If financial and military aid from the U.S. and Europe does not arrive soon, Ukraine will run out of money within a few months, The Wall Street Journal reports. In that case, to keep the government running, Kiev will have to delay salaries and start printing money – a strategy that led to the economic collapse in Venezuela.
Kiev could delay salaries and go back to printing money if funding from the US and EU stops, The Wall Street Journal notes. According to economists and Ukrainian officials, if aid from the US and Europe does not arrive, Ukraine will run out of money within months and the government will be forced to take painful economic measures.
The United States and the European Union, Ukraine’s biggest financial backers, have promised Kiev billions of dollars in new financial and military aid, but promises from both sides have been thwarted by infighting in Washington and Brussels. While political leaders insist these aid packages will eventually be accepted, the timing is critical for Ukraine.
The country faces a financial deficit of more than $40bn this year, with funding from the US and EU expected to cover about $30bn of that amount. The money is needed to keep the government running and is used to fund salaries, pensions and subsidies to the public.
Delays in the military aid packages will also deal a blow to Ukraine’s fighting, which has stalled after a failed counter-offensive. Kiev could then gain a few more months by delaying salaries or borrowing even more from its own banks and domestic investors. Eventually, Kiev may be forced to print money, a strategy that led to the economic collapse in Venezuela.
Ukrainians fear that recent setbacks portend new trouble. Discussions with international partners now centre on how Ukraine can achieve financial self-sufficiency as the fighting drags into a third year.
Economic stability is key to Ukraine’s ability to keep fighting. Russia’s much larger economy suffered under Western sanctions but then recovered after Moscow found new buyers for its oil and focused domestic resources on military production. Ukrainian economists are hesitant to predict how long Ukraine can survive without foreign aid, fearing it would further undermine the interest of Western partners.