Life or Debt in Ukraine by Anna Gelpern, et al

Given Ukraine’s current debt burden and foreseeable financing needs, its official creditors should take the initiative to defer repayments and lay the groundwork for a debt restructuring agreement. Staying in the good books of the financial markets is the last thing the Ukrainian government should have to think about right now.

BERKELEY/WASHINGTON, DC Public debt is rarely a matter of national survival, but it has become one for war-ravaged Ukraine. Two months into the heroic defense of the country against the Russian invasion, it is becoming increasingly clear that the war could continue for many months, if not years. Victory depends not only on Ukraine’s brave and highly motivated armed forces and citizens, but also on the country’s ability to muster the financial resources it needs to sustain an intense war effort indefinitely.

Even with arms donations and other aid from the West, the Ukrainian government needs huge sums of money to buy more weapons and equipment, recruit soldiers and auxiliary personnel and support the population. civil. Russia has destroyed much of Ukraine’s production capacity and infrastructure, leaving it with limited ability to generate revenue from royalties or taxes. Moreover, the Russian blockade of Ukrainian Black Sea ports is hampering exports and further amplifying the challenges facing the Ukrainian authorities.

Under these conditions, Ukrainian policy makers must establish clear priorities for the use of precious income and foreign exchange reserves. While the government can and should cut non-essential imports and postpone development projects, as it is doing, such measures will not free up enough resources to support a protracted all-out war effort. So, Ukraine’s remaining financing options are to borrow or print money.

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