Finance minister deems raising $11 bln for Ukraine's recovery by mid-2023 feasible
MOSCOW. April 27 (Interfax) - The Ukrainian Finance Ministry is actively involved in talks as part of its goal set to raise $11 billion in external financing for the country's recovery by the middle of this year, and believes this task is feasible.
"It is feasible, and we are working on this," Finance Minister Sergei Marchenko said in an interview with Ukrainian media following talks at the recent Spring Meetings of the International Monetary Fund (IMF) and the World Bank (WB).
He noted that the total needs for the recovery this year, as identified jointly with the World Bank, amount to $14 billion, of which $3.3 billion is already envisaged in the Ukrainian state budget, the main channel of its use will be the established budgetary fund of liquidation.
The sources of its replenishment are already known. In particular, they are the National Bank's revenue. "At this stage, it is important for us to find an external source, and then how we will transform it into the Ukrainian budget and this is another matter," the finance minister said.
He said that $1.5 billion is being discussed for this purpose with the United States government, which also allocates $0.8 billion for energy, "in the form of various kinds of power transformers, equipment, which is required to prepare for the winter."
The minister added that Japan has provided $0.4 billion in grant aid from the Japan International Cooperation Agency (JICA), and overall since the beginning of the year Ukraine and Japan have agreed to allocate more than $650 million for Ukraine's reconstruction needs.
"Further 1 billion euros has been announced by the European Union. The final format is not yet being discussed," Marchenko said.
He noted that even before the Spring Meetings the World Bank created the Ukraine Relief, Recovery, Reconstruction and Reform Trust Fund (URTF), which is a trust fund for the support, recovery and reform of Ukraine, which raises funds from the donor countries for the framework projects, in particular: RELINC (reconstruction of transport infrastructure), Re-Power (energy), HEAL (support of the health care system).
"It is very important that the URTF fund attracts grants. During the ministerial Roundtable of the World Bank and the IMF, we also urged our partners to invest in this fund," the minister said.
HOPE, a new project, is being discussed with the World Bank, he said. "This involves the restoration of housing and compensation to citizens for lost housing. The format of the project is under discussion," Marchenko said.
The first meetings of the URTF fund have already taken place with participation of representatives of the governments of Austria, Canada, Iceland, Japan, Lithuania, the Netherlands, Norway, Sweden and Switzerland, as well as the governments of the United States, Germany and Indonesia were invited to take part, he said.
"And we see that it is possible to accumulate $2 billion through the URTF by the end of the year. To date, the fund envisages about $1.1 billion in potential donor contributions: money has not yet reached the state budget, but there is already confidence in them," Marchenko said.
He said that these are the funds from Japan amounting to $471 million, Norway $100 million and $190 million in the course of processing, the Netherlands $94 million and $65 million more in the process of processing, Canada $84.5 million, Switzerland about $58 million, Sweden $13.48 million, Austria $21.21 million, Lithuania $5.32 million, Iceland $2.5 million and $0.5 million more in the process of processing and Latvia $2.2 million more in the process of processing.
"Of course, if they [donors] decide to provide them through the European Investment Bank (EIB) or the European Bank for Reconstruction and Development (EBRD), it could be a solution that suits us," the minister added.
He also said that the government is counting on the Special Program for Ukraine's Recovery and Crisis Response (SPURR), a new facility totaling $2 billion established by the International Development Association (IDA) credit institution, which is a member of the World Bank Group.
It is important that this is a multiplicative facility and that Ukraine could potentially receive $6 billion in aid, he said.
Marchenko added that potential contributors could also be the G7 countries, Norway, Switzerland, and the Netherlands, which have already declared great support for Ukraine.
"On the part of the Danish government, intentions were voiced to set up a special facility for Ukraine of about 1 billion euros," the minister said in particular, specifying that part of this amount could be military aid and another part could be humanitarian, while the distribution is still under discussion.
"Switzerland announced 1.8 billion Swiss francs for the next six years. In addition, several other countries have made statements: some pledged to invest in the SPURR, some in the URTF, some provide guarantees to the EBRD, some to the IFC corporation, as the other day the Netherlands invested $43 million and Switzerland $11 million," the finance minister said.
He also noted that the other day Japan allocated $23 million to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group, which establishes a facility for risk insurance, and Japan was the first country to make such a contribution.
"Other countries include Lithuania, Latvia, Ireland, Iceland, the Netherlands, etc. That is, the countries are looking at current channels: it's either the World Bank, or the development banks, like the EBRD, the EIB. The EIB also offers a facility for Ukraine. Now there is a competition for donors among international financial organizations," Marchenko said.
At the same time, he cannot provide the exact figure for the already raised funds, as their distribution is still being discussed.
Speaking of the external financing of the state budget deficit, which is estimated at $42 billion, the finance minister said that he did not see any problems until late 2023.
"But, of course, we understand the potential risks, including political ones, in different countries. And we have already delivered the message that it is important for us to have confidence in the future. We communicated this message to both the U.S. Treasury and our European colleagues," Marchenko noted.
He noted that the guarantees for such financing are the basis for the $15.6 billion four-year Extended Funding Facility (EFF) program, which was launched in late March.
"They [partners] guarantee that they will be able to finance the deficit, which is not covered by domestic sources and IMF loans. This is a key condition of the program. Until the 2023 budget gap was funded, there were difficult talks. Canada joined in, while Japan provided additional funds, and this allowed opening the program," the minister said.
As reported, along with $15.6 billion provided by the Fund the $115 billion package of support for Ukraine for the specified four years provides $80 billion from multilateral and bilateral donors, of which $20 billion in the form of grants and $60 billion in the form of preferential loans, and another $20 billion in the form of deferral of payments on foreign debt.