This year marked several pivots for Ukraine’s economy.
The west unlocked gains from Russian assets to make the invader pay to Ukraine, though this is only the first step - Ukraine insists all $280 billion frozen Russian assets should be confiscated.
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Ukraine’s internal, foreign investors and the state arranged several M&A deals to acquire telecom companies, banks, ports, mining and oil companies.
Russia continued striking Ukraine’s energy grid to plunge the country into darkness. The US delayed a large aid package that made the government completely reshift budget expenses, but the story had a happy ending.
Ukraine passed its record review of the IMF program while battling with corruption and revenue shortage. The latter also had a happy ending as Ukraine reached a favorable debt restructuring deal and voted for massive tax hikes.
- ERA Loan
After months of negotiations, the G7 countries agreed to create a tool that will enable payments from immobilized Russia’s central bank sovereign assets. They were frozen after Russia’s invasion of Ukraine, as the west’s response to aggression. The total amount of Russian assets vary from $210 billion to $300 billion.
All but $5 billion, which are located in the US, are held in Europe.
$191 billion of Russia’s central bank assets are held by Euroclear, a clearing house situated in Brussels. In February it reported €4.4 billion ($4.75 billion) of interest had been generated by the funds which could provide Belgium with €1.085 billion ($1.17 billion) in taxes, according to The Guardian.
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It was suggested that Ukraine may also receive funds arising from Russia’s frozen assets in the form of a loan that will be repaid from interest that Russian assets generate in Euroclear.
The ERA loan is the first historic step to make Russia pay for aggression. The G7 countries still have not agreed on policy that will allow confiscate all assets, but they assured Ukrainian government the assets will be unfreezed only after Russia will pay reparations to Ukraine.
Out of €45 billion ($50 billion) loan, $40 billion is already signed on paper. Britain announced it contributed £2.26 billion (almost $3 billion) and allowed to allocate it for military purposes. The US agreed to provide $20 billion.
The European Union will allocate up to €35 billion ($37.84 billion). The sum can be less than this and it remains unclear how much the EU will actually disburse and allow Ukraine to spend on defense.
The loan should help finance Ukraine’s financial needs in 2025, if the war sustains in 2025 and there will be no shocks.
- Investors risking before the war ends
2024 marked several vital M&A deals for Ukraine. Foreign, internal and state market players acquired assets of various forms: factories, ports, banks and large companies.
A consortium led by NJJ Holding (“NJJ”) that is a part of an investment group owned by a French billionaire Xavier Niel acquired both Ukraine’s leading fixed telecom and pay TV provider Datagroup-Volia and the country’s third mobile operator Lifecell.
Ukraine’s largest one-dollar store retailer Avrora secured a deal to buy a 100,000 square meter (1 million square feet) commercial property that belonged to Ukraine’s major investment bank Dragon Capital. Avrora took on the premises from the previous owners after they were burned during Russia’s invasion of the Kyiv region in 2022.
Dragon Capital bought 100% of the share capital from the Karavan Outlet, adding a sixth shopping mall to their portfolio – its largest shopping mall in Kyiv. Its previous owner is Oleksandr Yaroslavsky, a Kharkiv-based Ukrainian entrepreneur. Concorde Capital estimated that Fiala would have paid $80-120 million for Karavan while Forbes Ukraine estimated a more modest price of $40-60 million.
Polish Getin Holding and Ukrainian TAS Group have signed a deal to purchase Idea Bank Ukraine. The purchase will cost the new owner $34 million and became the first mergers and acquisitions (M&A) deal in the banking sector after Russia launched its full-scale invasion of Ukraine in February 2022.
The buyer of 100% of the shares is the Alkemi Limited (Cyprus), which is part of the TAS Group, belonging to Serhiy Tigipko. The Antimonopoly Committee of Ukraine has already approved the deal, now the final approval should be delivered from Ukraine’s central bank, the National Bank of Ukraine.
Ukraine successfully sold two large state-owned assets to private owners.
UMCC Titanium, Ukraine’s titanium producer operating the Vilnohirsk Mining and Metallurgical Plant and Irshansk Mining and Processing Plant was acquired by NEQSOL Holding, an international group of companies with operations across 11 countries and headquarters in Amsterdam, Baku, and Kyiv.
