IMF discusses activation of domestic budget financing in Kyiv with Ministry of Finance, NBU
The delegation of the International Monetary Fund (IMF), led by Deputy Director of the European Department Uma Ramakrishnan and with the participation of head of the IMF mission in Ukraine Gavin Gray, at meetings in Kyiv on Monday, discussed the possibilities of increasing state budget revenues and internal sources of financing its deficit with the Ministry of Finance headed by Minister Serhiy Marchenko and the NBU board headed by Governor Andriy Pyshnyy.
"Besides attracting external financing, the Ministry of Finance is taking measures to increase domestic resources reducing the State Budget deficit. The capacity development of the Ukrainian financial system is one of the priority areas of cooperation between the Ukrainian authorities and the IMF. The participants of the meeting discussed further measures to stimulate State Budget revenues and the domestic debt market," the Finance Ministry said in a release following the meeting.
According to it, the parties also discussed sources of financing the state budget of Ukraine, including international assistance and the domestic debt market.
"According to the results of 2023, tax and customs revenues of the State Budget returned to the pre-war level, and the volume of domestic government bonds issued doubled compared to 2022. Although external financing continues to play an important role at this stage, it is crucial for us to keep creating conditions for the growth of internal budget revenues," Marchenko said.
The Ministry of Finance also on Monday announced an online meeting of the Steering Committee of the interdepartmental Donor Coordination Platform, co-chaired by Marchenko, on Wednesday, February 14, emphasizing that as part of the work of the Platform, a clear prioritization of Ukraine's needs is necessary.
At the meetings of the IMF with the Ministry of Finance and the National Bank, preparations for the third revision of the four-year Extended Financing Facility (EFF) and the start of the corresponding Fund mission in Warsaw on February 17 were also discussed.
Expert discussions will focus on Ukraine's implementation of the terms of the Memorandum of Economic and Financial Policy. As a result of successful review of the program, Ukraine will be able to receive the next tranche from the Fund in the amount of about $900 million, the Ministry of Finance indicated.
"From the sphere of competence of the National Bank, the focus of meetings (with the mission) will be, in particular, the following issues: the situation in the country's financial sector, the state of the banking system, further implementation of the Strategy for easing foreign exchange restrictions, transition to greater exchange rate flexibility and return to inflation targeting, as well as priorities of exchange rate and monetary policy. As well as issues of further activation of internal channels of financing the state budget of Ukraine, which, together with international financial assistance, will help meet the needs of Ukraine," the National Bank noted, in turn.
Ukraine in 2023 attracted $4.5 billion from the IMF under the EFF out of a total program volume of $15.6 billion. At the same time, the program is part of a package of international support for Ukraine, which amounts to about $122 billion.
In 2024, the EFF program provides $5.4 billion in budget assistance to Ukraine, with the total volume planned in the state budget at about $37 billion.
According to the Memorandum of Economic and Financial Policies, Ukraine must prepare measures to mobilize at least an additional 0.5% of GDP in the 2024 state budget (up to UAH 40 billion) by the end of February, although the head of the Rada Budget Committee, Roksolana Pidlasa, announced the additional expenses announced by the Ministry of Defense in the amount of about UAH 720 billion.