Exclusive-War forces Ukraine to divert $8.3 billion to military spending, tax revenue drops – minister

div classBodysc17zpet90 cdBBJodivpBy Natalia Zinetsp

pKYIV Reuters – Ukraine has been forced to spend 245.1 billion hryvnia 8.3 billion on its war with Russia instead of development, the finance minister said on Thursday, providing a glimpse into the huge economic cost of Moscows Feb. 24 invasion.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pThe figure, which has not been disclosed by Ukraine‘s government before, lays bare the economic maelstrom that Ukraine is navigating as its soldiers try to keep Russia’s renewed offensive at bay in the countrys east. p

pThe spending — drawn from some funds initially budgeted for development — went on everything from buying and repairing weapons to emergency support for internally displaced people, Finance Minister Serhiy Marchenko said. There are 2.7 million officially registered IDPs, according to data from the social policy ministry, although the real figure is many times higher. p

pThe government only collected 60 of its planned tax revenue for April, a shortfall that was topped up to the equivalent of 79.5 by grants from foreign partners, Marchenko told Reuters in exclusive written comments. p

pMarchenko said that Kyiv urgently needed foreign support to be ramped up as it is being forced to funnel billions of additional dollars into emergency spending. p

pMarchenko said that Ukraine had received almost 2 billion in external funding in April, of which 719 million had come from grants. The figure for the period since February stands at5.4 billion, including 801 million in grants, he said. p

p“If we do not take into account foreign aid, we now estimate the receipt of revenues in MayJune at the level of 4550 of what was planned, provided that the situation does not worsen,” Marchenko said.p

pDEBT SERVICING COMMITMENTp

pThe 8 billion in war expenses equates to more than a month of total state spending as measured by annual 2021 expenditures of 1.84 trillion hryvnias 62.28 billion.p

pMarchenko said Kyiv was discussing various kinds of external financial support. p

pHe listed funds which Ukraine hoped to obtain through a special drawing rights SDR account launched by the International Monetary Fund. p

pDeveloped countries can direct part of their SDRs to the account.p

p“Currently, the Finance Ministry team is negotiating with our international partners, in particular, the G7 countries on sending their part of the SDR to support Ukraine,” Marchenko said. p

pHe added that Ukraine expected to receive a loan of about 1 billion Canadian dollars about 767 million from Canada in May through the account. p

p“We urge our partners to provide part of the funds as grants to reduce our debt burden which is already growing due to martial law as well as the need for financing,” Marchenko said. p

pThe minister said Ukraine remained committed to servicing its debt regardless of the war.p

p“Our stance on this issue remains unchanged. We continue to service our debts and the amount of our expenses for this is not large in comparison with the needs for financing the budget,” he said. p

p“Moreover, we dont even currently have reliable mediumterm forecasts that would allow us to model the debt trajectory in the future.”p

pCENTRAL BANK LOANS p

pThe government has also borrowed about 2.4 billion by placing domestic war bonds and does not plan to issue any other new commercial debt instrument, Marchenko said. p

pIn addition, Ukraines central bank has provided the government with financial aid of 100 billion hryvnia 3.4 billion by directly purchasing war bonds to its portfolio.p

pMarchenko said that the war had made the government ask the central bank for support.p

p“We are trying to maximise commercial funding through government war bonds and the volume of assistance from our partners, and only lastly count on funding from the central bank,” he said. p

pHe said that such an amount should not lead to higher inflation. p

p1 29.5420 hryvniasp

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pp Reporting by Natalia Zinets Writing by Tom Balmforth Editing by William Macleanp

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