Cabinet offers $2.5 billion for coronavirus recovery in new budget proposal

The Ukrainian government is prepared to create a Hr 66 billion ($2.5 billion) fund to pay for medical equipment and support Ukrainians affected by the economic downturn provoked by the COVID-19 pandemic, Ukrainian ministers told the press during a briefing on April 8.

The budget changes must now be passed by the parliament.

The ministers announced the changes amid an increasingly grim prognosis for the country’s economy. Earlier in the day, Prime Minister Denys Shmygal stated that quarantine measures to prevent the spread of the novel coronavirus would likely be extended until early May — bad news for business and industry.

The country’s economy will shrink by 4.8% in 2020, said Economy Minister Ihor Petrashko. Meanwhile, as of April 7, unemployment has increased by 13% compared to the same period in 2019.

By year’s end, a total of 9.4% of Ukrainians will be unemployed, Petrashko said.

Coronavirus fund

According to Finance Minister Serhiy Marchenko, the coronavirus fund will be $1 billion less than initially proposed because the government chose to bypass it when providing financial support to pensioners and medical workers.

The new budget will feature a Hr 20 billion ($700 million) increase of the pension fund, which will now stand at $7 billion. “The budget will also accommodate pay raises for medical workers,” said Marchenko.

Asked where the money will come from, Marchenko said that the government would cut spending on cultural projects, sporting events, festivals and non-essential projects. The budget deficit is now planned to be Hr 298 billion ($11 billion), or 7.5% of Ukraine’s gross domestic product.  

Ukraine’s total budget is estimated to be around $50 billion.

Help coming?

Marchenko said that the government is eying a much-needed $8-billion loan from the International Monetary Fund (IMF).

“We have discussed the budget with the IMF, and we hope that the lawmakers will pass the budget this week,” said Marchenko. 

It will be the government’s second attempt to pass budget changes. On March 30, the budget bill came three votes short of passing. At the time, the coronavirus fund was supposed to be Hr 97 billion ($3.5 billion), Hr 31 billion (nearly $1 billion) more than it’s now.

That substantial drop is the result of the government directly increasing the pension fund, rather than injecting money into the coronavirus fund, which is now tasked with buying equipment and financially stimulating those harmed economically by the ongoing pandemic.

As of April 8, COVID-19 has killed over 80,000 people worldwide and 52 in Ukraine. It has also hit Ukraine’s economy, with the government projecting that it will lose Hr 123 billion ($4 billion) in budget revenue.

However, the struggle to pass the budget is not what is keeping the IMF money locked away.

Lawmakers are hesitating to pass the “bank bill,” a piece of legislation colloquially known as the “anti-Kolomoisky law” after oligarch Ihor Kolomoisky. Passing the law is one of the key requirements for Ukraine to secure the much-needed loan program from the IMF.

If adopted, the law would prevent Kolomoisky from regaining control over PrivatBank, Ukraine’s largest bank, which he owned before it was nationalized in 2016. Independent forensic analysis found that $5.5 billion went missing from PrivatBank prior to the National Bank of Ukraine taking over.

Now, the Ukrainian government is suing the oligarch at home and in the United Kingdom, Switzerland, Cyprus and Israel to get the money back. Kolomoisky denies all accusations of wrongdoing and is countersuing in Ukraine.

The “bank bill” was passed in its first reading on March 30 and was expected to be put up for a second and final vote in early April. However, it was blocked by over 16,000 amendments, most of which were filed to apparently stall the law’s passing.