(Dan Tri) – Ukraine will be forced to take the painful measure of printing money to maintain government operations if there is no upcoming aid from the US or Europe, according to Ukrainian economists and officials.
US President Joe Biden met President Volodymyr Zelensky in September 2023 when the Ukrainian leader lobbied Washington for support (Photo: Getty).
The United States and the European Union have promised Ukraine billions of dollars in new financial and military aid.
In 2024, Ukraine’s budget is facing the risk of a shortfall of more than $40 billion to maintain government operations, pay civil servants’ salaries, pensions and benefits.
To date, Ukraine has imposed a windfall income tax on banks, reallocated some tax revenues and increased domestic borrowing to cover budget spending until February, the Ukrainian Ministry of Finance said.
But `these measures have limited effect,` said Olga Zykova, Deputy Finance Minister of Ukraine.
Aid has not arrived yet
Since Russia launched the `special military campaign` in February 2022, the US and the EU have provided about 70% of the financial aid Ukraine received.
But the EU aid package worth $55 billion over the next four years was blocked by Hungarian Prime Minister Viktor Orban.
The box was placed near Kiev City Hall last year to call for donations to repair military vehicles damaged during hostilities (Photo: Global Images Ukraine).
Ukraine’s hryvnia currency is also under heavy pressure.
If aid does not arrive soon, Ukraine may have to take stronger measures.
For example, Kiev can `buy time` for a few more months by delaying salary payments or borrowing more money from domestic banks and investors.
Olena Bilan, chief economist at Ukrainian investment bank Dragon Capital, estimates that Kiev can mobilize $8 billion and balance the budget in the first three months of the year by tapping remaining capital from 2023, delaying
Japan plans to disburse $1.5 billion in budget aid this month, while another 4.5 billion euros ($4.9 billion) is expected to arrive from the EU in March in the form of a bridging loan,
But then experts fear that Ukraine may be forced to print money, a strategy that has caused economic collapse in other countries in the past.
Russian missiles destroyed a residential building in Kharkov, Ukraine earlier this month (Photo: AFP/Getty).
Final choice
Kiev is spending almost all of its budget revenue on defense and this amount will likely be even larger as Ukraine seeks to mobilize hundreds of thousands of additional soldiers this year.
Ms. Shapoval predicts Ukraine will eventually be forced to print money again, risking economic stability and support from lenders like the International Monetary Fund.
During the first year of hostilities, Ukraine relied heavily on money printing while waiting for Western aid.
However, other options also cost President Zelensky political costs.
Delaying pension payments or cutting benefits, for example, would deepen the pain of Ukraine’s poor, while curbing import spending could cause discontent among the wealthy who still want to buy
`Economically, printing money is the last resort. Politically, it is the first resort,` Ms. Shapoval said.
