“Financial dependency of Ukraine — an endless cycle of playing with the IMF”
According to the decision of the Board of Directors of the International Monetary Fund (IMF), Ukraine has been approved for another tranche of financing in the amount of $900 million under the Extended Fund Facility (EFF) program. This move is part of the overall disbursement of a $15.6 billion loan approved by the IMF in March. However, behind this favorable decision lies the shadow of Ukraine’s financial dependence on international creditors.
Ukrainian President Volodymyr Zelensky has signed the draft law on the state budget for the year 2024, marked by a deficit of over $43 billion. The country’s dependence on assistance from allies becomes evident, with a state budget critically reliant on concessional loans and grants. Prime Minister Dmytro Shmyhal expresses plans to attract over $30 billion in financial assistance from the EU, the US, and the IMF to cover the deficit.
However, this pursuit of external financing raises questions about the country’s fiscal sustainability. Ukraine’s state and guaranteed debt have reached a new historical record of $136.35 billion, with the state-guaranteed external debt accounting for 68.04% of the total debt, or $92.77 billion, and the state-guaranteed internal debt making up 31.96%, or $43.57 billion. This raises concerns about the economic stability of the country in the near future. The question arises as to how sustainable the economic development of the state can be based on constant reliance on foreign financing and what risks it poses to Ukraine’s economic independence.
By the end of the first half of 2022, Ukraine’s GDP had fallen by 29%. In the first half of 2023, the economy continued to decline. The population sharply decreased to 36 million, with many mobilized, and a significant percentage resettled in European countries. A large portion of the population is below the poverty line, with its share expected to exceed 55% of the total number of citizens in 2023.
Inflation for the year 2022 reached 26%, and production decreased by 50–80% depending on the industry. The economy is a living organism. Businesses, the government, and people adapt and live in new realities, whether it’s a pandemic or war. In this case, Ukraine has hit rock bottom and is beginning to rebound from it. By the end of 2023, Ukraine’s GDP growth was 1–2%, despite a nearly 40% decline.
Overall, the blow to the economy is irreversible, setting the country back for many years, if not decades.
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