International aid to Ukraine will exceed $31 billion in 2022– NBU

The main risks for economic development are a longer war and strikes on the energy structure

It is expected that in 2022, the volume of international aid will exceed $31 billion. It is stated in the message of the National Bank of Ukraine (NBU).

As the NBU noted, in the second half of 2022, international partners significantly expanded financial support for Ukraine. This became an important factor in maintaining macro-financial stability.

The international financial assistance needed to finance the budget deficit and economic recovery will continue to arrive in 2023. In particular, preliminary agreements on the provision of €18 billion by the European Union, as well as about $10 billion from the United States, have already been announced. It is expected that, as in the current year, in 2023 a significant share of these funds will come in the form of grants, which will not increase the debt burden of Ukraine in the post-war period.

Progress was also made in negotiations with the International Monetary Fund regarding the conclusion of a new Monitoring Program with the involvement of the Fund’s Board.

“The final approval of this program will help attract funding from other international donors in 2023. The National Bank expects that after the completion of the Monitoring Program, Ukraine will be able to gain access to the extended financing program. Negotiations regarding financing are ongoing with other partner countries and international financial organizations,” the regulator said in a statement.

The main risks for economic development are identified by the NBU as a longer period of full-scale military aggression by the Russian Federation and a further increase in terrorist attacks against critical infrastructure facilities.

In particular, the macro forecast of the NBU in October 2022 contained assumptions about the temporary unavailability of transmission and generation capacities in winter, but the scale and duration of outages may be more serious than expected. This may lead to worse indicators of economic activity and increased inflationary pressure. Other risks remain relevant, which may worsen the dynamics of inflation and hold back the economic recovery.

As GMK Center reported earlier, on November 3, 2022, the Verkhovna Rada adopted the state budget for 2023. Next year, the government expects GDP growth of 3.2% and an inflation rate of 28%. Almost half of the expenditures of the 2023 state budget are Western aid.