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In February 2022, the Ukrainian government faced a challenge on a scale never seen before. Ports were closed, millions of people were displaced, heavy industry was destroyed, and 90% of companies ceased operations.
This is a scenario that was not envisioned in the textbook. This level of uncertainty has never been experienced by any government before.
The indicators of 2022 describe the situation in Ukraine better than any words. GDP decreased significantly by 28.8%. Inflation rate soared to 26.6%. The fiscal deficit soared to 17.5% of GDP. And exports fell by 35%.
This was a perfect storm that required an unconventional approach. Funding military resistance was a fight for our survival, so defense spending soared to 30% of GDP.
There is no doubt that all of this has had a significant negative impact on the financial system. However, despite these shocks, the government’s determined efforts to maintain macroeconomic and financial stability were effective.
First, the Ministry of Finance took necessary measures, including optimizing national budget expenditures, introducing war bonds, and implementing debt management strategies.
From the first days of the full-scale war, the government provided not only humanitarian expenditures and wages of civil servants, but also all social payments in full and in a timely manner.
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The state’s budget deficit was about $5 billion a month. Importantly, we avoided financial financing in 2023. This helped keep inflation in check and the CPI fell to her 5.1%. The fiscal gap has narrowed to $3.5 billion per month. Tax and customs revenue returned to prewar levels. Domestic borrowing more than doubled to $15.5 billion.
The Ministry of Finance also began issuing war bonds. This puts more than $24 billion into the state budget starting in February 2022. By the end of last year, the amount invested by corporations had increased more than 1.7 times, and the amount invested by individuals had more than doubled. This is an example of national unity in a crisis.
However, no country can face these times in isolation. Military operations were financed by internal resources, but relied on partner support for financing social and humanitarian needs.
Cooperation with international donors was crucial. In 2022, we attracted more than $31 billion in external funding. In 2023, he already had stable and predictable support from partners, which amounted to his $42.5 billion.
In collaboration with the World Bank, eight new projects were created for budget support, including the largest project in history, valued at more than $25 billion.
Ukraine and the IMF have launched a four-year cooperation program worth $15.6 billion, unprecedented for a country at war.
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Aid from the EU and the US is a key part of the budget funding package. Since February 24, 2022, these amounted to $27.4 billion and $22.9 billion, respectively.
The support from the Japanese government demonstrated that despite the geographic distance of more than 8,000 kilometers between us, we are close in our commitment to democratic values, freedom, and justice.
These international partnerships have helped accumulate funds to address Ukraine’s most urgent needs.
Despite all expectations, Ukraine maintains fiscal stability and remains resilient. The Ukrainian government enters the third year of the war with vast and valuable experience and foresees even greater challenges. Bitter lessons will shape the future of governance and fiscal approaches, not just in Ukraine.
But our stability is a fragile equilibrium, one that we use existing and new tools to balance. It’s not sustainable, but we’re doing the best we can during these uncertain times.
Changes in the political climate around the world are already having an impact on our situation. Now, more than ever, it is important to recognize that unity is essential. The potential costs of democratic failure are very high. Supporting Ukraine therefore means supporting a stable world order and investing in collective security.
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