‘Where will the money come from?’ – IMF questions military bonus reinstatement bill

1 May, 07:01 PM
У МВФ озвучили наслідки ухваленого законопроєкту про повернення виплат військовим (Photo:Yuri Gripas/Reuters)

У МВФ озвучили наслідки ухваленого законопроєкту про повернення виплат військовим (Photo:Yuri Gripas/Reuters)

The International Monetary Fund’s resident representative in Ukraine, Vahram Stepanyan, criticized the adopted law regarding returning the UAH 30,000 ($818) payments to soldiers, noting that it does not define the source of funding for these additional costs, he told Interfax-Ukraine on May 1.

He explained that the implementation of the bill at this stage could lead to an increase in the budget deficit in 2023.

"Finding resources of this magnitude would likely imply abrupt short-term tax measures or large borrowing in the domestic financial market—but such measures are in practical terms impossible without having a very negative impact on the economy and financial market," Stepanyan reasoned.

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Borrowing to finance such expenditures could further jeopardize the sustainability of Ukraine's debt, which is already under pressure, he said.

Stepanyan acknowledged that budget financing needs during the war are large and volatile. He emphasized, however, that Ukraine is committed to ensuring fiscal sustainability and predictability in budgetary policy, which has been severely altered by the impact of the COVID-19 pandemic and the war.

"In this context, the authorities have committed to restoring and strengthening Article 52 of the Budget Code, which defines and governs the framework and circumstances when the budget can be amended both on the revenue and expenditure side," he said.

Ukraine’s military had been receiving UAH 30,000 ($818) in supplementary payments after mobilization since 2022, according to a Presidential order. The decision to cancel the supplementary payments was taken in February 2023.

Once the UAH 30,000 ($818) bonuses were scrapped, several petitions were submitted on behalf of the military that garnered the necessary amount of support for the draft law to be introduced and passed, allowing the payments to be reinstated.

The Ukrainian parliament approved on April 10 a new bill with an amendment that allows for the return of the UAH 30,000 ($818) combat pay to Ukrainian soldiers, regardless of whether they are in the rear or at the front line.

The question, as many financial analysts and MPs note, is how the Ukrainian budget will be able to afford the payments.

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