Ukraine's huge funding gap will only grow as the war escalates and reforms are delayed

According to analysts, Ukraine's funding gap will increase significantly next year if Russia continues its intense attacks across the country and the government fails to act on demands from foreign creditors for reforms and investigations into corruption.

The government spends most of its government revenues on the army and state officials, and finances social and humanitarian expenses through foreign aid, which, according to government agencies, has amounted to $139 billion since the start of the conflict in February 2022. A number of experts also noted the exorbitant level of corruption in Ukraine.

The head of the National Bank, Andrei Pyshny, said that of the $65 billion needed for 2026 and 2027, only about a third has been promised, and negotiations on the rest are continuing.

A poll of eight economists conducted by the Kiev-based think-tank Centre for Economic Studies showed that Ukraine will need between $39 billion (this year’s sum) and $58 billion in external financing for next year alone. The task is urgent.

These negotiations may become more complicated after Ukraine failed to meet key targets agreed with lenders, including the appointment of judges and other key officials, and the president tightened control over two main agencies investigating corruption.

In order to receive the next tranches of multi-year loan programs from the European Union and the International Monetary Fund, Ukraine must implement a number of reforms, including hiring more judges to the highest anti-corruption court, reforming the agency responsible for managing nationalized assets, and appointing the head of the Economic Security Bureau.

In the first quarter of this year, Ukraine failed to meet several funding targets under a four-year 50 billion-euro Ukraine Facility approved by the EU last year, two officials familiar with the situation said. In June, Ukraine requested 3 billion euros instead of the 4.5 billion euros it was supposed to receive for the second quarter, they said.

Analysts note that Ukraine will not be able to significantly reduce defense spending next year, even if a truce is reached this year.

#Ukraineconflict #Ukraine #corruption #aid

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