MINISTRY OF HEALTH OF UKRAINE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID- 19 RESPONSE VACCINATION PROJECT, FINANCED FROM THE PROCEEDS OF THE LOAN No. 9369-UA SPECIAL PURPOSE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2022, AND FOR THE PERIOD FROM MARCH 08, 2022 To DECEMBER 31, 2022 Together with Independent Auditor's Report JBDO SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT SPECIAL PURPOSE FINANCIAL STATEMENTS For the period from MARCH 08, 2022 TO DECEMBER 31, 2022 CONTENTS: INDEPENDENT AUDITOR'S REPORT 1-111 STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR THE PREPARATION AND APPROVAL OF THE SPECIAL- PURPOSE FINANCIAL STATEMENTS 1 SUMMARY OF SOURCES AND USE OF FUNDS 2 SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT 3 STATEMENT OF ACTUAL EXPENDITURES IN NATIONAL CURRENCY 4 RECONCILIATION OF ENTRIES BY PIU AND BANK CATEGORIES 5 NOTES TO THE SPECIAL-PURPOSE FINANCIAL STATEMENTS 6 I- I "' LIn www.bdo.ua BDO LLC B_ _ _ TeL.: +38 044 393 26 87 201-203, Kharkivske Road, 10th floor Fax: +38 044 393 26 91 Kyiv e-mail: bdo@bdo.kiev.ua Ukraine, 02121 TeL.: +38 056 370 30 43 4, Andriya Fabra Str. Fax: +38 056 370 30 45 Dnipro e-mail: dnipro@bdo.com.ua Ukraine, 49000 2 INDEPENDENT AUDITOR'S REPORT To the Ministry of Health of Ukraine We have audited the special purpose financial In our opinion, the special purpose financial statements related to the Second Additional statements give true and fair view of the sources and Financing to Ukraine Emergency COVID-19 use of funds of the Loan No. 9369-UA related to the Response Vaccination Project, financed from Second Additional Financing to Ukraine Emergency the proceeds of loan no. 9369-UA (Project) of COVID-19 Response Vaccination Project for the period the International Bank for Reconstruction and from March 08, 2022 to December 31, 2022, according Development (the Bank), as at December 31, to the Bank's rules. 2022 and for the period from March 08, 2022 to External funds have been used in compliance with the December 31, 2022, which comprise: requirements of the corresponding general conditions, I Summary of sources and use of funds; financial agreements and have been used only for the L corresponding purposes. Schedule of withdrawals from the loancorsndgpuoe. aScheul; oTerms of the Loan Agreement No. 9369-UA do not provide for the use of the partners' costs. Statement of actual expenditures in The services and the goods have been purchased in national currency; compliance with the corresponding general conditions, Reconciliation of entries by PIU and Bank financial agreements. categories; Accounting and storing of the necessary supporting documents, accounting data and accounts regarding all Notes to the special purpose financial Project transactions, including those concerning the statements. expenditures, are performed in a due manner. There is a clear interconnection between accounting data and the financial statements provided to the World Bank. The prepared special purpose financial statements comply with the requirements of generally accepted accounting principles and practices, and the instructions from the World Bank; and truly and objectively reflect the financial position of the Project as of December 31, 2022 as well as the resources and expenditures for the period from March 08, 2022 to December 31, 2022. Separate opinion on expenditures Furthermore, in respect of expenditure for the period from March 08, 2022 to December 31, 2022, adequate supporting documentation has been maintained, confirming applications submitted to the Bank for reimbursement of incurred expenditure. More to that, costs specified in the applications, are subject to financing in accordance with the conditions of the Loan No. 9369-UA. BDO LLC, a Ukrainian LLC, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BO is the brand name for the BDO network and for each of the BDO Member Firms B BDO Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Special Purpose Financial Statements section of our report. We are independent of the Ministry of Health of Ukraine in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA's Code), as well as ethical requirements applied in Ukraine to our audit of special purpose financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA's Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Material uncertainty related to going concern Loan closure We refer to Note 2 to the special purpose financial statements that states that the final drawdown date of the Loan No. 9369-UA is March 31, 2023, or a later date that the Bank may determine. As of December 31, 2022 loan funds have been used in full, project activities have been completed. Our opinion is not modified in respect of this matter . Military aggression of the Russian Federation against Ukraine We draw attention to Note 5 and Note 6 to the special purpose financial statements of the Project, which states that during the Project implementation period, the military aggression of the Russian Federation against Ukraine occurred, which