Ukraine is developing an action plan in the event of the termination of aid from the United States in order to receive credit from the International Monetary Fund (IMF). The plan includes three key elements: expanding domestic bond sales, raising taxes and cutting spending.
Bloomberg writes about this, citing its own sources.
Ukraine can propose this plan to the IMF during the missionʼs visit to Kyiv. He will provide a guarantee that Ukraine will be able to service its debts if the allies do not provide assistance. This is an important condition for the IMFʼs $15.6 billion credit program.
IMF staff together with the head of the fundʼs mission in Ukraine Gavin Gray will come to Kyiv on February 12 for a three-day visit. The visit will take place on the eve of the review of the IMF loan program, which will unlock a $900 million aid tranche.
Although Ukraine fulfills its obligations, the Ministry of Finance and the National Bank believe that there is a risk that the IMF board of directors will not approve the next tranche without a fiscal plan in case of further blocking of aid from the United States. According to the IMF program, Ukraine should receive $5.3 billion this year.
A key source of funds to replace US aid will be the expansion of domestic public borrowing, as writes Bloomberg. Ukrainian banks are highly liquid, so the government expects them to continue to invest cash in government bonds. Journalist sources predict it could bring in at least $5 billion in revenue this year, but the government could also raise taxes or cut spending if necessary.
What the IMF program provides
The IMF program is aimed at supporting fiscal, external, price and financial stability, supporting economic recovery, as well as strengthening institutions for long-term growth in the context of recovery and Ukraineʼs approach to EU accession.
On March 31, 2023, the Executive Board of the International Monetary Fund approved the largest financial aid for Ukraine since the beginning of the full-scale war — $15.6 billion. On April 3, 2023, Ukraine received the first tranche in the amount of about $2.7 billion within the framework of the new extended financing program from the IMF. The third tranche from the IMF arrived on December 14.
And what is wrong with the help from the USA
On October 20, 2023, US President Joe Biden submitted a request to Congress for additional funding of approximately $106 billion. It, in particular, provided for aid to Ukraine ($61.4 billion, the largest package) and Israel ($14.3 billion), as well as providing funds for the security of the US southern border. However, consideration of the document was blocked by representatives of the Republican Party, who insist on strengthening measures to control migration at the US-Mexico border. Biden called the Republicansʼ refusal to support the bill political blackmail, noting that "the stakes are too high."
Currently, aid to Ukraine from the United States is suspended. This will continue until the US Congress passes new funding.
On February 8, 2024, the US Senate voted to consider a separate bill on aid to Ukraine, Israel, and Taiwan. This made it possible to open the debate on the draft law, that is, the vote was not final. After the Senate, the bill will go to the House for a vote, but itʼs unclear when or if Speaker Mike Johnson will hold a vote.