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Ukraine’s finance minister calls for immediate tens of billions of dollars in financial support to Russian invasion.
Government spending exceeded revenue by about $2.7 billion in March, and Ukraine expects the gap to widen to $5 billion to $7 billion a month in April and May due to the war. Ukraine’s GDP in 2021 is $164 billion.
“We’re under enormous pressure and at worst [financial] conditions,” Sergii Marchenko said in an interview with the Financial Times. “It is now a matter of our country’s survival. “
“If you want us to keep fighting this war and win this war . . . then help us.”
Marchenko paints a grim picture Damage to the Ukrainian economy Influenced by Russia’s full-scale invasion in late February. So far, damage to civilian and military infrastructure has been estimated at $270 billion, with nearly 7,000 residential buildings damaged or destroyed, he said.
While Ukraine has received substantial military aid to help fend off Russia, the government wants its Western partners to provide financial aid and approve emergency loans from the International Monetary Fund and the World Bank.
About 30 percent of Ukrainian businesses have stopped all activities, and 45 percent have reduced capacity, he said. Electricity usage dropped by 35%. Trade collapsed, with exports halving in February-March and imports falling by more than two-thirds.The Kyiv School of Economics estimated on Monday the total economic damage caused by the war as up to $600 billion.
Marchenko demanded that Russia pay compensation for “destruction of private and public property” during the war, and said Kyiv had assembled an international legal team to file a claim against Moscow.
But the priority is short-term financing. The minister said the government has cut spending by more than $6 billion as Ukraine tries to limit its budget shortfall, but it is not enough.
“We can cut some spending, but it won’t fill the gap,” he said.
He added that revenue was only slightly above half of pre-war levels. Before the Russian invasion, the budget deficit for 2022 was expected to be 3.5 percent of GDP, and would be “many multiples” depending on the duration of the war, he said.
The government continues to meet its core obligations to pay public sector wages, pensions and services its debt, He said. He added that the country last month paid $292 million for dollar-denominated euro bonds due in September and will continue to meet its obligations to avoid default or restructuring.
“A lot of politicians suggest we talk about restructuring, but that’s not our policy,” he said. Ukraine hopes to be able to obtain concessional and commercial financing and to be able to continue to issue foreign debt.
He said the administration was in discussions with the U.S. to ensure it could issue sovereign bonds at rates lower than what the market is currently asking for, which is “well above the optimal level we’re borrowing right now.”
this The International Monetary Fund said Friday It has opened an account to provide Ukraine with grants and loans to help it “meet its balance of payments and budget needs and help stabilize its economy”.
Marchenko called on rich countries to use the account to channel the funds they received from the IMF last August, when it allocated $650 billion in Special Drawing Rights, or Special Drawing Rights, the equivalent of newly minted currency. form of reserve assets. The grant is designed to help countries deal with the economic impact of the coronavirus.
The G7 members of the world’s largest economies receive about $290 billion in grants shared among the IMF’s 190 member countries, roughly equal to their share of global output. Marchenko urged rich countries to donate or lend 5 to 10 percent of their allocations to Ukraine’s war effort through a new IMF account.
“That allocation wasn’t used, and a lot of countries just stopped it,” he said. “It’s probably the easiest [form of support]. “
Last month, the U.S. Congress approved $13.6 billion in military and humanitarian aid to Ukraine and other war-affected countries. While Marchenko welcomed the move, he said Ukraine “will not receive a cent” because it will be provided in the form of direct aid rather than cash. “This is not direct budget support. We cannot use it to fill the deficit,” he said.
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