Ukraine's forex reserves up 42% on 'unprecedented' Western aid in 2023

Ukraine's foreign exchange reserves grew 42% over the past year due to "unprecedented" foreign financial aid, reaching $40.5 billion as of Jan. 1, the central bank said on Friday. Kyiv has relied heavily on military and financial aid from its Western allies since the start of Russia's invasion in February 2022, but political wrangling has delayed the disbursement of major aid packages for this year.

Ukraine's foreign exchange reserves grew 42% over the past year due to "unprecedented" foreign financial aid, reaching $40.5 billion as of Jan. 1, the central bank said on Friday.

Kyiv has relied heavily on military and financial aid from its Western allies since the start of Russia's invasion in February 2022, but political wrangling has delayed the disbursement of major aid packages for this year. "Last year, Ukraine received unprecedented global financial support. About $42.7 billion came into the government's accounts at the National Bank of Ukraine," it said in a statement.

Government data shows Ukraine has received more than $73.5 billion in financial aid since the start of the war. Last year, the European Union was Ukraine's largest financial supporter and transferred about $19.7 billion, the central bank said.

But as the war has dragged on, concerns have grown over the availability of Western aid this year. New packages totalling more than $110 billion for Ukraine have been delayed in the United States and the European Union. Ukraine spends most of its domestic budget revenues on funding its army and defence. Western financial aid is vital for the Ukrainian government to be able to continue financing its social and humanitarian spending and pay pensions and public sector wages.

Ukraine's hryvnia currency has come under pressure due to uncertainty over financial aid. The central bank sold $3.55 billion on the foreign exchange market in December to meet demand for hard currency. The central bank said seasonal factors, including more active budget payments, were also behind higher demand for hard currency.

In December, the central bank's foreign currency sales were offset by the inflow of Western aid. The central bank statement said Ukraine received over $5.5 billion from its Western allies in December. That included $1.8 billion from the European Union and nearly $2.5 billion from the governments of Japan, Norway and the United States via a World Bank trust fund. Last month Ukraine also received about $900 million from the International Monetary Fund, part of a four-year program worth $15.6 billion.

Reserves stood at $38.8 billion at the start of December.