In the nearest future, foreign partners plan to provide financial support to Ukraine in the amount of about $34 billion. This support will consist of several nonrepayable loan receipts and grants. Among the largest donors are the European Union, the USA, the European Investment Bank, the World Bank, and the United Kingdom. Out of the entire promised amount, $12.7 billion has already been credited to accounts in Ukraine. A shareholder and the Chairman of the Supervisory Board of IBOX BANK Alona Shevtsova will tell us about who financed Ukraine in the conditions of the ongoing war and for what reasons.
A lot of financial support was provided in August, thus increasing Ukraine’s international reserves by 13.6%, amounting to more than $25 billion. Another favorable factor for increasing savings is the postponing of payments on debt obligations, which was previously approved by investors. According to the recent calculation of the NBU, these funds will be enough to ensure the import of goods for the next 4 months. As a result, August was the month with the highest amount of financial aid received. It totaled in the amount of almost $5 billion. This made it possible to avoid printing additional hryvnia banknotes while easing the pressure on the foreign exchange market.
The Ministry of Finance of Ukraine has developed an infographic that clearly shows the sources of financing for the state budget since the beginning of the full-scale invasion. The data is relevant as of August 30, 2022. The lion’s share of the budget is usually covered by the National Bank and the sale of government bonds, but it is extremely difficult to ensure the functioning of the budget independently in war conditions.
To cover all budget needs, in addition to aid from the West, the NBU continues issuing more money for at least 4.5 months. This is happening because even considering all these finances, we still have a huge budget gap of $5 billion a month. According to the NBU, from January to July 2022, the state spent almost 45% of the consolidated budget on military needs. It is worth noting that the financing of the economic system of Ukraine is directed exclusively to social and humanitarian programs. The allocation of grants and loans for the military sphere is a separate thing and is not included in these expenses. For example, this money is used to finance the supply and manufacture of weapons, as well as the training of the Ukrainian military.
Constant financial support from our Western partners is a weighty argument for us to be confident in our allies. Many European and American politicians are in favor of supporting Ukraine as much as necessary. On June 7, the European Commission offered Ukraine an additional amount of €5 billion in macro-financial assistance. This was offered in addition to the amount of €10 billion that has already been provided in the form of financial, humanitarian, and military assistance. The government counts to get this money until the end of September. Even earlier, on September 5, the European Commission announced its readiness to sign a new budget support program for €500 million. These funds are planned to be used to support internally displaced persons and the agricultural sector.
It is also worth noting that foreign assistance to the financial sector of Ukraine contributes to ensuring economic stability, continuing support for the army and displaced persons, as well as the successful beginning of the heating season, and other state social and humanitarian expenses. Keeping in mind the projected reduction of the economy by a third according to the annual results, we have become dependent on international revenues, but this also means that Ukraine has not been left with its problems on its own. We are having talks about the post-war reconstruction of Ukraine with the help of the EU, G7, and other world economic leaders. All these give confidence in a rapid recovery and the ability to continue paying off government loan obligations.