A thousand hryvnias for everyone. Will Ukraine have enough funds for pensions and defense, and where will the money for these payments come from?
One Thousand Hryvnias from Zelensky. Is it necessary to distribute money during wartime? What do experts say?
First Deputy Minister of Economy Alexey Sobolev recently commented on the source of the payments of 1,000 hryvnias to the population. According to him, these funds come from existing programs. "We are redirecting from those programs of the Ministry of Economy and other ministries, from which the allocated funds for this year will not be fully utilized by the end of the year," Sobolev said. He also mentioned that the funds were allocated by donors (international financial organizations, partner countries), and there is a stipulation against their use for military purposes.
1 Funds for family support are an important step, some experts say. Primarily due to the expected effect of reviving consumption, which is necessary for the domestic economy. "Technically, unconditional income stimulates consumption. It is crucial for us that consumption is stimulated specifically in the segment of goods and services produced in Ukraine. Subsequently, such tools can be complicated and stimulate the development of various sectors. When a thousand hryvnias leaves our accounts, it becomes part of the revenue of a domestic company, which pays salaries, taxes, and hires workers. This instrument is used in Finland, China, and Middle Eastern countries," says Vitaly Shapran, former member of the NBU Council. In his opinion, the overall effect on the consumer market will be short-term.
Experts hope that the thousand hryvnias from the authorities will help reduce Ukrainians' debts for utility services.
"About 30 billion will definitely go into the utility sector for utility services. Considering that the debt for utility services was over 200 billion hryvnias, such an industry injection is necessary for the operational capacity of the sector, especially during the peak heating season," the expert said.
Executive Director of CASE Ukraine Dmitry Boyarchuk believes that the distribution of one thousand hryvnias will have a certain economic effect, as it creates additional demand for specific types of goods/services. However, it is not that simple. "The problem is that this is funded by foreign taxpayers and is clearly a politically motivated program. If there are unused funds, there are many non-military directions where these funds could be applied, which would also stimulate demand. Essentially, it turns out that 'helicopter' money distribution is financed by international support. This case will undoubtedly be used to argue why support for Ukraine should be reduced or even stopped altogether," warns the economic expert.
2 Another point that prompts consideration of the appropriateness of distributing money is the provision of aid at a time when the parliament approved tax increases. According to economist of the CES Maxim Samoylyuk, this program (the issuance of one thousand hryvnias) is currently untimely, given that a tax increase bill is awaiting the president's signature. "This means that there is a plan to collect higher taxes from people (as it has been justifiably stated — to cover important military expenses), but at the same time to spend comparable amounts on giving 1,000 hryvnias to all citizens of Ukraine," says the economist.
3 The expert adds: there are specific areas where the existing state funds could be directed, particularly towards business lending. "The '5-7-9%' program is already a proven method of supporting the economy and businesses, so directing funds to support its reliable operation would raise no questions," noted Maxim Samoylyuk.
Give More. What tranches from partners does the government expect in 2024 and what will happen with funding in 2025?
The Ministry of Finance expects to receive 15 billion dollars from partners in November-December 2024. This was reported by the ministry's press service following the annual meeting of the IMF and World Bank in Washington.
4 The Ministry of Finance expects 15 billion dollars from partners this year and nearly 39 billion dollars in 2025.
"Regarding foreign financing, especially for the short term, the Ministry of Finance always provides an adequate assessment. I have no reason to doubt that their confidence in receiving these $15 billion by the end of the year is backed by appropriate agreements with partner countries. This amount is quite realistic," believes Maxim Samoylyuk. However, not all experts are convinced that Ukraine will receive all 15 billion dollars by the end of the year. "For Western partners, stability is a top priority. But against the backdrop of populist decisions, they may slow down to demonstrate that such behavior is unacceptable," says Dmitry Boyarchuk.
5 According to Andrey Shevchishin, part of the inflow will depend on the fulfillment of all structural benchmarks and Ukraine's compliance with IMF requirements. "Therefore, not the entire amount, but part of it may be delayed and carried over to 2025. However, as seen from the votes in the Rada, lawmakers will do everything necessary to ensure that everything is fulfilled on their part. How other structural benchmarks will proceed is hard to say. Also, there may be risks in relation to the States due to the elections," says Andrey Shevchishin.