Kyiv had planned to receive new aid from its allies in early 2024, but it still hasn’t arrived.
Due to the lack of financial assistance from the United States and Europe, Ukraine may run out of money within a few months, writes The Wall Street Journal. Due to internal political disagreements, the US Congress has not yet approved funding for additional military aid to Ukraine for more than $60 billion. The European Union still hasn’t agreed on a 50 billion euro aid package for Ukraine, which Hungary has blocked.
Not enough money
In 2024, the Ukrainian budget deficit will be more than $40 billion, which is slightly lower than last year. It is assumed that the deficit will definitely be covered by aid from the US and the EU. According to data from the Ministry of Finance of Ukraine, cited by the WSJ, the measures introduced by the Ukrainian authorities will help cover budget costs until February. These include an increase in the profit tax for banks from 18% to 50%, a redistribution of part of the tax revenues and an increase in the amount of domestic borrowing. Ukraine’s Deputy Minister of Finance Olga Zykova said that “these measures have a limited effect.”
Print money?
According to Elena Bilan, chief economist at the Ukrainian investment bank Dragon Capital, Ukraine can raise eight billion dollars and balance its budget in the first three months of the year, using the remaining funds from 2023. To do this, it will be necessary to delay the salaries and increase domestic loans.
In addition, in January Japan will allocate $1.5 billion to Ukraine in budget aid. Another 4.5 billion euros is expected from the European Union as a “bridge loan.”
The head of the KSE Institute (an analytical center at the Kyiv School of Economics) Natalia Shapoval believes that Ukraine will be forced to print money. But this would jeopardize both economic stability and the support of Western creditors, including the International Monetary Fund.
The WSJ notes that Ukraine and its partners are discussing how to make military spending “self-sustaining” in the long term, including by raising taxes and increasing domestic military production. The publication explains that Kyiv now spends almost all of its income on defense. These costs are likely to be greater due to the possible mobilization of new military personnel. According to Shapoval, sending a soldier to the front line costs Ukraine one million hryvnias per year (about 26 thousand dollars).
As the WSJ notes, the United States and its partners are also exploring the possibility of using part of the fixed assets of the Bank of Russia. However, economists estimate that all these efforts may take years to bear fruit.
After the outbreak of a full-scale war in Ukraine, Western countries froze about half of the Bank of Russia’s gold and foreign exchange reserves – about $300 billion. Most of these funds are located in Europe.
Source: korrespondent
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.