became the basis for the introduction of martial law in Ukraine from February 24, 2022, in accordance with the Law of Ukraine "On Approval of the Decree of the President of Ukraine "On the Introduction of Martial Law in Ukraine" No. 2102, which lasts until its official end. These events indicate that there is a material uncertainty that may cast significant doubt on the ability of the Ministry of Health of Ukraine and the Project to continue as a going concern. Our opinion is not modified in respect of this matter. Responsibility of management and those charged with governance for the special purpose financial statements Management is responsible for the preparation and fair presentation of these special purpose financial statements in accordance with the rules of the World Bank, and for such internal control as management determines is necessary to enable the preparation of the special purpose financial statements that are free from material misstatement, whether due to fraud or error. In preparing the special purpose financial statements, the management is responsible for assessing the Project's ability to continue as a going concern during the period of funds use, that is, up to December 31, 2022 or such later date as the Bank determines on a going concern basis, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of the Project. Auditor's responsibility for the audit of the special purpose financial statements Our objectives are to obtain reasonable assurance about whether the special purpose financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, butassurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements. IBDO As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. . Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. 0 Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the special purpose financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the special purpose financial statements, including the disclosures, and whether the special purpose financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The audit was performed under th p n of K it Partner 0. M. Nikolaienko Key Audit Partner kolaienko Number of registration with the Register of uditors an t November 06, 2023 Kyiv Limited Liability Company BDO. Identification code under EDRPOU: 20197074. um' Wregistration with the Register of Auditors and Audit Entities: 2868. Legal address: 4, Andriia Fabra Street, Dnipro, 49070. Tel. 044-393-26-87. _______BDO LLC is included in the Register of auditors and audit entities in section 4 "Audit entities that have right to conduct statutory audit of financial statements of the public pidpryjemstv-shho-stanovljat.suspilnyj.lnteres/ SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID- 19 RESPONSE VACCINATION PROJECT Special Purpose Financial Statements for the period from 08 March 2022 to 31 December 2022 LI STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR THE PREPARATION AND APPROVAL OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS The following statement, which should be read in conjunction with the independent auditors' responsibilities stated in the Independent Auditors' Report set out on pages 1-III, is made with a view to distinguishing the respective responsibilities of management and those of the independent auditors in relation to the special purpose financial statements of the Second Additional Financing to Ukraine Emergency COVID-19 Response Vaccination Project, financed from the proceeds of the Loan No. 9369 - UA through the International Bank for Reconstruction and Development for the period from 08 March 2022 to 31 December 2022. Management of the Ministry of Health of Ukraine and the Project is responsible for the preparation of the special purpose financial statements that present fairly, in all material respects, the financial position of the Project as at December 31, 2022 and funds and expenses for the period from 08 March 2022 to 31 December 2022. In preparing the special purpose financial statements, Management of Ministry of Health of Ukraine and the Project is responsible for: Selecting and applying appropriate accounting policies; * Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; * Providing additional disclosures in the notes and annexes when compliance with the accounting policies is insufficient to understand the effect of specific transactions, other events and conditions on the special purpose financial statements of the Project; * Assessing the ability of the Ministry of Health of Ukraine and the Project to continue as a going concern. Management of the Ministry of Health of Ukraine and the Project is also responsible for: * designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; * maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Project, and which enable them to ensure that the special purpose financial statements of the Project comply with accounting policies; * taking such steps that are reasonably available to them to safeguard the assets of the Project; and * preventing and