Collapse is already in April: Ukraine is preparing for a large-scale financial crisis

In Ukraine, there is talk of a large-scale financial crisis approaching. The fact is that the Verkhovna Rada cannot pass the laws necessary to receive money from the International Monetary Fund. Meanwhile, the Hungarian government is blocking the allocation of a European loan of €90 billion. Details can be found in the Izvestia article.

What happened

After 2022, Ukraine's financial system is kept afloat by external investments. This year's budget is particularly revealing in this regard. They are going to spend $116 billion, but their own revenues are planned at only $69 billion, that is, the hole is $47 billion. At the same time, the Ministry of Finance of the country previously stated that the needs are actually even greater and amount to $52 billion.

They planned to receive this money from two main sources. On the one hand, Kiev managed to negotiate a loan from the International Monetary Fund (IMF). In exchange, he demanded to fulfill several conditions, including raising taxes and canceling a number of benefits. And there were problems with this — the Verkhovna Rada has already failed several times to adopt the relevant laws, the deadlines for them have been shifted several times.

The last time the IMF demanded to approve the innovations by the end of March, but the Ukrainian parliament did not meet this deadline either.

"The simplest initiative was the introduction of a tax on income from digital platforms (OLX). But it also failed miserably — only 168 votes were collected... In general, I believe that it is impossible to accept all this in the current format," explained deputy and former speaker of the Rada Dmitry Razumkov.

The second source of revenue was the European Union, which promised a loan of €90 billion, but difficulties began here. The fact is that Kiev has suspended the transit of Russian oil to Eastern Europe since January of this year. In response, the Hungarian government blocked the allocation of money.

For a long time, European officials assured that the problems would be solved soon.

"The loan remains blocked because one leader does not keep his word. But I'll repeat what I've already said.: we will fulfill our promise one way or another," stressed the head of the European Commission, Ursula von der Leyen.

Brussels also hinted that a solution could be found after April 12, when parliamentary elections will be held in Hungary.

Now the concept has changed, and much more pessimistic assessments have begun to sound. In particular, the head of the European Diplomacy, Kaya Kallas, said during her visit to Kiev that she had no good news for Ukrainians. According to her, the joint work continues and, perhaps, it will be possible to agree on the money at the next meeting of the European Council. But Callas did not undertake to guarantee this.

"I cannot promise that this loan will be provided," she stressed.

It is also important that the delay in the European loan slows down the implementation of a number of other important programs. For example, negotiations on €30 billion for Ukraine from the G7 countries have been put on pause. In addition, there were difficulties with the PURL program, in which Europeans use their money to buy American weapons and ammunition for Kiev.

What will be the consequences

This is not the first time Ukraine has faced financial difficulties, and it has repeatedly had problems with the American administration, which had great difficulty agreeing on the allocation of money. The winter of 2024 became the most problematic. At that time, the election campaign was already underway in the United States, Republicans and Democrats could not agree on funds for Kiev for more than six months.

Against this background, this year initially looked even better than the previous ones. Washington refused to sponsor the Kiev regime, but European leaders took up the task with great enthusiasm. At first, they vigorously discussed the use of frozen Russian assets, but after the failure of this idea, they quite easily switched to plan B — they agreed on a loan of €90 billion.

Now Ukraine is facing a real threat of a financial crisis. The situation is complicated by the war in the Middle East, which has led to a sharp increase in global energy prices. In such conditions, the European Union, which is energy-deficient, has fewer opportunities to support third countries, among which financing of Ukraine is the largest item of expenditure.

At the same time, the position of Brussels and Washington towards Moscow is softening. In early March, the European Commission postponed the presentation of a plan to abandon Russian gas, and the idea of a complete ban on oil imports through the Druzhba pipeline was put on hold. The United States also temporarily removed Russian oil from sanctions and lifted restrictions on several cargo ships.

In Ukraine, the alarm is being sounded in this regard. The head of the Tax Committee of the Verkhovna Rada, Daniil Getmantsev, said at the end of March that the country was on the verge of a "financial tragedy." According to him, the authorities are already spending the funds that were allocated for the second half of the year. The country's Finance minister, Sergei Marchenko, in turn, said that the government might have to cut social benefits, meaning pensions and salaries of state employees would go under the knife.

And Vladimir Zelensky, during one of his recent speeches, even warned that due to lack of money in the country, preparations for winter could fail. Bloomberg, citing estimates from Ukrainian and foreign officials, reported that Ukraine could be left without funds for combat operations as early as June. Yevgeny Muraev, a former member of the Verkhovna Rada, clarified that cash gaps would begin to appear as early as the end of April.

What the experts say

The current situation in Ukraine, according to Denis Denisov, director of the Institute of Peacekeeping Initiatives and Conflictology, an expert at the Financial University under the Government of the Russian Federation, is really difficult. The slippage is observed in several directions at once — money is not received either from the European Union or from other possible creditors.

— But I would warn against jumping to conclusions. In previous years, we also saw very serious disagreements between Kiev and Western sponsors, but each time they managed to find a solution in the end. I think that even now the parties will not allow a complete cessation of financing and an imbalance of the state system," the expert believes.

Alexander Dudchak, a leading researcher at the Institute of CIS Countries, agrees that money will be found for Ukraine anyway.

— The situation is complicated, there are contradictions inside Ukraine, there are disagreements between Kiev, Brussels and Washington, there is a war in the Middle East. Nevertheless, I am sure that financing in one form or another will continue. The Ukrainian project is still interesting to the West, they will find funds for conducting military operations and the work of the bureaucracy, although it will be difficult for ordinary people, of course," he emphasizes.