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Ukraine swallows exorbitant amounts of EU and US funds

2022.10.25. 19:04 2022.10.25. 20:34
Ukraine swallows exorbitant amounts of EU and US funds

Ukraine requires huge sums of money to cover its expenses. The country is practically bankrupt while its economic capacities are continuously deteriorating. It is highly doubtful that they will be able to repay the billions of euros received as loans and subsidies according to a VG (Világgazdaság, leading Hungarian newspaper) article.

Ukraine is in need of about 3 - 4 billion euros per month in order to maintain a functioning state. In Brussels last Friday, President of the European Commission Ursula von der Leyen stated that the European Union would sponsor 1.5 billion of that; in other words, equalling 18 billion euros in all next year. She also added that aside from the EU, their American friends and financial partners would contribute to the total monthly amount.

Last month, the International Monetary Fund reported that Ukraine’s financial needs have significantly increased. In addition to damaged infrastructure, the country has lost access to financial markets.

Around the end of September, the IMF calculated a minimum of 37.3 billion euros for Ukraine to meet its financial needs this year. This amount has grown.

“If we go with the monthly four billion euros cited by Ursula von der Leyen, that would be 48 billion euros in a year. The EU would take on 18 billion of this and the rest would presumably be split between the USA and other international financial organizations. Some of those funds would be loans and the rest would be direct grants,” writes the VG (Világgazdaság, leading Hungarian newspaper) article.

Not to mention that Ukraine may not even be able to repay any of these loans. The country came to an agreement in August with its creditors that repayments on bonds worth 20 billion dollars would be frozen for two years. According to the S&P and the Fitch international ratings, this is tantamount to bankruptcy.

Ukraine’s hopeless economic situation is highlighted by the fact that their public debt could practically double, thereby reaching 100 percent of GDP. Economic downturn this year could equal 35 to 45 percent. The country lost two thirds of its coal industry, nearly half of its gas deposits, and almost a third of its ore mines. The export capacity is continuously deteriorating while import demand is increasing. The main export item, grain, could barely be exported this year, reaching less than half of what they managed last year.

The country’s budget for next year is practically a wartime budget.

According to the document, in 2023 they plan to spend about 30 billion dollars on wartime costs. The deficit could amount to 50 percent of GDP which would be covered by foreign loans and direct grants.

Magyar Nemzet’s article from the end of September also pointed out that priority spending is earmarked for security and defense sectors. The defense amount of 30 billion dollars is close to half of the total expenses.

In addition to all of this, state allowances and services must also be ensured. This is not an easy task either as the pension fund also faces a constant deficit. This is made possible thanks to the monthly budget support of 1.5 billion dollars provided by the United States to Kiev.

Ukrainian pensioners could end up beggars without EU aid

Ukrainian Prime Minister Denys Shmyhal stated that EU funds are of vital importance for his country and necessary for reconstruction and maintenance of social benefits.

 

Photo CRedit: MTI/EPA/Stephanie Lecocq

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