detecting fraud and other irregularities. MOW_ The special purpose financial statements at December 31, 2022 and for the period from 08 March 2022 to 31 December 2022, is validated on November 6, 2023. Signed on behalf of Ministry of Health of Ukraine: Deputy Minister of Health - Chief State Sanitary I. V. Kuzin Doctor of Ukraine. SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-1 9 RESPONSE VACCINATION PROJECT SUMMARY OF SOURCES AND USE OF FUNDS As of December 31, 2022, and for the period from March 08, 2022 to December 31, 2022 in USD Actual Budget Discrepancies 2022 Total 2022 Total 2022 Total Opening balances of funds Loan account - USD FINANCING: IBRD funds 91 391 740 91 391 740 TOTAL 91 391 740 91 391 740 PROJECT EXPENDITURES: (1) Category 1 Goods (including COVID- 19 vaccines) for part 1 of the project 91 163261 91 163261 91 163261 91 163261 Fee for granting loan 228 479 228 479 228 479 228 479 TOTAL 91 391 740 91 391 740 91 391 740 91 391 740 Closing balances of funds Loan account - USD Notes on pages 6-9 are an integral part of these special-purpose financial statements. 2 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT SCHEDULE OF WITHDRAWALS FROM THE LOAN ACCOUNT For the period from March 08, 2022 to December 31, 2022 in USD Apnplicion Category Withdrawal Payment date Currency Amount USD Equivalent 239 1 14.03.2022 USD 91 163261 91 163261 Fotai:91 163 261 Summary schedule by category: Category 1 total 91 163 261 Total 91 163261 Notes on pages 6-9 are an integral part of these special-purpose financial statements. 3 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT STATEMENT OF ACTUAL EXPENDITURES IN NATIONAL CURRENCY For the period from March 08, 2022 to December 31, 2022 in USD EXPENDITURE BY CATEGORY ----- Payment ----- USD Equivalent Currency Amount Amount (1) Category 1 Goods (including COVID-19 vaccines) for part 1 of the project UAH 2 666 972 084 91 163 261 Fee for granting a loan UAH 6684 130 228 479 Expenditures for period in total: 2 673 656 214 91 391 740 Notes on pages 6-9 are an integral part of these special-purpose financial statements. 4 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID- 19 RESPONSE VACCINATION PROJECT RECONCILIATION OF ENTRIES BY PIU AND BANK CATEGORIES For the period from March 08, 2022 to December 31, 2022 in USD Loan amount under the Agreement 91 391 740 Balance of the amount of the Loan under the Agreement as of March 08, 2022 91 391 740 Less: Balance on the Project accounts as of March 08, 2022 Loan account - USD Total: Less: Project costs: (1) Category 1 Goods (including COVID-19 vaccines) for part 1 of the project 91 163 261 Fee for granting a loan 228 479 Total Project costs: 91 391 740 Loan account - USD Total: Interim result: (91 391 740) Balance of the amount of the Loan under the Agreement as of December 31, 2022 Notes on pages 6-9 are an integral part of these special-purpose financial statements. 5 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT NOTES TO THE SPECIAL-PURPOSE FINANCIAL STATEMENTS As of December 31, 2022, and for the period from March 08, 2022 to December 31, 2022 in USD 1. PROJECT DESCRIPTION On March 08, 2022, Ukraine and the International Bank for Reconstruction and Development signed a Loan Agreement No. 9369-UA for the implementation of the Second Additional Financing to Ukraine Emergency COVID-19 Response Vaccination Project, which provides for retroactive financing of the vaccine against acute respiratory disease COVID-19 caused by the coronavirus SARS-CoV-2 in the amount of USD 91 163 261. The objective of the Project is to prevent, detect and respond to the threat posed by COVID-19 and strengthen the national health system for public health preparedness in Ukraine. This Project consists of the following parts: Part 1. Strengthen Public Health System 1.1 COVID-19 Vaccination Support. Supporting the urgent efforts to respond to the COVID-19 pandemic through: (a) procuring Project COVID-19 Vaccines and logistic services; (b) strengthening the Borrower's institutional framework to enable safe and effective Project COVID-19 Vaccine deployment, including through the development of: (i) national policies surrounding prioritization of Project COVID-19 Vaccine allocation; (ii) regulatory procedures for vaccination; (iii) procedures surrounding cold chain, supplies, storage, logistics, and training; and (iv) accountability, grievance, citizen and community engagement mechanisms; (c) developing the Borrower's Project COVID-19 Vaccine-related infrastructure, immunization systems, and service delivery capacity, including, (i) the acquisition of cold chain facilities and logistics infrastructure; (ii) the assessment of vaccine management capacity; and (iii) the carrying out of training of service delivery workers; (d) enhancing safe medical waste management and disposal systems through, inter alia: (i) the mobilization and training of health personnel to set up appropriate procedures on site and for mobile teams engaged in the rollout of vaccination; and (ii) the acquisition and installation of autoclaves and other disinfection and .waste disposal devices; and (e) carrying out vaccination campaigns, developing information systems and purchasing information technology equipment for vaccine management. The funds of the Loan No. 9369-UA were used only from the loan account. As of December 31, 2022, the loan proceeds were fully disbursed and the project activities were completed. