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Plan B in case of absence of funds from US: When to expect details

Plan B in case of absence of funds from US: When to expect details Photo: IMF Managing Director Kristalina Georgieva (Getty Images)

Details of Plan B in case of the absence of funding from the United States will be detailed in the IMF (International Monetary Fund) Memorandum during the next program review in May, according to an article by RBC-Ukraine "Can Ukraine make it without US-EU aid? Budget sufficiency and alternatives assessed".

So far, the IMF memorandum does not outline actions in case of a reduction in receipts from partners – the hope of receiving money from the USA still remains. However, sources familiar with the negotiation process with the IMF said that specific steps, if the situation develops negatively, will be determined during the next program review in May.

"Specific steps will be provided after the next review," said the interlocutor.

In fact, this will be the concretization of Plan B which has been discussed since the end of last year.

If this funding is not forthcoming, Ukraine will have to:

a) seek alternative sources, which is quite difficult to do in such volumes;

b) cut expenses, which is also not easy, given that the budget was already formed with maximum cost-saving measures;

c) increase the tax burden.

But most likely, a combination of these measures will be necessary. The IMF memorandum also mentions the possibility of increasing financial pressure and reducing expenses in the event of a shortage of external financing.

IMF memorandum

Recently, a new memorandum from the IMF was published. In particular, it mentioned that the Ukrainian government, with the support of the World Bank, is preparing changes to the pension system and mechanisms to support vulnerable segments of the population.

In addition, in a letter of intent to the IMF management, the Ukrainian government allows for a gradual increase in utility tariffs for the population during and after the war.

Furthermore, Ukraine will establish legislative mechanisms to limit transfers from card to card under certain conditions.