Ukraine needs extra $5bn per month, lawmaker says — Analysis

According to the head of a finance committee in parliament, Kiev will face budget cuts without any additional foreign aid

A senior Ukrainian lawmaker stated that the Ukrainian government needs $5 billion more each month in order to prevent drastic budget cuts. He appealed for additional assistance from other countries, even though billions of dollars have already been provided by the United States, European Allies, and others.

The head of Kiev’s parliamentary Committee on Finance, Tax and Customs Policy, Danylo Hetmantsev, addressed the looming shortfalls in comments to local media on Tuesday, highlighting mounting economic troubles linked to the ongoing conflict with Russia. 

“We have to borrow $5 billion monthly. If we do not get it, we will have to cut spending,”He stated. “We have no potential in the economy to raise taxes. We cannot do without the help of our partners as long as the fighting continues.”

According to the official, while the government collected $3.4 billion in taxes, it spent $8.4 trillion in that time.

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Though Hetmantsev noted that Ukraine had received loans and grants from the US and some allies in Europe – with Finance Ministry data showing that the country was provided more than $5.1 billion in direct economic aid between January and May – he said that amount was not sufficient to cover the growing budget gap. 

The Group of Seven (G7) countries agreed late last month to provide $19.8 billion more assistance to Kiev. This coincided with an enormous $40 billion package by Washington. However, a significant portion of that aid was dedicated to military equipment and weapons.

With the World Bank forecasting a shocking 45% reduction in GDP in 2022, Ukraine’s war has had a significant impact on its economy. The fighting has also sent global food prices soaring, with both Ukraine and Russia accounting for around 40% of wheat exports in Eastern Europe, while retaliatory sanctions on Moscow have helped to drive up energy costs around the world.

As head of both the finance committee as well as Kiev’s National Recovery Council, Hetmantsev has faced heated opposition from Ukrainian businesses and the broader public, with thousands signing a petition demanding his resignation in May. The petition was accompanied by an open letter in which Hetmantsev was criticized for supporting recent tax hikes, saying that they discouraged investment in Ukraine.  

Hetmantsev refused to resign, but he deemed the criticisms unacceptable. “myths”insisting that the government was following the correct approach.

“I do not want to shock you, but any state wants to collect as many taxes as possible. The question is in the golden mean and balance,”He said that, and added: “we have managed to find, are still managing to find, and hopefully will be able to find [this balance] in the future.”

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