FT: Ukraine warns of possible delays in pensions and salaries without Western help
Kyiv • UNN
Ukraine risks delaying payments to civil servants and pensioners without vital foreign aid; it needs $37 billion in 2023. Delays in EU and U.S. funding threaten Ukraine's recovery and stability.
Ukraine may have to postpone payments to civil servants and pension payments to millions of its citizens if the EU and US do not provide promised financial aid early next year, the Financial Times quoted Deputy Prime Minister and Minister of Economy of Ukraine Yulia Sviridenko as saying, UNN.
Yulia Sviridenko was quoted as saying that the shortfall in external support would return the Ukrainian economy to "survival mode" after it began recovery in 2023, with gross domestic product growth estimated by the IMF at 4.5 percent.
"Support from partners is critical," Sviridenko said. - We need it urgently.
The country will reportedly need $37 billion dollars in external support next year.
A $60 billion funding request from U.S. President Joe Biden's administration remains stalled in Congress, while a proposed four-year, €50 billion EU support package was vetoed by Hungary this month. EU leaders will meet again on Feb. 1 to try to overcome Hungary's resistance, but they are also working on alternative plans to send 20 billion euros to Ukraine, bypassing Budapest.
Sviridenko expressed hope that the EU would approve the support in February and provide funds by the end of March. But she also said it would not be enough.
Ukraine, as indicated, has been trying to save money and reprioritize spending since September, when Western support began to wane. But the country is already facing a deficit, the minister said. About $5 billion in payments from international donors and creditors in December "will not be enough" to cover spending needs.
Sviridenko said that Ukraine will prioritize defense and debt service, which means that "there is a huge risk of underfunding certain social sectors."
"She said Kiev might have to postpone salaries for 500,000 civil servants and 1.4 million teachers, as well as payments to 10 million pensioners, if foreign aid had not arrived," the publication notes.
Some Western officials are quoted as saying that Ukraine could get by for a few months with domestic borrowing or monetary financing from the central bank, but this could trigger inflation and undermine financial stability.
Deep cuts in government spending or rising inflation could undermine Ukraine's economy and weaken its tax base, making the country even more dependent on foreign support. According to Sviridenko, Kiev collected $4.4 billion more in taxes in the first 11 months of 2023 than in the same period last year.
The minister noted that the EU's proposed financing mechanism of 50 billion euros includes 8 billion euros of risk-sharing guarantees, with the help of which Kiev intended to attract 30 billion euros of private investment in the economy.
"This not only preserves macroeconomic stability, but also creates prerequisites for economic recovery and the return of Ukrainians," Sviridenko said.
A sustained recovery is needed to encourage Ukrainian refugees to return home and further boost economic growth, Sviridenko said. Although the unemployment rate is estimated at 18.9 percent, Ukraine suffers from labor shortages in many sectors, the newspaper said.
As for exports, Ukraine has already benefited economically from the breakthrough of the Russian blockade of the Black Sea and the work of the Ukrainian shipping corridor. According to Sviridenko, shipments in November were up 70% from the previous month. But she reportedly called for more Western air defense equipment to further protect the route.
It also called on the new government in Warsaw to end the blockade of Polish carriers at the border, protesting against what they called unfair competition from Ukrainian drivers. Ukrainian exporters lost 160m dollars due to the Polish protests, while importers' losses amounted to 700m dollars, the newspaper said.
