More than 22 billion dollars for Ukraine by the end of the year. How does the world finance Ukraine?

Ukraine wants to receive $65 billion from international partners by the end of the year, but has received only half of this amount so far. From whom will help come

During the pompous presentation of the Recovery Plan of Ukraine in Lugano, the Ukrainian authorities announced what kind of financial assistance they are counting on from their partners. In particular, by the end of the year, 60-65 billion dollars of financing from abroad is needed, with the fact that this amount does not include the defense and security sector.
By July 11, Ukraine received only one-sixth of this amount (about 11 billion dollars), the Ministry of Finance of Ukraine told LIGA.net. Expectations are much more modest than the demands made in Lugano - about $22 billion by the end of this year.

In the case of the Ministry of Finance, it is money that is already being negotiated. And where to get the 60-65 billion dollars announced in Lugano is still not clear.
We calculated which countries and organizations helped Ukraine and in what amounts, and we learned from the Ministry of Finance what kind of help Ukraine should receive and from whom in 2022.

Budget financing

Sources of financing the budget from February 24 are military bonds, loans from international financial organizations and bilateral loans and grants, according to the Ministry of Finance.
As further stated, during the invasion it was possible to attract 335.9 billion Ukrainian hryvnias - UAH (11.1 billion dollars) to the budget with the help of military bonds. In addition, two-thirds of the amount (225 billion hryvnias or 7.7 billion dollars) came from the National Bank - it bought military bonds, that is, it actually printed 225 billion hryvnias.
In such conditions, Ukraine depends on international aid, the NBU emphasizes in its macro-financial report.
This assistance comes in the form of long-term loans at low rates and, to a lesser extent, in the form of grants. This is one of the problems of Ukraine, but more on that later.

As noted by the Ministry of Finance, the amount of international aid since July 11 can be compared to the funds that were managed to attract through military bonds - and here and there there is a little more than 11 billion dollars.
For comparison: tax revenues to the budget in June amounted to UAH 45 billion (USD 1.5 billion), in May – UAH 73 billion (USD 2.5 billion).
Ukraine received about $4.2 billion in aid from four international organizations - the IMF, the European Union, the World Bank and the European Investment Bank. These are loans on preferential terms.
Ukraine received 3.2 billion dollars in the form of preferential loans (less often - credit guarantees) from partner countries within the framework of bilateral agreements.
The most profitable aid for Ukraine is grant aid, because this money does not have to be returned. From February 24 to the end of June, Ukraine received $3.65 billion in such aid, mostly from the United States (on the day of publication, Ukraine received another $1.7 billion in grants from the United States).

How much more money will there be?

Earlier, Minister of Finance Sergey Marchenko said that Ukraine expects aid in the amount of more than 20 billion dollars by the end of the year (including the one that has already arrived). LIGA.net asked the Ministry of Finance how much and the answer states:

- the German state bank KfW must transfer a grant for budget support in the amount of "up to 220 million euros";
- in the final stage of receiving 1.7 billion dollars of grant aid from the United States (on the day when the text was published, Ukraine received this money);
- an agreement was signed between Ukraine and the EBRD for 300 million euros in credit guarantees. Those funds should go to Naftogas "for the urgent purchase of gas".
In addition, the Ministry of Finance expects to sign a loan agreement with the Italian Ministry of Economy in July. However, they do not specify the exact amount.
The largest amount stated in the response of the Ministry of Finance is nine billion euros of macro-financial assistance (soft credit) from the European Union.
However, a day earlier, the Italian newspaper Corriere della Sera announced that Germany is blocking EU aid, because it is dissatisfied with the loan approval mechanism.

In total, the Ministry of Finance expects to receive more than 22 billion dollars (taking into account what has already been transferred). Prime Minister Denis Šmihal is more optimistic in his expectations - on July 3 he announced almost 29 billion dollars. Where did the 65 billion dollars in the plan presented in Lugano come from?

LIGA.net asked MP Jaroslav Železnjak, who was a member of the Ukrainian delegation in Lugano, about this. According to him, the promised aid will be enough until October, and there is still one quarter left until the end of the year.

"We need five billion dollars every month. But if we want not only to close the holes, but also to rebuild something, then we need 60-65 billion dollars," said Železnjak.

However, the reality in Lugano is more modest. According to Denis Šmihal, it was possible to reach an agreement for 1.9 billion dollars.

Is this enough?

In response to LIGA.net's request, the Ministry of Finance notes that Ukraine is grateful to all international partners for their support, but considers their assistance insufficient. Thus, the monthly need of Ukraine to cover the budget deficit is five billion dollars. In the month that is the most "harvest" (June), Ukraine received 4.4 billion dollars from its partners.
An important aspect of international aid is whether it is loans or grants, according to Maria Repko, deputy director of the Center for Economic Strategy. In her opinion, the largest part of the aid should be in the form of grants (while the situation is reversed).
"Even if the credit is at ultra-low rates, it will still increase Ukraine's debt burden. Most likely, our post-war reality will be that the debt will reach 100 percent or more of GDP," notes Repko.
The economist adds: under the conditions when the central banks of the partner countries raise key rates, the rates on loans received by Ukraine will also increase, which represents a risk for the post-war recovery. That's why we need more grants.

Jaroslav Železnjak told how the war affected the national debt. In 2022, barring a full-scale invasion, it should remain at less than 50 percent of GDP. Now the forecast for the end of the year is more than 90 percent of GDP.

Another problem is the reduction of Ukraine's international reserves. According to the results in June, they amounted to 22.8 billion dollars, and a month ago the indicator was nine percent higher - 25.1 billion dollars. The demand for foreign exchange far exceeds the supply - in June, the NBU sold 3.987 billion dollars on the foreign exchange market and bought only 31 million dollars.

However, this benefit from foreign exchange interventions comes at the cost of a decline in international reserves, and financial assistance from partners, which comes in foreign currency, helps offset these losses. Losses cannot be fully compensated, because reserves continue to "lose".

A further decline could be risky, because according to IMF standards, reserves should not be less than the country's imports for three months. In our case it is 15 billion dollars.

It must be remembered that the partners do not only support the Ukrainian budget. There are two other big items for which Western countries allocate millions of dollars - military and humanitarian aid.

In the case of military aid, we are talking about the acquisition of weapons or the allocation of money with which the Ukrainian command can acquire the necessary equipment or weapons.

Humanitarian aid is provided either in the form of products, clothing, equipment, etc., or financially, but it does not go through the budget of Ukraine, but directly from international humanitarian organizations to Ukrainians.

The calculation of such aid is done by the Kiel Institute for the World Economy (Germany). The following data are the total amounts of declared aid, which include both what Ukraine has already received and what has yet to be transferred. Ukraine receives the largest military support from the USA and Great Britain.

The United States also leads in the volume of humanitarian aid. This data does not include private donations from companies, religious or non-governmental organizations or private individuals.