Monday, December 23, 2024
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What will happen to the Ukrainian budget if financial assistance is not provided?

Ukraine needs to find $3 billion in additional funding every month to meet the state budget for next year. In what ways can these finances be secured? What options can be considered to raise the necessary funds?

A delay in financial assistance from the United States could lead to “difficulties with spending in the social and humanitarian spheres” as early as January, said the head of the Verkhovna Rada of Ukraine Budget Committee Roksolana Pidlasa in a commentary to Forbes . The politician did not make any clarifications, but it would be appropriate to say that even pension payments fall under this formulation. According to Pidlasoy, in a bad scenario, the government will have to cut state budget expenditures and raise more funds from the placement of domestic government bonds (OVDPs). Let us recall that the planned state budget deficit of Ukraine for 2024 reaches UAH 1.57 trillion, and Ukraine expects to receive $11.8 billion from the United States, which is UAH 480 billion (at the rate included in the budget). However, for now, the draft law on the allocation of funds for Ukraine, Israel and Taiwan is blocked in the US Congress due to the internal political confrontation between Republicans and Democrats on the topic of strengthening the border with Mexico.

DS publishes a blog by financial analyst Alexey Kushch, which is essentially a response to Roksolana Pidlasa’s statement.

Will the budget stop if there is a pause in the provision of international financial assistance to Ukraine? The head of the budget committee of parliament, Roksolana Pidlasa, spoke about such a threat.

In my opinion, he will stop only in one case: if we stop him ourselves.

The National Bank has $39 billion in foreign exchange reserves.

The budget's need for a mode of not even saving, but simply rational spending - $3 billion monthly in the form of additional revenues to the planned tax revenues.

$20 billion of reserves is up to seven months of budgetary deficit coverage.

Plus there is an emission potential - up to UAH 400 billion, that is, another three to four months of additional financing.

In general, the year can be closed if desired and without horror stories about freezing pensions and social benefits.

Yes, you will have to save every penny. In Kyiv, for example, now is the season for insulating public buildings in wet snow to absorb budget expenditures in December (on December 31, expenditure items will turn into a pumpkin and the beneficiaries will receive nothing).

And so it repeats from year to year. The process did not stop even during the war.

In the format of rational spending of funds, it will be necessary to go for budgetary consolidation on the highest priority costs according to a clear ranking:

  • defense;
  • critical infrastructure;
  • pensions and social benefits;
  • education, medicine, science;
  • everything else that there is money left for.

And finally, we will have to solve the problem of government debt: write-off, restructuring, reduction of the coupon rate.

But the most important thing is that there will be no budget collapse. This does not change the real problem of financing for 2025.

But I described a scenario of a complete stop of foreign aid, and with a 99% probability this will not happen. There is a real risk of losing up to 50% of external support from the average level of 2022-2023. That is, part of 2025 can be covered.

The main thing for officials is not to become hysterical and keep a clear hand at the helm.

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Source Dsnews.ua
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