Ukraine warns of pension and salary delays

The country’s economy would go into “survival” mode without foreign aid, its deputy prime minister has said

The Ukrainian government could be forced to delay paying pensions and salaries to millions of citizens if the US and the EU do not provide more financial support, Deputy Prime Minister Yulia Sviridenko has warned.

The country is facing a “huge risk of underfunding of certain social sectors” as it prioritizes defense and debt servicing amid the conflict with Russia, Sviridenko, who is also the economy minister, told the Financial Times on Wednesday.

If Kiev does not receive more foreign aid, it may be forced to postpone salary payments to 500,000 civil servants and 1.4 million teachers, as well as delay benefits for 10 million pensioners, she added.

The amount of Western assistance to Ukraine has reduced significantly in recent months. US Republican lawmakers are resisting attempts by the administration of President Joe Biden to push through another $60 billion in aid for Kiev, while Hungary has vetoed the EU’s planned four-year, €50 billion ($55 billion) aid package for Ukraine.

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“The support of partners is extremely critical. We need it urgently,” Sviridenko said, estimating that Ukraine would require $37 billion in external assistance next year to function properly.

The country’s economy, which according to the IMF saw 4.5% GDP growth this year, will be back in “survival” mode without more Western aid, she stated.

Unnamed Western officials told the FT that Ukraine should be able to sustain itself for a few months by borrowing domestically or through monetary financing by its central bank. However, they warned that this could provoke a spike in inflation, undermine financial stability, and weaken the tax base, thus making the country even more dependent on foreign support.

Ukraine has to achieve a sustained economic recovery so that those who fled the country after the start of the Russian military operation will return, Sviridenko insisted. Unemployment is currently almost 19%, although at the same time numerous sectors are suffering labor shortages, the deputy prime minister said.

Kremlin press secretary Dmitry Peskov suggested on Wednesday that there is “discord” in the West regarding further support for Ukraine, considering that funds go “to a regime that uses it with unknown efficiency and for unclear purposes.” The US and the EU are “already well aware of the level of corruption [in Ukraine]. They understand that a large part of this money is simply being stolen,” he claimed.

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The shift in the public opinion in the US regarding the issue has been reflected by FT-Michigan Ross poll earlier this month, which revealed that 48% of Americans thought that Washington was spending “too much” on helping Kiev.