Ukraine finance minister says donor ‘tiredness’ growing as war drags on

© Reuters. Ukrainian Minister of Finance Serhiy Marchenko attends an interview with Reuters during the annual meeting of the International Monetary Fund and the World Bank, following last month’s deadly earthquake, in Marrakech, Morocco, October 14, 2023. REUTERS/Su

By Jorgelina do Rosario and Elisa Martinuzzi

MARRAKECH (Reuters) – Ukraine is finding it harder to secure financial support as the attention of officials in key donor countries shifts to upcoming elections and geopolitical tensions heighten, Finance Minister Serhiy Marchenko told Reuters on Saturday.

“I see a lot of tiredness, I see a lot of weakness among our partners, they would like to forget about the war but the war is still ongoing, full-scale,” Marchenko said on the sidelines of the International Monetary Fund (IMF) and World Bank meetings in Marrakech.

He said Ukraine is making “twice the effort right now to convince our partners to provide us with support compared to the last annual meetings” in April.

As the war with Russia rages on, Ukraine needs to secure Western financial support to cover a $43 billion budget gap in 2024. Talks this week have been overshadowed by the conflict between Israel and Hamas, which broke out just as delegates were making their way to Marrakech.

Marchenko said “a geopolitical shift and internal political context in different countries” was dampening governments’ appetite to support Ukraine, mentioning elections scheduled in the U.S. and the European Union next year.

Ukraine has earmarked additional tax receipts and funds to be raised from internal debt, but it will be dependent on outside help for the bulk of next year’s spending requirements.

“We already have some commitments, like $5.4 billion from the IMF programme, and we expect commitments from Japan and United Kingdom, and of course, we rely on our key partners and allies the United States and European Union,” Marchenko said in the interview.

The EU is working on a 50 billion-euro ($52.6 billion)Ukraine package for 2024 through 2027. Marchenko said Ukraine is seeking 18 billion euros of that in 2024, matching the package received for this year.

Marchenko welcomed the efforts to harness frozen Russian state assets, saying that what was previously portrayed by Western backers as an “achievable goal” now “sounds like a plan”. Legal concerns, among others, have complicated recoveries.

CREDITOR DISCUSSIONS

Since Moscow’s February 2022 invasion, most of Ukraine’s bilateral lenders have suspended repayment obligations until 2027, and the country has agreed a two-year freeze on $20 billion of international bonds that runs through August.

Ukraine has been sounding out major investors over plans to restructure the international debt and the possibility of raising fresh financing, Reuters reported on Oct. 9, citing people with knowledge of the discussions.

“We have some time to prepare discussions with private creditors,” Marchenko said, declining to provide a timeframe on when formal talks with creditors may start.

“Our natural desire is to preserve access to the market,” he added.

Marchenko said credit enhancement notes could be “one of the ways” to raise funds, but that how such guarantees would work depends on the future of Ukraine’s growth, among other economic factors. This has not been a topic of discussion at the meetings in Marrakech, he said.

Ukraine’s economy is set to grow 5% in 2024, Marchenko told the meetings earlier this week, and sufficient gas storage for the winter should buttress the economy from a potential rise in prices, he told Reuters.

($1=0.9516 euros)

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