A team from the International Monetary Fund began discussions with Ukrainian officials Tuesday.
These talks aim to identify strategies for boosting revenue streams in Ukraine’s war-ravaged economy, and for addressing the significant budget deficit forecast for 2024.
Budgets and fiscal policies are under review
IMF has announced that its meetings in Kyiv will focus on the evaluation of Ukraine’s fiscal policies for 2024, and medium-term.
The IMF disbursed $3.078 Billion to Ukraine this year under the Extended Fund Facility Program of $15.6 billion.
According to Roksolana PIDLASA, the head of parliament’s Budget Committee, Ukraine is facing a budget deficit estimated between 400 and 500 billion Hryvnias (9.8 to $500 billion).
Analysts and officials indicate that this deficit will be addressed by the government through an increase in taxation as well as increased domestic borrowing.
Defense spending and foreign aid: key financial pillars
Ukraine’s 2024 budget dedicates over $40 billion–approximately half of its total expenditures–to the defence sector.
To support its social and humanitarian expenditure, the government is heavily dependent on financial assistance from abroad.
IMF funds are a major part of the foreign aid worth $37 billion that Ukraine expects to receive this year.
According to the Finance Ministry, Ukraine received about 16 billion dollars from Western partners. By the end 2023, the amount of foreign aid that Ukraine received since the Russian invasion began in February 2022 was $73.6 billion.
The economic turmoil and recovery efforts
Invasion has caused severe economic disruption in Ukraine, with massive displacements, destruction of infrastructure and cities, as well as significant interruptions in supply chains.
In 2022, the economic output of Ukraine will have plummeted approximately by 29%.
In 2023 the economy started to show signs of recovery, with an annual growth rate of 5,3%. Businesses adapted themselves to war conditions.
The government has revised down its forecast of economic growth for this year to around 3 percent, citing an increasing energy deficit due to Russian drone and missile attacks against Ukrainian power plants.
Debt restructuring: Urgency is key
The Ukrainian government must not only address its deficit but also restructure its debts abroad in the midst of the conflict.
On August 1, the payment moratoriums will expire, which highlights how urgent this effort is.
The ongoing IMF discussions will be crucial in helping Ukraine to navigate these complex challenges and secure the financial assistance it needs.
It is anticipated that the outcome of this meeting will influence future budget changes and possible tax increases.
The post IMF begins critical fiscal policy discussion in Kyiv on Ukraine’s budget deficit 2024 may be updated as new information unfolds
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