The Hotel Ukraine, located in Kyiv’s centre, was sold for approximately $60 million to cybersport tycoon Maks Krippa who owns Ukraine cybersport team NAVI.
Aeroc company, a concrete and building materials factory previously owned by Russian entrepreneur Andrey Molchanov.
Ukraine-owned oil and gas producer Ukrnafta acquired a 51% stake in Shell. The owner of the Shell network in Ukraine is Alliance Holding, 51% of which belonged to Shell and 49% to the subsidiary of the Russian Independent Oil and Gas Company (IOC) of Russian Eduard Khudaynatov.
Over 15 years, Shell has invested $470 million in the Ukrainian gas station network, Forbes Ukraine reported. After the deal is closed, Ukrnafta will consolidate its status as the largest network in Ukraine - the number of its gas stations will increase by 22%, to 665, according to their estimates.
Aeroc, aerated concerete products manufacturer previously owned by Russian billionare Andrei Molchanov and confiscated by Ukraine’s court, also received a new owner. During an auction on December, 19, the highest stake was made by Ukrainian entrepreneur Hennadii Butkevych, co-owner of Ukraine’s largest ATB and founder of the investment company BGV Group Management.
Three participants took part in the auction and the final price for the asset was estimated at almost Hr.2 billion ($45 million), Ukraine’s State Property Fund reported.
- Membership negotiations for EU membership launched
In summer this year, Ukraine entered a historic milestone by starting the membership negotiations with the EU. The European Union held the first Intergovernmental Conference at ministerial level.
Ukraine started negotiations on the same day as Moldova. In the future years, Ukraine’s legislation and policies will be reviewed by EU delegations to adhere with the European laws.
The EU and Ukraine will discuss regulations in 35 subjects, from taxation and public finance to the environment. Each subject is organised in so-called clusters and chapters. If Ukraine completes all to-do lists, the European Commission should give its Opinion on the readiness of the country - it can then become a member state. But this process can last from several years to decades and nobody knows when Ukraine will reach its readiness state.
- Delay in the $61 billion aid package from the US
A $61 billion US aid package that was promised to Ukraine but delayed because of long debates in the US House of Representatives caused several problems for Ukraine in 2024. It weakened the potential of Ukraine’s counter-offensive and caused a critical lack of ammunition on the frontline. Russia used Ukraine’s weakened state to advance in the Kharkiv region.
But it also caused financial problems for Ukraine’s economy. Financing planned in Ukraine’s budget from the US cash had to be covered by previously planned sources that was nearly ending in summer.
A source familiar with the matter told Kyiv Post that Ukraine was already at risk of a liquidity crisis in July 2024, but the timely financial aid from the EU covered social expenses.
In April US approved the $61 billion package, which was a part of $95bn in total funding: $61bn for Ukraine with some of the funding going towards replenishing American munitions; $26bn for Israel; $8bn for US allies in the Indo-Pacific region, including Taiwan; and $9bn in humanitarian assistance for civilians in war zones of Haiti, Sudan and Gazа, the Guardian reported.
- Russia’s attack on the energy grid and massive blackouts in summer
In spring-summer 2024, Russia launched repeated strikes on Ukraine’s power grid that caused a loss of nine gigawatts (GW) of power production.
Dixi Group estimated a total of 20 GW of available nameplate capacity in the country as of May 15. But even this capacity is not always available in the network, for example the estimates do not take into account repairs at nuclear power plants, the availability of hydro resources, and low capacity of renewable energy facilities.
To help Ukraine’s energy system survive the strikes, Ukrenergo, the state-owned electricity transmission company, has imposed blackouts around the country.
What worsened the situation was that the blackouts were imposed during a massive heatwave in Ukraine, when temperatures reached +30 on average across the country during the day, and +20 throughout the night. This made turning on air conditioning to survive the heatwave complicated.
The damages from the strikes were only a part of total $1.2 trillion in lost revenue and $386 billion in lost added value for Ukraine Russia caused in Ukraine as a result of launching a full-scale invasion of the country.
This is the estimation from Kyiv School of Economics (KSE) that helps to show what the state of Ukraine’s economy might have been had the invasion not happened and how it has affected the sectors and regions that contribute most to Ukraine’s GDP.
