What threats does the reduction of international financial aid to $21.1B in 2026 pose to Ukraine?

Tuesday, August 6, 2024
What threats does the reduction of international financial aid to $21.1B in 2026 pose to Ukraine?

The NBU’s basic scenario envisages the preservation of significant volumes of external financing for Ukraine, which, however, will slowly decrease as Ukraine’s ability to fund its budget expenditures with internal resources expands. According to the NBU, Ukraine will receive $38B in external financing this year, $31.4B in 2025, and $21.1B in 2026.

“Such amounts of aid, together with an increase in domestic borrowing, will help to finance a significant budget deficit – about 23% of GDP in 2024 and 18% in 2025,” the NBU review says.

In contrast to the current year, the risk of not receiving the expected funding remains significant for the following years.

“Its implementation will increase the probability of the budget being renewed for emission financing. In addition, smaller inflows of international aid will reduce international reserves, weakening the state’s external stability and causing a deterioration in exchange rate and inflation expectations,” the NBU said.

However, a loan secured by income from immobilized Russian assets may provide an additional financial resource beginning in 2025.

 

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