Ukraine may have to postpone the payment of pensions and salaries to government employees. This will happen if the EU and the US do not provide promised financial assistance early next year. This was stated by Minister of Economy Yulia Sviridenko in a commentary to the Financial Times.
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What is the reason
According to her, the lack of external support will push the Ukrainian economy back to the “survival” mode after how it began to recover in 2023 with GDP growth estimated by the IMF at 4.5%.
Ukraine will need $37 billion in external support next year. Currently, US President Joe Biden's $60 billion request is “deadlocked” in Congress, and the EU's €50 billion support package is blocked due to a Hungarian veto.
Sviridenko hopes the EU will approve the aid Ukraine in February and will provide funds until the end of March.
As the FT notes, Ukraine has been trying to save money and change spending priorities since September. In particular, the Cabinet of Ministers increased the tax on bank profits, and taxes on personal income from the military will now go to the central budget.
However, Sviridenko notes that this is not enough. According to the Minister, the priority for Ukraine will be defense and debt servicing.
Delay of payments
Ukraine may have to delay the payment of wages for 500 thousand government employees and 1.4 million teachers, as well as payments to 10 million pensioners if the West does not give money.
Recall
On October 1, the US Congress passed a bill on a temporary budget. It did not include new funding for assistance to Ukraine, since it was decided to consider such an initiative separately.
After this, US President Joe Biden proposed that Congress allocate $106 billion. Most of these funds ($60 billion) want to be used to help Ukraine.
The White House expects Democrats and Republicans to reach an agreement in January 2024.