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. Recognition of income and expenses The Project maintains its records and prepares its financial statements on a cash basis. Income is recognized when it is received on the bank accounts maintained by the Bank. Expenditures are recorded on the date when the funds are withdrawn from the accounts. 2.2. Reporting currency ACcording to the Bank's requirements, the reporting currency is the US dollar. 2.4. Reporting period This report covers the period of using the Loan funds from March 08, 2022 to December 31, 2022. The closing date of the Project is March 31, 2023, or such later date as the Bank may determine. 3. LOAN ACCOUNT Pursuant to the terms of the Loan Agreement No. 9369-UA dated March 08, 2022 between Ukraine and the Bank, immediately after the effective date of the Agreement, the Bank, on behalf of the Borrower, shall withdraw from the Loan Account and pay to itself a loan fee in the amount of one quarter of one percent (0.25%) of the Loan amount. 6 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT NOTES TO THE SPECIAL-PURPOSE FINANCIAL STATEMENTS As of December 31, 2022, and for the period from March 08, 2022 to December 31, 2022 in USD 4. CONTRACTS List of contracts paid for the period from March 08, 2022 to December 31, 2022 is as follows: Type of goods or services Amount of Currency of contracts, USD contracts Goods (including COVID-19 vaccines) for part 1 of the project 91 163 261 USD 5. ECONOMIC ENVIRONMENT The Ministry of Health of Ukraine operates in Ukraine. 2022 was the most difficult year for Ukraine since its independence. The full-scale war unleashed by Russia has had an unprecedented impact on the lives of every Ukrainian, business, and the country's economy in general. On February 24, the President of Ukraine, based on the proposal of the National Security and Defense Council of Ukraine, introduced martial law in accordance with the Constitution of Ukraine and the Law of Ukraine "On the Legal Regime of Martial Law", which was extended as of the date of approval of these financial statements. The ongoing military attack has resulted in significant destruction of infrastructure, displacement of large numbers of people and disruption of economic activity in Ukraine. Until August 2022, all ports in the Black Sea area were not operational, which resulted in a complete suspension of export and import operations carried out through seaports. Airports, many roads and bridges were closed, damaged or destroyed, further disrupting transportation and logistics. The transportation of goods to and from Ukraine was carried out by rail and trucks, and by European transportation companies, which allowed most companies in Ukraine to resume and establish transportation and logistics of their products from May-June 2022. On July 22, 2022, in Istanbul, representatives of Ukraine signed an agreement with Turkey and the UN to unblock ports and resume grain exports from August 01, 2022, which were blocked in Black Sea ports due to the war. Russia also signed a mirror agreement with Turkey and the UN. On November 17, 2022, in Istanbul, the parties agreed to extend the "grain deal" for another 120 days, until March 18, 2023, respectively. From the beginning of the agreement until the end of 2022, about 16.3 million tons of agricultural produce were exported from Ukrainian ports. At the end of April 2022, Ukraine also faced a significant fuel shortage due to the need to create new logistics routes for supplies from Europe; the problem was resolved in May-June 2022. In October-December 2022, there were massive power outages for households and businesses due to significant damage to power grids as a result of shelling by the Russian Federation, which also caused problems with water and heat supply. The government has introduced a number of emergency measures to address these matters and stabilize the impact on the country's economy. Since February 2023, the situation in Ukraine's energy system has improved and stabilized. As a result of the armed invasion of the Russian Federation and the outbreak of a full-scale war, Ukraine's economy has undergone serious consequences. In 2022, Ukraine's GDP fell by 30.3% (in 2021, real GDP grew by 3.2%:. Starting from February 2022, the inflation rate increased year-on-year and reached 26.6% at the end of the year (2021: 10.0%) due to disruption of supply chains and production processes, uneven demand, -ncreased business costs, rising global prices, limited supply of certain goods, as well as physical destruction of assets of a number of companies caused by the military attack of the Russian