26th day of war: economy seriously damaged but MinFin commits to continue debt servicing

UKRAINE - In Brief 21 Mar 2022 by Dmytro Boyarchuk

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Since no big movements at the front are observed, except for continued desperate attempts of Russians to overtake Mariupol, we have an opportunity to pay more attention to economic developments in Ukraine over the recent weeks. Military actions run at the territories that used to produce 60% of Ukrainian GDP. Ministry of Finance estimates damage on the level of near 50% of GDP. For sure, Russians bunch up primarily across the main roads and in many cases do not dare to move far from the key routs. But even if a company remains unaffected directly by actions, businesses had to operate under huge uncertainty and many employees simply move to the West for the sake of safety. The authorities addressed entrepreneurs with a request to move their production capacities to the West and restore their activities. President announced large-scale simplification for businesses in terms of taxation and licensing procedures. Credit holidays. Simplified customs procedures. Taxes for fuel and foods reduced. Despite incredible shock Ukraine enjoys extensive financial and humanitarian support from the whole world. Already on March 9th the IMF approved $ 1.4 billion loan in emergency financing support under Rapid Financing Instrument (RFI) arrangement. Other IFIs has committed multibillion support in loans and grants. The Finance Minister reported € 6 billion already committed and more support coming. The US approved $ 13.6 billion package of military support. Against this backdrop the NBU reported that gross international reserves now exceed the level before Russian interventions started ($27.6 billion were reported as of end of February). The NBU has managed to keep control over the bank...