Even as Ukraine rejoices in recent victories on the battlefield, its government faces a looming financial challenge: how to cover the enormous cost of the war effort without inciting uncontrollable price increases for common people or accumulating debt that could obstruct postwar reconstruction.

Finding loans or donations to cover a sizable budget deficit for the following year is difficult because doing so would require using central bank bailouts, which run the risk of devaluing Ukraine’s currency, the hryvnia.

According to economists who work for the government, if Ukraine can maintain its financial stability through the end of next year, it is Russia who may run into financial difficulties if a proposed oil price cap by the United States, the European Union, and allies reduces Moscow’s earnings.

The Ukrainian government sought intermittent foreign assistance in the early stages of Russia’s invasion. The central bank used freshly printed money to purchase government bonds when it was short on cash. The other option was to stop paying people’s pensions and government salaries.

Even though it was a desperately needed stop-gap measure at the time, economists warn that printing money runs the risk of allowing inflation to spiral out of control and eventually devaluing the nation’s currency.

According to economist Nataliia Shapoval, Ukraine still carries the painful memories of the early 1990s’ hyperinflation. When she was a young girl, she saw her parents make regular purchases using huge bundles of currency that eventually gave way to the hryvnia of today.

Price increases have made it difficult for those with lower incomes to afford food because inflation is already high (27%).

According to President Volodymyr Zelenskyy, Ukraine needs USD 38 billion in direct assistance from Western allies like the US and the EU, which has 27 members, as well as USD 17 billion for a fund to rebuild areas damaged by the conflict.

A lower overall sum of USD 50 billion from donors, according to economists with the Kyiv School of Economics, would be sufficient to see Ukraine through the year.

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