10 Nov 2023 12:06

Ukraine's MinFin acknowledges problems financing 2024 budget, but not considering printing money

MOSCOW. Nov 10 (Interfax) - Ukraine's Finance Ministry acknowledges the difficulty of financing the planned state budget deficit in 2024, but is counting on previously promised support from G7 countries and is not currently considering monetary financing, Ukrainian media reported, citing Finance Minister Sergei Marchenko.

A transcript of his address to the Verkhovna Rada on November 9 in a presentation of the budget has been posted on the parliamentary website.

"We're not talking about any monetary financing at this stage and I hope that we will manage to ensure macroeconomic stability and acquire the necessary amount of external resources, because this is genuinely very important for both inflation and other macroeconomic indicators," Marchenko said.

"As for the $29 billion [of unconfirmed funding out of the $41 billion in external financing factored into the budget], this is indeed an issue that has not been finally decided yet. However, there are clear assurances that aid will arrive steadily and in the amount that is needed, and that's enough for us," Marchenko said.

He said these assurances are also sufficient at this point for the International Monetary Fund to continue releasing tranches to Ukraine under the four-year $16 billion Extended Fund Facility (EFF). When it opened the facility, the IMF received assurances from G7 countries that they would finance their share of the overall $115 billion support package for these four years.

"Since the program is continuing, and [an IMF] is [in Ukraine] now as we speak and active negotiations are being held, we hope that this issue will also be closed," Marchenko said.

Ukraine's main task is to "not give any reason for them to reduce this [financial] aid," he said. "Because, unfortunately, sometimes many pretexts arise and even the rhetoric of negotiations with our key partners changes. And the desire to find a so-called excuse [...] often prevails," Marchenko said.

He also said that Ukraine is not just financially dependent on the United States, since the G7 countries provided assurances of support for the four-year EFF program.

"And at my last meeting with G7 finance ministers I raised the question of what will happen if one country is unable to realize its assurances. The other finance ministers said that they will find a backstage solution, a systemic solution in order to cover these issues that now have to be closed," Marchenko said.

He said hopefully the U.S. administration will make a decision to support Ukraine, remarking that U.S. financing is also important to Ukraine because it is provided on a grant basis.

Ukraine expects to receive $5.4 billion from the IMF and $8.5 billion from the United States next year, he recalled.

Speaking about support from the European Union, the minister said negotiations on an aid package are continuing and his ministry is pushing for the EU to provide 18 billion euros for Ukraine's budget in 2024 out of the discussed 50 billion euros over four years.

"We are holding negotiations with the governments of Canada, Norway, Japan and South Korea on the possibility of finding alternative sources for financing the budget deficit," Marchenko added.

Ukraine's parliament passed the state budget for 2024 on November 9. The budget targets a deficit of UAH1.57 trillion or 20.6% of forecast GDP, down from UAH2.01 trillion or 31.1% of forecast GDP in the 2023 budget. Budget revenues are expected to total UAH1.767 trillion, 24.9% more than the planned figure in this year's budget, while spending is expected to drop by 1.1% to UAH3.355 trillion.

The lion's share of the deficit, equivalent to $41 billion, is expected to be covered by external financing.

The official exchange rate is UAH36.04/$1 on November 10.