- Historical progress in the IMF Program
Both Ukraine’s Ministry of Finance and central bank previously told Kyiv Post Ukraine “broke the spell” since the country has never gone so far in the IMF program.
Ukraine and the IMF approved a 48-month Extended Fund Facility (EFF) Arrangement on March 31, 2023. That enabled access to $15.6 billion or about 577 percent of the quota and forms part of a US$122 billion support package for Ukraine.
In November, The mission of the International Monetary Fund (IMF) conducted the sixth review of the EFF program with Ukraine in Kyiv. The IMF team and the Ukrainian authorities have reached staff-level agreement (SLA). The agreement is subject to approval by the IMF Executive Board, the central bank reported.
Ukraine would have access to about $1.1 billion (SDR 834.9 million), bringing total disbursements under the program to $9.8 billion, according to the IMF.
- The debt restructuring deal easened Ukraine’s debt burden.
Since Russia’s full-scale invasion in 2022, Ukraine’s Eurobond holders agreed to a two-year moratorium and haven’t received any payments. The need to finance the military kept rising after 2022 – Ukraine’s debt-to-GDP ratio rose from 81.6 percent to 90.4 percent by the end of 2023, according to Ukraine’s central bank.
All debt cannot be repaid now since Ukraine will have nothing in its pocket to finance the military – and the country’s survival. When companies, countries or individuals lack money to repay their debts, they talk about easing debt conditions. That is called restructuring and is normal for the corporate world.
Ukraine needed to repay Eurobonds worth almost $20 billion. All of them were issued during 2015-2021, according to the Ministry of Finance website. The bondholders committee include Amundi SA, BlackRock Inc and Amia Capital LLP, and other investors holding 25 percent of the bonds.
The first round of negotiations was unsuccessful. The second round brought a deal thanks to which Ukraine expects to save $11.4 billion over the next three years by a combination of lower coupons and maturity extensions, the Ministry of Finance said.
Bondholders agreed to forgo $8.67 billion in claims, accepting nominal losses of 37 percent of their holdings across 13 bonds. Without the restructuring, $9.381 billion in principal (excluding capitalized interest) would have been due between 2024 and 2029.
The deal also helped to decrease the budget gap from 23% GDP in 2024 to 19% GDP in 2025.
- Massive tax hike to mobilize revenues
Ukraine’s defense spending as it holds off Russia’s full-scale invasion exceeds its overall pre-war spending. Despite this fact, Ukraine had not increased taxed after Russia invaded Ukraine, but in 2024 the Ministry of Finance finally started a campaign to adjust the tax regime to the war economy.
It submitted a bill to impose new military levy, new taxes for entrepreneurs in general, and enforce stricter control during tax inspections.
Out of Hr.140 billion ($3.5 billion) initially planned, lawmakers’ amendments decreased the possible tax revenues to Hr.58 billion ($1.4 billion) in 2024. The new tax bill increases the military tax on personal income from 1.5% to 5%.
The new bill will now force Enterprises with Sole Proprietorship (FOP in Ukraine) to pay military tax as well – something they have not done before. The bill will impose advance tax payments from gas, diesel and LNG sellers. Companies selling fuel B2C will be expected to pay taxes from profits upfront.
A windfall tax of 50% will also be imposed on banks for the year 2024, and a corporate tax of 25% for non-banking financial institutions (excluding insurers) will apply.
A suggested windfall tax on the banks was something neither the Ministry of Finance, Ukraine’s central bank, nor the National Bank of Ukraine (NBU), liked the idea of – it may damage the long-term investment climate.
Ukraine’s president Volodymyr Zelensky hesitated with enforcing the law and was not signing it for a month after the legislative deadline. But the story had a happy ending and the president signed the law, so the new taxes came into force.
Ukraine also tries bringing the shadow economy back to the light, and one of the policies aiming to do this is restrictions on outgoing transfers from one bank card to another, also known as peer-to-peer (P2P) transactions.
The restrictions lifted have become a key measure for the central bank to fight against “drops” – individuals who provide their bank account data, PIN codes, and even access to web banking to a third party and get rewards for using the cards for transactions. Such transactions do not show real income – cards are used as transit tools to allocate illegal income.
But the effect of this policy remains debatable so far at the time of publishing this article.
A paragraph about privatisation of Aeroc was added after publishing the article.
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