Federation on Ukraine. The national currency devalued at official exchange rates by 34% against the US dollar and 26% against the euro at the end of 2022 compared to the end of 2021. Since the outbreak of the full-scale war, the National Bank of Ukraine (NBU) has introduced a number of temporary measures, such as limiting international payments in foreign currency and fixing the official exchange rate for major currencies (on July 21, 2022, the NBU adjusted the official hryvnia/US dollar exchange rate by 25% to UAH 36.5686/USD). Despite the increase in the official US dollar exchange rate, the disparity between the official and market exchange rates still exists. Since the outbreak of the war, the NBU has kept the key policy rate at 10% due to the introduction of mandatory administrative restrictions, but later raised it to 25% in June. In 2023, the NBU further increased the required reserve requirements for banks. The NBU will return to inflation targeting with a floating exchange rate regime as the economy and financial system return to normal. At the same time, thanks to assistance from partners, the NBU's international reserves exceeded the pre- war level and reached USD 28.5 billion by the end of 2022. In August 2022, the Ministry of Finance of Ukraine postponed payments on sovereign Eurobonds for two years and amended the terms of government 7 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT NOTES TO THE SPECIAL-PURPOSE FINANCIAL STATEMENTS As of December 31, 2022, and for the period from March 08, 2022 to December 31, 2022 in USD derivatives, reducing funding needs. In general, the Ukrainian government keeps servicing its external debt obligations, and the banking system keeps operating and maintaining its stability. The adopted state budget of Ukraine for 2023 envisages that budget revenues will be twice lower than expenditures, and the deficit will be about 21% of GDP (or USD 35.5 billion). It is expected that the budget deficit will be financed by financial assistance from foreign partners in the form of grants and concessional long-term interest-free loans. The Ukrainian government has received substantial international support, funding and donor contributions from international organizations, including individual countries, and charitable contributions to maintain financial stability, social payments and military needs. In 2022, the volume of pledged international financial assistance amounted to more than USD 65 billion, and the volume of received international financial assistance was more than USD 32 billion. The volume of military aid exceeded USD 16 billion, and humanitarian aid exceeded USD 41 billion. The scale and protracted nature of the war in Ukraine further increase risks to the global economy. War- fueled global inflation and corresponding monetary policy tightening are slowing economies and threatening Ukraine's key partners with recession. However, financial, military and humanitarian aid to Ukraine is only increasing, as is the sanctions pressure on Russia. The war between Ukraine and the Russian Federation is ongoing, resulting in significant destruction of property and assets in Ukraine and other significant consequences. The consequences of the war are evolving on a daily basis and their impact in the longer term is uncertain. The future impact on the Ukrainian economy depends on the outcome of the full-scale war, the successful implementation of new reforms by the Ukrainian government, the country's recovery and transformation strategy with a view to EU membership, and cooperation with international funds. The management and staff of the Ministry and the Project are located outside the area of open hostilities and are still operating in a relatively normal business mode. These factors will have an impact on the Ministry's and the Project's performance in future periods. The management of the Ministry and the Project are monitoring the current situation and are taking measures to minimize any negative effects to the extent possible. In preparing these special purpose financial statements for the Project, the known and estimable results of the impact of these factors on the special purpose financial statements for the Project in the reporting period were considered. Management of the Ministry and the Project cannot predict all developments that could have an impact on the economy as a whole and what effect they might have on the special purpose financial statements of the Project and the Ministry in the future. Management of the Ministry and the Project believes it is taking all reasonable steps to support the sustainability of the business. However, a further unstable business environment could negatively affect the results of operations and financial position of the Ministry and the Project which nature and consequences cannot be currently determined. These special purpose financial statements for the Project reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Ministry and the Project. The future business environment may differ from management's current assessment. As at the date of approval for issue of these special purpose financial statements for the Project, there is a material uncertainty regarding the going concern. 