Natalia Zinets

KYIV, Reuters – Ukraine is forced to spend 245 billion hryvnia (8.3 billion dollars) on its war against Russia. The finance minister stated this on Thursday. It was a look at the immense economic impact of Moscow’s invasion of Ukraine on February 24, 2014.

This figure was not disclosed before by the Ukrainian government and reveals the economic mess that Ukraine is in as it tries to stop Russia from renewing its offensive in Ukraine’s east.

Financial Minister SerhiyMarchenko stated that the funds were used to purchase and repair weapons, as well as emergency aid for those internally displaced. According to the data provided by the ministry of social policy, there are approximately 2.7 million IDPs officially registered. However, the actual number is much higher.

Marchenko said that the government collected only 60% of April’s planned tax revenue. However, foreign grants made up the difference of 79.5%, which Marchenko shared with Reuters in written comments.

Marchenko indicated that Kyiv needs urgent foreign aid as it has been forced to spend billions on emergency spending.

Marchenko claimed that Ukraine has received close to $2 billion in foreign funding since February, with $719 million of this money coming from grants. He said that the figure stands at $5.4 billion for the time period from February, which includes $801 million in grants.

Marchenko explained that, if we don’t take in foreign aid, then we estimate that May-June’s revenue receipts will now be 45-50% higher than what was originally planned. However, this assumes that the economic situation doesn’t get worse.

DEBT SERVICING COMPONMENT

Eight billion dollars in war costs equals more than one month’s total state expenditures, as calculated by 2021 annual spendings of 1.84 trillion Hryvnias ($62.28 million).

Marchenko claimed that Kyiv had been discussing different forms of foreign financial support.

The International Monetary Fund launched a Special Drawing Rights (SDRs) account that Ukraine wanted to access. He listed the funds Ukraine was hoping to get.

Part of the SDRs can be directed to this account by countries that are developed.

Marchenko stated that the Finance Ministry team was currently negotiating with international partners to send their SDRs to Ukraine.

The account holder also stated that Ukraine was expected to be granted a loan in the amount of approximately 1 billion Canadian dollars, or $767 million.

Marchenko stated that he urged his partners to contribute part of the funds to help reduce the debt burden, which has been growing because of martial law and the lack for funding.

According to the minister, Ukraine was determined to service its debts regardless of whether it is involved in war.

“Our stance remains the same on this matter. He stated that we continue to service our loans and that the cost of this expense is small in relation to the need for funding the budget.

“We don’t have current reliable medium-term projections to allow us model the debt trajectory for the future.”

CENTRAL BANK LOANS

Marchenko indicated that $2.4 Billion has been borrowed by the government through domestic war bond placements. However, Marchenko did not say whether any new debt instruments would be issued.

Additionally, the central bank of Ukraine provided financial support to the government totalling 100 billion hryvnia ($3.4 million) through direct purchase war bonds.

Marchenko claimed that war has forced the government to seek support from the central banks.

He stated that “We’re trying to maximize commercial financing through government war bonds, the volume of our assistance from partners and lastly depend on the funding from the central banks.”

He stated that this amount should not cause higher inflation.

($1 = 29.5420 hryvnias)