $1.7 billion was provided in April, only $1.5 billion in May, $4.4 billion in June, $1.7 billion in July, $4.7 billion in August, and about $2 billion in September," he said.
If the European Union's macro-financial assistance [about 3 billion euros] and the funding declared by the U.S. [$7.5 billion] are disbursed before the end of 2022, the Ukrainian Finance Ministry would feel comfortable enough, he said.
"But again, this doesn't mean that we'll be able to cover all our expenses before the end of the year. This only means that we'll be able to manage the liquidity gap [...] we can finance critical expenses, while other expenses could be postponed," he said.
The Ukrainian Finance Ministry estimates the need for extra foreign financing to cover social budget expenditures at $3 billion to $3.5 billion, excluding expenditures for urgent recovery, he said.
The European Union's undertaking to disburse 1.5 billion euros a month in 2023, or 18 billion euros on the whole over the year, which European Commission President Ursula von der Leyen announced on Wednesday, give reasons to assume that this problem can be solved, he said.
"Again, it's important for us to plan in advance. It's not clear yet whether we'll be able to use this money in the first quarter of 2023," Marchenko said.
He said he discussed the matter with the German finance minister and ministers from other countries.
"If you are ready to support Ukraine, please do it quicker, because while it takes you some time to make a decision, we have no time. January is drawing near, and there's no coverage for January," he said.
Marchenko said he expected the United States to make its contribution to financing Ukraine.
"But again, it's unclear to me when the money can be disbursed, and if not, we should find other options, we'll consider some other prospect, perhaps involving bilateral creditors and so on. That's why predictability is so important," Marchenko said.