Koretskyi: The situation with state finances is approaching a critical line

The situation with Ukraine's state finances has approached a critical point, and delays in fulfilling the conditions of international programs could deprive the budget of a significant part of the $29.5 billion in financing provided by partners for this year. The government is accelerating the implementation of its part of the obligations and demands that the Verkhovna Rada pass the necessary laws.

This was stated by Prime Minister of Ukraine Serhiy Koretskyi.

According to him, $29.5 billion is provided for within the framework of several external financing programs, including the Ukraine Support Loan and the Ukraine Facility. However, the receipt of a significant part of these funds is linked to Ukraine's fulfillment of conditions agreed in advance with partners.

Responsibility is distributed between the Cabinet of Ministers and the Verkhovna Rada. The government needs to adopt 42 resolutions and other regulatory decisions, while 27 bills are already in parliament awaiting a vote.

Initially, the Cabinet planned to complete its part of the obligations by November 1, but due to the state of public finances, it decided to accelerate the work. Koretskyi promised to finish the adoption of government decisions by October 15, and to submit all necessary bills to the Rada back in September.

"This is simply the instinct of self-preservation of the country. These laws must be passed," the prime minister said earlier, addressing the deputies.

Koretskyi emphasized that the government is ready to work with parliamentarians at the level of committees and working groups, including discussing controversial provisions of bills. However, in his assessment, parliament is currently behind the necessary schedule for fulfilling obligations.

Without partner funds, some expenditures may be suspended

The risks go beyond the direct implementation of reforms. International financing is necessary for Ukraine to cover the state budget deficit and maintain financing for both defense and civilian expenditures.

Koretskyi warned that if external revenues are delayed, the government will have to redistribute available resources in favor of the priority needs of the Defense Forces. In such a scenario, some other budget payments may be temporarily suspended or reduced, and resumed after the receipt of international funds.

The government expects that fulfilling all the conditions on the part of the Cabinet and the Verkhovna Rada will allow it to receive the planned funds and balance the budget.

In early September, the Cabinet already accelerated the transfer of necessary initiatives to parliament. In particular, the government approved four bills related to Ukraine's obligations to the EU and the IMF and the receipt of a macro-financial assistance tranche of €1.45 billion.

They provide for changes in VAT administration, bringing transfer pricing rules in line with EU and OECD standards, reforming capital market infrastructure, and changing the procedure for considering certain cases by the High Anti-Corruption Court.

Later, the government sent three more bills from the package of international obligations to the Rada. They concern the work of the National Securities and Stock Market Commission, Ukrzaliznytsia, and the High Qualification Commission of Judges.

At the same time another $27 billion is missing for defense

The problem with $29.5 billion in international financing is only one of the financial challenges. Separately, Ukraine needs to find about another $27 billion to cover the new needs of the Defense Forces.

These funds are not yet fully backed by confirmed sources. Among the options, the government is considering accelerating financing under the Ukraine Support Loan, using frozen Russian assets, additional loans from partners outside the European Union, and optimizing expenditures within the Ukrainian budget.

Additional pressure on state finances is created by Russian attacks on Ukrainian enterprises. According to preliminary government estimates as of early September, due to the strikes the budget may lose about 70 billion UAH in tax revenues. Koretskyi warned that if the attacks continue, this amount may increase.

Thus, by the end of the year, the authorities must simultaneously solve two tasks: not to lose the financing already provided for by international programs and to find additional resources for increased defense expenditures.

Separately, the European Union has repeatedly stressed that payments under the Ukraine Facility are directly linked to the implementation of the agreed Ukraine Plan. Funds are transferred in stages after assessing the implementation of reforms in public administration, the judicial system, the economy, energy, the financial sector, and other areas.

Based on materials from: Serhiy Koretskyi, Cabinet of Ministers of Ukraine