Ukraine faces budget cut without $5 billion in monthly external aid

Ukraine’s budget revenues cover less than half of expenditures following Russia’s invasion, and Kyiv will have to cut budget spending sharply if more external financial assistance does not arrive, the head of parliament’s financial committee said.

“We have to borrow $5 billion monthly. If we do not get it, we will have to cut spending,” Danylo Hetmantsev told local television on Tuesday.

He said the government had collected 101 billion hryvnias ($3.42 billion) in taxes in May, but had to spend 250 billion hryvnias financing the army and supporting people who had been forced to leave their homes or whose homes had been destroyed.

Ukrainian President Volodymyr Zelenskiy said this month that about 20% of Ukrainian territory in the industrialized east and southern parts of the country had been occupied by Russian forces that invaded on Feb. 24. Other areas are being fought over.

International financial organizations expect the Ukrainian economy to shrink 35%-45% because a large significant number of businesses has suspended their operations and are unable to pay taxes.

“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,” said Hetmantsev.

He said the United States, the European Commission and some countries had provided financial support – loans and grants – but the amount was far below the $5 billion needed each month.

Finance Ministry data showed Ukraine received 151.1 billion hryvnias ($5.12 billion) from foreign partners in January-May.

($1 = 29.5400 hryvnias)

(Reporting by Natalia Zinets, Editing by Timothy Heritage)

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