Ukraine country report - April, 2024

March 30, 2024

Ukraine is running out of money, men, ammo and time. Since the US cut off its financing in January and Russia retook Avdiivka on February 17 Kyiv has lost the initiative in the war.

The skies are open again and Russia began to pound its power infrastructure on March 21, knocking out several important power plants.

Ukraine has been striking back since February by using its new long range drones to hit Russia’s oil refineries: there were 24 attacks as of the end of March of which 11 did enough damage to reduce Russia’s oil product production by 14% and force it to start importing petrol from Belarus.

In the first two months Ukraine had only received 10% of the money promised by partners and all of that came from Japan. By March cash started to arrive, but not enough. Ukraine is currently running about a $3bn current account deficit a month that it cant finance properly.

The EU has signed off on its four year €50bn aid package which will keep Ukraine in the game and the IMF has also transferred $800mn. Germany also continues to supply Kyiv with significant weapons, but continues to refuse to send the powerful Taurus cruise missiles. But the big problem is that at the time of writing a US aid package on the order of $60bn remains tied up in red tape in Congress.

Ukrainian President Volodymyr Zelenskiy says without the US money Ukraine may lose the war. More recently he threatened to upset international oil markets by increasing his attacks on Russian oil refineries – something the US has asked Bankova to scale back, afraid of pushing up the price of gas at the pump in an election year.

What should Ukraine expect from its international partners in 2024? In the first quarter of the year, Ukraine plans to receive almost $10.2bn from partners:

● $4.88bn from the EU (Ukraine Facility)
● $1.5bn from the World Bank (DPL)
● $1.47bn from Canada
● $0.88bn - fourth tranche from the IMF (EFF)
● $0.23bn from Japan (agricultural sector restoration)

In the pipeline is:
● continued restructuring of commercial external debt (will save $4.5bn on debt payments)
● receipt of the third and fourth tranches under the Ukraine Facility
● the fifth and seventh tranches from the IMF ($2.3bn in July, $2.1bn each in September and December)

Ukraine is also counting on $10bn in aid from the US in 2024 and the EU's decision on using the profits from frozen Russian assets (€3bn is planned to go to the Peace Fund).

Another headache is trade crossing the Polish border is still blocked. A deal is being worked out to renew the unfettered access to the EU, but “emergency brake” restrictions are going to be reintroduced on key products like eggs, chicken and honey.

The spat has highlighted the limit of the EU support for Ukraine as it is proposing to limit Ukraine’s ability to trade with the EU and desperately needed money, in an effort to protect member state’s home markets. At the time of writing this dispute, which started last April when Poland banned all agricultural imports, has still not been resolved.

Meanwhile the economy is growing strongly. Ukraine's GDP grew by 5.3% in 2023 and the IMF has updated its macro forecast for Ukraine for 2024 to UAH7.75 trillion from the UAH7.64 trillion predicted in December last year’ However, 2025’s forecast remains almost unchanged at UAH8.86 trillion. The economy's growth rate will decrease by 3-4% in 2024 says the IMF, which is worried about the impact of the current Russian barrage of missiles.

Much depends on what happens in the war. In March Zelenskiy was predicting that Russia might launch a major counteroffensive in May-June. As bne IntelliNews has previously reported, 2024 will be a very tough year for Ukraine.

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