Ukraine pressing for $50B aid package to cover budget gap, adviser says

Ukrainian officials are appealing to the U.S. and other Group of Seven nations for a $50 billion aid package to cover the country’s widening budget deficit, a top economic adviser to President Volodymyr Zelenskyy said Monday.

Oleg Ustenko said a delegation of Ukrainian officials, including finance minister Serhiy Marchenko, will present the plan to policymakers from the world’s biggest economies in Washington this week, on the sidelines of the International Monetary Fund and World Bank spring meetings.

Ustenko said in an interview that the financial assistance would help Ukraine offset a budget shortfall that is projected to reach $8 billion per month for at least the next six months, as the Russian invasion batters Ukraine's economy. By comparison, officials projected before the war that the government's deficit would total about $7 billion for the entire year, or roughly 3.5 percent of its gross domestic product.

Without the ability to raise cash from private markets, Ustenko said Ukraine could soon be forced to dramatically shrink expenditures, including paychecks to soldiers and aid payments to its citizens.

“It’s next to impossible,” he said. “You have to understand, the $50 billion for us is crucial for keeping our lives going.”

Ukraine’s economy relies heavily on exports of grain and metals that can no longer be shipped via the Black Sea, and roughly half the country’s businesses remain closed amid intense fighting, Ustenko said. That has sent budget revenue plunging.

Ukrainian officials are already in technical discussions about the aid plan with the U.S. Treasury, Ustenko said, as well as with officials from Germany, which chairs the G-7 this year.

Asked whether Treasury would support such a plan, a department spokesperson said Secretary Janet Yellen “is committed to working with our partners and allies to support Ukraine’s economic needs in the short and long term, and will use her meetings this week to galvanize support.”

The Ukrainians are proposing an initial tranche of about $10 billion, half of which Ustenko proposed could be covered by the U.S., which he sees as leading the global effort to provide support. That would be followed by subsequent payments on an agreed-upon schedule.

“This is something which is needed to be resolved almost immediately,” he said. “It’s not like we have time to wait.”

Ustenko said the money would ideally be provided as grants that wouldn't have to be repaid but said he expects at least some of the assistance could come in other forms, such as loans or loan guarantees. The U.S. provided several similar loan guarantees for Ukraine after Russia’s 2014 invasion of Crimea, which enabled the country to borrow on international markets.

Ukraine has already cut back spending on most everything but the military and safety net, Ustenko said. As more Ukrainian refugees have begun returning to the country from parts of Europe, safety net spending could begin to rise over the coming months, adding to the red ink, he added.

“The EU should be motivated to support us because our people are coming back,” he said.

Meanwhile, Russia escalated its attacks after Ukrainian missiles sunk its flagship, Moskva, and has launched a major new offensive to take control of the Donbas region in Eastern Ukraine.