Russian invasion collapsed Ukraine’s economy, Kyiv prints money

WASHINGTON — Ukraine is struggling to pay its military salaries and is being forced to print money to cover military spending, The Wall Street Journal reported, citing Finance Minister Sergei Marchenko and National Bank Deputy Chairman Sergei Nikolaychuk. “It’s a constant headache every day and night,” Marchenko said.

Russian invasion collapsed Ukraine's economy, Kyiv prints money
Photo credit: Joseph Sywenkyj fpr WSJ

Tax revenues cover only about 40% of government spending, while military spending exceeds 60%. The government needs about $5 billion a month to cover the remaining costs.

The national bank has to print money so the government can pay soldiers and buy weapons and ammunition, which weakens the hryvnia and fuels inflation. Nikolaychuk wants Western countries to allocate at least about 3 billion dollars a month. The central bank is pushing the government to raise taxes and cut spending. Marchenko, in turn, believes that “it is better to risk high inflation than not to pay the soldiers’ salaries.”

In early July, Ukraine’s Prime Minister Denis Shmykhal announced that the country’s monthly expenses for the maintenance of the armed forces since the start of hostilities amounted to 130 billion hryvnias [$4.4 billion].

Freeze payments

In early August, Kyiv’s creditors, which account for about 75% of the bonds, agreed to freeze payments until 2024. This will allow Ukraine to save $5.8 billion, Bloomberg reported. The total foreign debt of the country is 19.6 billion dollars.

Ukraine’s President Volodymyr Zelensky has accused the EU of “artificially delaying” the provision of €8 billion in financial aid to the country and called for ordinary Ukrainians not to be held hostage to the “indecision or bureaucracy” of some EU leaders. At the same time, the Ukrainian leader noted that he believes that “this is still a mistake that will be corrected.”

At the end of June, the EU countries approved the provision of additional financial assistance to Ukraine for € 9 billion. However, later the head of the Ukrainian Ministry of Finance in an interview with the Corriere della Sera newspaper said that some countries “are not ready to support Ukraine with such an amount”.

Russian invasion collapsed Ukraine's economy, Kyiv prints money
Photo credit: pixabay

The publication, citing sources, writes that Germany is blocking aid. The fact is that it provides almost interest-free loans to Kyiv with repayment in 25 years at the expense of its own European obligations, and Berlin is the largest guarantor of these Eurobonds, Germany has so far only agreed to the release of the first tranche of 1 billion euros, writes Corriere della Sera.


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