A delegation from the International Monetary Fund (IMF) on Tuesday started talks with Ukrainian officials as Kyiv looks for ways to increase revenue streams for the war-ravaged economy and plug its 2024 budget deficit, officials said.
The meetings in Kyiv will "focus on the authorities' fiscal policy plans for the remainder of 2024 and the medium term," the IMF said in a statement.
The IMF has already released nearly $3.1 billion to Ukraine this year under its $15.6 billion Extended Fund Facility program.
More than 28 months since Russia's full-scale invasion, the government faces a budget gap of between 400 billion hryvnias ($9.8 billion) and 500 billion hryvnias for this year, said Roksolana Pidlasa, head of the parliament budget committee.
Officials and analysts say the government plans to cover its budget deficit this year by raising taxes and increasing domestic borrowing.
"The IMF mission starts this week," Yaroslav Zheleznyak, a lawmaker from the Holos party, said on the Telegram messaging app. "I think after that there will be news from the government on budget changes and tax increases."
Ukraine's 2024 budget allocates more than $40 billion – about half of its total expenses – for the defense sector, while the government relies heavily on international financial aid to cover social and humanitarian spending.
The IMF is one of Ukraine's major multilateral creditors and its funds are a key part of about $37 billion that Ukraine expects to receive in foreign aid this year.
The government has received about $16 billion from its Western partners so far this year, according to the finance ministry. Foreign aid totaled $73.6 billion between the February 2022 invasion and the end of 2023.
The invasion battered Ukraine's economy, with millions fleeing the fighting, cities and infrastructure bombed, and supply chains and exports disrupted. The nation's economic output tumbled by about 29% in 2022, but started recovering in 2023, with the economy growing 5.3% as businesses adapted to wartime conditions.
This year, the government was forced to cut its economic growth forecasts to around 3% due to a growing energy deficit after repeated Russian missile and drone strikes on Ukrainian power facilities. The government is also working against the clock, trying to succeed in its unprecedented aim of restructuring its foreign debts in the middle of the war before payment moratoriums expire by Aug. 1.