Will Western aid plug Ukraine's gaping budget deficit in 2024?

KYIV - Ukraine relies heavily on economic assistance from the West and has received more than US$68.5 billion (S$90 billion) in budgetary support during the war started by Russia in February 2022, finance ministry data shows.

Ukraine spends all its revenue on the defence sector and army, while budget sector overheads have been largely covered by Western aid. A single day of fighting costs about US$136 million, Finance Minister Serhiy Marchenko has said.

Next year, the government will again need massive injections of financial support to disburse social payments, wages for budget workers, and pensions for millions of Ukrainians.

The government expects a budget deficit of about US$43 billion in 2024 and plans to cover it with domestic borrowing and financial aid from its Western partners.

Finance ministry officials have previously said they expect to receive US$41 billion in international aid next year.

But the government and analysts are now worried by signs of uncertainty over the provision of that financing. Some analysts predict Western aid is likely to start diminishing next year.

Here are some facts and figures about the main Western packages containing economic assistance that Ukraine hopes to receive.

US assistance

Ukraine is in talks with the US government to receive economic assistance next year. Kyiv seeks US$8.5 billion in aid to help cover its budget deficit, senior lawmaker Yaroslav Zheleznyak said.

US President Joe Biden's administration asked Congress in October for nearly US$106 billion to fund plans for Ukraine, Israel and US border security, but Republicans who control the House with a slim majority rejected the package.

Ukrainian President Volodymyr Zelensky was expected to address US senators by video link behind closed doors on Dec 5, in order to make the case for more Ukrainian funding. The package is still being discussed, but its passage remains uncertain.

Europe’s Ukraine facility

This summer, the European Union announced a €50 billion (S$70 billion) multi-year support package named the Ukraine Facility that would be delivered through 2027.

Kyiv officials have said they hope to receive €18 billion of budgetary support from the facility in 2024, financing that would be crucial for covering the budget gap next year.

But there is still no agreement on granting the aid inside the bloc. Several members have criticised the idea of the package.

IMF programme, IFI support

Ukraine's cooperation with the International Monetary Fund (IMF) is important for its macroeconomic and financial stability. This year the IMF approved a new 48-month lending programme worth some US$15.6 billion.

Ukraine received US$3.6 billion this year and expects another US$900 million in December. In 2024, the government hopes to receive US$5.4 billion but each tranche is linked to a series of reform targets and economic indicators.

Ukraine also expects about US$1.5 billion from other international financial institutions, including the World Bank, next year.

Other packages

Ukraine has agreed financial support packages from Britain and Japan for 2024.

It is also in talks with the governments of Canada, Norway, South Korea and others to secure other funds. REUTERS