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13 Aug, 2022 12:39

Ukraine struggles to find money to pay troops – WSJ

The promised Western aid is arriving too slowly, officials in Kiev complain
Ukraine struggles to find money to pay troops – WSJ

With Western financial help apparently slow to arrive, Ukraine has been forced to print money to pay its troops in the fight against Russia, the Wall Street Journal reported on Friday.

Ukrainian Finance Minister Sergey Marchenko told the US outlet that it’s “a constant headache” for him to keep balancing the cost of the conflict and the lower tax revenues in an economy battered by almost half a year of fighting.

With around 60% of the budget being spent on the fighting, the minister said he has had to cut all unnecessary expenditures. But it’s still not enough, as tax revenues only cover 40% of government spending, the WSJ reports.

The Kiev authorities earlier said they needed $5 billion per month to run the country, and would not be able to cope without Western help. However, the grants and loans pledged to Ukraine by its foreign backers have been arriving slower than expected, according to the journal.

For example, the EU has so far provided only €1 billion out of €9 billion it promised to Kiev, with Germany resisting the idea of offering low-interest loans backed by guarantees from the bloc’s member states.

According to Marchenko, a lot of his time at work is spent trying to persuade Western governments to act faster. “Without this money, the war will last longer and it will damage economies more,” he explained.

Rostislav Shurma, an economic adviser to President Vladimir Zelensky, described the situation in harsher terms.

If Kiev acted as sluggishly at the West, “the Russians would be at the Polish border by now,” he told the WSJ.

“They don’t feel the war. That’s the problem. The only thing they feel in the EU is high prices,” Shurma said.

Due to the lack of funds, the Ukrainian Central Bank has no choice but to print more money to allow the government to pay the troops and purchase arms and ammunition in order to keep fighting.

This approach has been weakening Ukraine’s national currency, the hryvnia, which has already lost 30% since the launch of the Russian military operation in Ukraine, prompting a major spike in inflation.

But this is a sacrifice that Marchenko is willing to make: “we have to worry about winning the war. It is better to risk high inflation than not to pay soldiers’ salaries.” 

He also said the conflict will likely be prolonged, and this must be factored in as well. “This is a war of attrition. You have to think in these terms, to think about 2022 and 2023. It’s a marathon.” 

Earlier this week, Sergey Kiriyenko, the deputy head of the administration of the Russian president, accused the authorities in Kiev of selling out their own people to fight on behalf of NATO.

“NATO will gladly fight against Russia ‘to the last Ukrainian’ as they say themselves without hesitance. Why not? They don’t feel sorry about it,” Kiriyenko said.

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