The Ukrainian government is getting along, with a little help from friends. But the damage inflicted by Russia’s attack on the country has depleted its income and plunged its public finances into the red. The European Union and the United States have so far provided enough money for kyiv to pay its employees and attend to the most urgent public services. But they must prepare for a long financial effort to keep Ukraine afloat, before even beginning the gigantic task of rebuilding the country.
Finance Minister Serhiy Marchenko has stated that Ukraine will need 4.6 billion euros in monthly aid to continue operating. He appears to be referring to total government spending, not the budget deficit. From January to April, according to figures from the Ministry of Finance, Ukraine collected less than 60% of the revenue that should have come in, according to estimates by the International Monetary Fund. Expenditure is also below target, although to a lesser extent, due to the death of potential beneficiaries or the destruction of infrastructure.
Extrapolating from the first four months of the year, the Ukrainian government would face a deficit of at least €26 billion this year. This is a conservative estimate, as the reference period only includes two months of war. And Ukraine cannot go on borrowing forever by selling “war bonds” to the population, as it has done since the outbreak of the conflict.
G7 finance ministers said last week that they had already committed $18.5 billion in aid to Ukraine in the form of grants and loans. But they will have to do more this year, and their effort will have to continue beyond that timeframe.
His actions are, for now, fragmented. National governments, the EU and international organizations such as the IMF or the World Bank make their own contributions. They will have to coordinate more, being clear that the bill will continue to rise. And a serious debate will have to start about Ukraine’s governance and its pre-war levels of corruption.
He knows in depth all the sides of the coin.
Building a solid foundation for emergency aid to Ukraine will help secure crucial Western public support for the next stages of the country’s reconstruction: repairing transportation and electricity infrastructure, and then investing in the country’s renaissance. The task will require at least 280,000 million euros, an amount 10 times higher than the state budget for this year. Better start off on the right foot.
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