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Statement on Financing of Ukraine in 2024
by the Reimaging, Reconstruction and Recovery of Ukraine
Task Force of the Friends of Ukraine Network
It is a fundamental U.S. national security interest that Ukraine wins the war against Russia and defeats Russia so that Ukraine can return to its borders of 1991. Otherwise, the Russian troops are likely to proceed to attack NATO countries, and then the United States would have to intervene with our troops. In order to avoid this, the West, and most of all the United States, needs to provide Ukraine with the necessary weapons expeditiously so that it can defeat Russia, but the West also needs to offer Ukraine sufficient financial support to maintain state function and keep inflation at bay.
In spite of the war, the Ukrainian state – its ministry of finance, central bank, and tax collection –function very well, to the full satisfaction of the International Monetary Fund. Yet, the war is costly, and it reduces Ukraine’s revenues. In 2023, Ukraine’s defense costs about 18 percent of its Gross Domestic Product (GDP), and in 2024, it is budgeted to cost 22 percent of GDP. Yet, because of Russia’s war, its GDP plummeted 29 percent in 2022, and tax revenues fell correspondingly. Therefore, Ukraine needs roughly $40 billion in international financial support each year in order to finance its budget deficit.
In 2022, Ukraine received only $32 billion of international financial budget support, mainly because the European Union did not deliver as much as it had promised. As a consequence, inflation rose to 27 percent in December 2022. The Western donors got rightly worried and made a firmer commitment for 2023 so that Ukraine’s budget deficit has been fully financed with international financial support of $43 billion this year. The EU has provided $20 billion, the United States $11 billion, and the IMF $4.5 billion in 2023, while the rest comes from many bilateral and multilateral sources. Therefore, Ukraine’s inflation fell fortuitously to 5 percent in October.
For 2024, Ukraine had expected $61 billion of support from the United States, mainly arms, but also $11.8 billion in budget support that would cover about one-quarter of the budget deficit. Now, all of a sudden, U.S. Congress might not provide those funds. The immediate effect would be a sharp rise in inflation in 2024, which is likely to lead to greater demoralization and a sense of losing the war at home. Ukraine’s financial prospects have been further aggravated by today’s news that Hungary’s Prime Minister Viktor Orban has put the EU’s planned financial aid package of 50 billion euros in jeopardy. Those funds are likely to arrive eventually, but they might be delayed. The United States needs to lead and encourage rather than discourage the EU from playing its part.
Most of all, Ukraine needs arms to keep the Russian troops at bay, but it also needs financial support to be able to finance its state budget to avoid high inflation. As in 2023, the EU plans to provide twice as much financing to the Ukrainian budget as the United States in 2024, but without U.S. support Ukraine would probably be forced to print money as in 2022, which inevitably leads to high inflation. The brave Ukrainian people don’t need that hazard that the United States can prevent at quite a low cost. We must not abandon the bravely fighting Ukrainians in their time of distress.
We therefore urge Congress to approve the supplemental appropriation for Ukraine. This modest level of U.S. support will be more than matched by Europe and ensure that Ukraine has the economic means to continue its defense against Russian aggression.
Anders Aslund
Swedish economist and former Senior Fellow at the Atlantic Council, a chairman of the International Advisory Council at the Center for the Social and Economic Research
Professor Charles Becker
Research Professor of Economics, Duke University
Ed Chow
Internationally Recognized Energy Expert
Ambassador Daniel Fried
Former U.S. Ambassador to Poland, Weiser Family Distinguished Fellow, Atlantic Council
Nadia K. McConnell
President & Co-Founder of the U.S.-Ukraine Foundation, former Director of Congressional Relations, Federal Emergency Management Administration (FEMA). And former Deputy Assistant Administrator of NASA
Ambassador Richard Morningstar
Former U.S. Ambassador to the Republic of Azerbaijan, Founding Chairman. Global Energy Center, Atlantic Council
Ambassador Kurt Volker
Former U.S. Ambassador to NATO and former U.S. Special Representative for Ukraine Negotiations, Distinguished Fellow, CEPA
Dr. Philip Zelikow
White Burkett Miller Professor of History, University of Virginia, executive director of the 9/11 Commission, and counselor of the United States Department of State.