Ukraine needs money NOW!
Only later will we know the economic cost of the ongoing war, but already the damage to physical infrastructure is likely to run into many tens of billions of dollars, perhaps even triple digits as Ustenko says in this piece.
https://www.ft.com/content/33df4912-3926-4264-a706-aead38054335
But I expect economic activity to collapse - think 10-20% real GDP declines, perhaps more. Exports through Southern ports are now all but impossible. Who is able to pay taxes? This likely means a collapse in government tax receipts.
As per the original plan the deficit was set to be $7bn, with $14bn in debt rollovers. But I would now estimate a tax revenue loss of perhaps $30bn. Gross financing needs are likely to be $50bn plus. Let’s assume $10bn debt rollovers, which might be optimistic, and $10-$20bn in NBU money printing. That still leaves a gap of $20bn-$30bn.
Where is that going to come from?
The IMF SBA has been cancelled - it’s impossible to lend into a war scenario where conditional programmes make zero sense.
The IMF have extended a $1.4bn RFI and other donor commitments maybe add up to $5-6bn total. This does not even touch the sides.
But much more needs to be done to prevent the onus falling on the NBU to print money which would damage macro financial stability and might threaten a run in banks and eventually the collapse of the financial system.
Official creditors need to think creatively - currently there is $100bn in Unallocated SDR allocations to rich Western countries. There are programmes being put together to allow their allocation to poorer countries but Ukraine does not tick those boxes. But the IMF and Western shareholders need to pull their fingers out and make the political decisions needed to agree and fast track SDR re-allocation to Ukraine.
Ukraine and Ukrainians are fighting and dying for us. For the defence of Western liberal market democracy. And if we are unwilling to provide Mig29s or enforce no fly zones at least give them the cash needed to pay their soldiers money that still had value. Otherwise we will see financial and economic collapse which will make the current crisis multiple times worse and likely will hasten Putin’s victory.