The Russian invasion caused the collapse of the Ukrainian economy, Kyiv prints money

WASHINGTON — Ukraine struggles to pay military salaries and is forced to print money to cover military expenses, The Wall Street Journal reportedciting Finance Minister Sergei Marchenko and Deputy Chairman of the National Bank Sergei Nikolaychuk. “It’s a constant headache day and night”, said Marchenko.

Photo credit: Joseph Sywenkyj of the WSJ

Tax revenue covers only about 40% of public expenditure, while military expenditure 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 around $3 billion 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 soldiers’ salaries.”

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

Freeze payments

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

Ukrainian President Volodymyr Zelensky accused the EU of “artificially delay” the granting of 8 billion euros in financial aid to the country and demanded that ordinary Ukrainians not be held hostage by the “indecision or bureaucracy” of some EU leaders. At the same time, the Ukrainian leader indicated that he believed that “This is another mistake that will be corrected.”

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

The Russian invasion caused the collapse of the Ukrainian economy, Kyiv prints money
photo credit: pixabay

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


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Christi C. Elwood