Ukraine's budget deficit remains high in 2025.
Fitch Ratings forecasts that Ukraine's external financing needs will be $38 billion in 2025, down from $41 billion in 2024. This indicates a reduction in the amount of financial assistance needed by the country.
This is stated in the agency's report.
The report says that the uncertainty over Ukraine’s external financing has decreased in the short term. This has become possible because the G7 countries are likely to provide Ukraine with about $50 billion in loans. These loans will be secured by revenues from frozen Russian sovereign assets.
The agency forecasts that Ukraine’s state budget deficit will remain high, at 19.1% in 2024 and 19.2% in 2025. This will happen despite recently approved tax increases, due to high defense spending and an expected decrease in foreign grants.
The report says that significant fiscal consolidation will be limited by the continuation of the war and reconstruction costs in the event of a prolonged ceasefire. This will likely lead to Ukraine remaining highly dependent on external financing.
Analysts also note that the National Bank of Ukraine (NBU) has kept its key rate at 13% since June due to a stronger-than-expected jump in inflation.
According to the report, improved exchange rate flexibility, which ensured the transition to a managed float in October 2023, as well as reduced uncertainty about short-term official financing, have provided the NBU with room to ease foreign exchange restrictions.
Recall that the European Parliament approved a €35 billion macro-financial loan for Ukraine, which will be provided by the European Union as part of a loan from the G7. The loan will be repaid using revenues from frozen Russian assets.
