How much additional funding Ukraine needs to finance state salaries?
The United States and the EU are yet to allocate additional—and much needed—financing for Ukraine. State budget funding, payments in the public sector and, ultimately, the salaries of Ukrainian troops depend on this allied assistance. Otherwise, Kyiv’s only option is to print currency, leading to hryvnia devaluation and soaring inflation.
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U.S. President Joe Biden has called on Republicans in Congress to approve additional funding, including more than $60 billion for Ukraine, after the 2024 government funding deal. The debate on this issue reached an impasse in the U.S. House of Representatives in late 2023. However, there are prospects that U.S. aid will finally be approved in the near future. In the EU, too, there is still no decision on the allocation of funds to Ukraine, with Hungarian PM Viktor Orban remaining an intractable opponent of extending EUR 50 billion ($55 billion) in aid.
Time is short. According to forecasts by Ukraine’s parliamentary Finance Committee Chairman Danylo Hetmantsev, Ukraine has enough cash on hand to last through January-February. Earlier, the head of the International Monetary Fund (IMF), Kristalina Georgieva, warned that a delay in financial aid for Ukraine could jeopardize the recovery of its economy and force the authorities to return to printing currency.
Finance Minister Serhiy Marchenko is not sure that Ukraine will receive aid from its partners in January-February, which is why the ministry prepared a backup plan: "We will maximize the resources that we can bring to January-February. These include advance payments of dividends, increasing borrowing, and other measures. The situation is not critical – there is simply an understanding that we will need to rely on internal resources as much as possible," Marchenko said at a recent public event.
NV Business asked experts to estimate the minimum amount of foreign aid that would be sufficient for 2024.
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Olena Bilan, Director of the Analytical Department and Chief Economist of Dragon Capital, told NV Business that, according to their estimates, Ukraine would need about $40 billion of external financing and $4 billion of borrowing on the domestic market to finance the budget.
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According to Capital Times investment director Artem Shcherbyna, as of Dec. 1, more than $29 billion in international financial aid has been contracted, but not yet approved. He assesses that Ukraine's need to finance the budget deficit is $44 billion (of which the Finance Ministry plans to provide $11 billion via domestic borrowing). That would leave another $4 billion, which probably won't be difficult to find. However, it will be extremely difficult to ensure a sufficient surplus of funding to support Kyiv’s gold and forex reserves, social security spending, and the expansion of funding for the military.
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How much is the absolute minimum required? Alexander Parashiy, head of Concorde Capital's analytical department, believes that it would be possible to get by with a more modest amount of about $30 billion.
Vitaliy Vavryshchuk, the head of the macroeconomic research department of the ICU Group, estimates that Ukraine will need $28-30 billion in financial aid in 2024 to settle the current account deficit, but, according to him, this will not be enough to cover the budgetary shortfall. This assistance, according to Vavryshchuk, could be provided either in the form of grants or loans.
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