Sergii Marchenko Gave a Speech at G7 Financial Bloc meeting

Minister of Finance of Ukraine Sergii Marchenko delivered a speech at the session of the Finance Ministers of the G7 countries and Central Bank Governors, EU leaders, the IMF, and the World Bank.

The key topics for discussion were support for Ukraine and sanctions against russia. 

During the speech, Sergii Marchenko thanked the G7 partners, as well as the EU and international financial institutions for their unprecedented support of Ukraine throughout the year. The G7 Finance Ministers, leaders of the EU, IMF and WB  assured that they would continue to support Ukraine as much as necessary to accelerate the victory and realize the post-war reconstruction.

IMF Managing Director Kristalina Georgieva emphasized the high results achieved by Ukraine in implementing the Program Monitoring with Board Involvement, positive impressions of the first visit to Ukraine and the Fund's commitment to provide further support to Ukraine.

The participants of the meeting also noted the efforts of the Government of Ukraine to facilitate the adaptation of the economy to the war conditions, to ensure the sustainable functioning of the financial system and the continuity of public services (primarily in the social sphere).

The Minister of Finance informed the participants of the meeting about the negative impact of the war on the Ukrainian economy, the financial needs of the Government to maintain macroeconomic and financial stability, as well as about the current state and prospects of cooperation with the IMF.

The key points of Sergii Marchenko's speech:

• State of the economy

In 2022, the Ukrainian economy contracted by 30% as a result of russia's full-scale aggression, which is slightly less than the previous forecasts. We managed to maintain macroeconomic and financial stability. Inflation is gradually slowing down, and in January it was 26%.

Society and businesses have adapted to new conditions in the security, logistics and energy environment. 90% of businesses have resumed their operations. We managed to reduce the electricity shortage in January 2023 thanks to almost round-the-clock repairs, electricity imports from the EU, and increased solar power generation. During the last week, we witnessed no electricity deficit in the system.

• State Budget

The war has put unprecedented pressure on Ukraine's State Budget. Expenditures on security and defense, humanitarian and social needs have increased significantly, while budget revenues have decreased. With the support of our international partners, the financing of critical budget expenditures in 2022 was ensured, including the payment of pensions, social allowances, and salaries to public sector employees. 

In 2023, Ukraine's State Budget deficit reaches USD 38 billion. The European Union and the United States have already confirmed their intentions to provide Ukraine with EUR 18 billion and USD 9.9 billion, respectively, during the year. The deficit remains at around USD 10 billion. External support to cover this deficit is critical for Ukraine.

Since the beginning of 2023, we have already attracted about USD 5 billion to the budget, including USD 3 billion from the EU, USD 1 billion from the US, USD 500 million from the UK, and over USD 160 million from the World Bank. Further assistance from international partners is vital for Ukraine.

• Multi-Agency Donor Coordination Platform for Ukraine

The year 2023 is a multitasking year for the Ministry of Finance. In addition to budgetary needs, Ukraine needs funds for rapid recovery. In particular, for the energy sector, the reconstruction of housing, critical and social infrastructure and humanitarian demining. 

To attract the necessary funding, we are counting on close cooperation within the Multi-Agency Donor Coordination Platform for Ukraine. Active participation of the G7 countries and IFIs in this initiative will make it more effective and efficient. 

We are also cooperating with the World Bank to conduct an updated damage assessment of Ukraine. This document will become a reliable basis for attracting external financing for the recovery.

• IMF

Last week, the representatives of Ukraine and the IMF staff reached a staff-level agreement on the review under the Program Monitoring with Board Involvement (PMB). The Ukrainian side has performed all structural benchmarks agreed with the IMF under the PMB. Also, all end-December quantitative and indicative targets have been met. We hope that a staff-level agreement will be soon approved by the IMF Board as we committed to a quick transition to the launch of discussions on a fully-fledged IMF-supported program.

Funding from the IMF will help to partially cover the State Budget deficit and mobilize financial assistance from other donors. 

I would also like to emphasize that our priority is stability, predictability and rhythmicity of external financing so that we can cover our priority budget expenditures in a timely manner and in full.