6. EVENTS AFTER THE REPORTING DATE As stated in the note 5, Ukraine is still engaged in a full-scale war with the Russian Federation and the legal regime of martial law is in effect. Further, the key risk is the prolongation of the war, even if the hostilities are localized. This will require the economy to operate under extreme conditions for a long time, threaten to deepen its decline, and increase the need for assistance from partners. The impact of the war on the global economy will also increase. International support for Ukraine is growing thanks to the resistance of the Armed Forces, effective diplomacy, and extensive coverage in the global media. The main mechanisms of support are arms supplies, financial and humanitarian aid, and sanctions against Russia. Since the beginning of 2023, inflation has been falling faster than expected. The easing of inflationary pressures was facilitated by an ample supply of food and fuel, as well as a fairly rapid recovery of the energy system from the effects of Russian terrorist attacks. Another important factor was the improvement in inflation expectations since the beginning of the year, as the NBU stopped issuing debt, the hryvnia's cash 8 SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT NOTES TO THE SPECIAL-PURPOSE FINANCIAL STATEMENTS As of December 31, 2022, and for the period from March 08, 2022 to December 31, 2022 in USD exchange rate strengthened, and hryvnia assets became more attractive. According to the NBU's forecasts, inflation will slow to 10.6% in 2023 and return to single digits in the following years. Given the rapid recovery of the energy system and loose fiscal policy, the economic growth forecast for 2023 has been improved from 0.3% to 2.9%. Under the security assumptions, no significant electricity shortages are expected in the future, except for localized and situational deficits in the second half of the year. At the same time, increased budget expenditures amid significant international financial assistance will support economic activity and consumption. Reducing security risks next year will help accelerate economic growth to 3.5% in 2024. Thus, the de-occupation of the territories and the full opening of the Black Sea ports will allow for a gradual increase in industrial production and harvests. In addition, domestic demand is expected to expand due to the return of some forced migrants. Overall, this year's revenues from international partners may exceed USD 42 billion. Receipts from partners will contribute to the growth of international reserves to about USD 35 billion by the end of the year. Given the uncertainty related to the war, and significant state budget expenditures, maintaining exchange rate stability amid plans for currency liberalization will require ensuring that hryvnia savings are highly attractive. In view of this, the key policy rate was kept at 25%, reduced to 22%, and is expected to be further reduced in the fourth quarter of 2023. The key risk is still a longer duration and intensity of the war. The main assumption of the forecast, as before, is a significant reduction in security risks from the beginning of 2024. A longer period of hostilities is likely to slow economic recovery and worsen inflation and exchange rate expectations. This will create additional challenges for the economy and finance. The situation is still evolving and its consequences are currently uncertain. Management is unable to predict all developments that might affect the economy as a whole and what effect they might have on the financial position and the results of future operations of the Ministry. Management keeps monitoring the possible impact of these developments on the Ministry and will take all possible measures to mitigate any consequences. 9 CHECKLIST OF BANK'S AUDIT DOCUMENTATION Name of Loan/Credit: SECOND ADDITIONAL FINANCING TO UKRAINE EMERGENCY COVID-19 RESPONSE VACCINATION PROJECT Loan/Credit No. No. 9369-UA Audit Report: for the period from March 08, 2022 to December 31, 2022 Checkif Checkif Included N/A I. Audit report (Opinion): A. Applicable accounting standards noted X B. Applicable auditing standards noted X C. Opinion rendered on all forms of withdrawals: 1. Statement of Expenditures X 2. Designated Account X D. All sources of financing for the project are noted X II. Financial Reports: A. Revenue Earning Entity (all of the following are required): 1. Balance sheet X 2. Cash Flow Statement X 3. Income Statement X B. Non-Revenue Earning Entity (all of the following are required): 1. Balance sheet 2. Summary of Sources and Uses of Funds C. If applicable (refer to Loan Agreement): 1. Statement of Expenditure (SOE) Statement 2. Designated Account Statement III. Notes to the Financial Statements X IV. Reconciliation between World Bank records and project records X V. Management Letter X 10