KYIV

Ukraine expects its economy to grow 3.8 percent in 2022, slightly down from 4 percent expected this year, and plans to issue Eurobonds worth $1.5 billion to finance part of next year’s budget deficit.

The government approved a draft budget for 2022 with a deficit of 3.5 percent of gross domestic product (GDP), down from 5.5 percent expected this year, Prime Minister Denys Shmyhal said.

Annual inflation is projected to slow to 6.2 percent in 2022 from about 10 percent this year.

“The budget for 2022 is not only balanced and realistic, but it is also a budget for modernising the country, restoring the economy and investing in people, in their health, education, and development,” Shmyhal said.

The finance ministry said Ukraine was planning to issue $1.5 billion in Eurobonds. It also expects to receive a combined $2.9 billion from the International Monetary Fund (IMF) and other international financial organisations.

The IMF agreed a $5 billion standby arrangement with Ukraine in June 2020 and an initial tranche of $2.1 billion was rapidly disbursed. But subsequent tranches were held up by the Fund’s insistence on guarantees for central bank independence and on the creation of institutions to overhaul a judicial system widely seen as corrupt.

Shmyhal said Kyiv expected to receive a new $750 million tranche from the IMF credit arrangement by the end of this year following a new Fund mission to iron out remaining differences.

Ukraine’s economy continued to expand in the first seven months of this year, backed by the growth in industry due to favourable conditions on foreign commodity markets.

The country’s GDP grew by 2.1 percent year-on-year in January-July compared to a 6.1 percent contraction in the same period last year.

Ukraine’s GDP first grew by 6 percent year-on-year in the second quarter, reversing five consecutive quarters of negative growth linked to the imposition of restrictions owing to COVID-19.

The government forecasts 4.1 percent growth for all of 2021, cancelling out last year’s decline of 4 percent. The European Bank for Reconstruction and Development issued a forecast of 3.5 percent GDP growth in June. Inflation in Ukraine last year stood at 5.0 percent.