Ukraine Finance Minister forecasts 45% GDP drop, committed to servicing debt

An aerial view shows a tractor spreading fertiliser on a wheat field near the village of Yakovlivka after it was hit by an aerial bombardment outside Kharkiv, as Russia’s attack on Ukraine continues, April 5, 2022. REUTERS/Thomas Peter

LONDON, May 11 (Reuters) – Ukraine’s economy is expected to contract by 45% this year, the country’s Finance Minister Serhiy Marchenko said on Wednesday, adding his government was committed to servicing its debt in full.

Ukraine expects a bigger economic decline in 2022 than both European Bank for Reconstruction and Development (EBRD) and the International Monetary Fund, which have projected the country’s economy to shrink by 30% to 35% amid Russia’s invasion.

“People of Ukraine are paying an enormous price, and this price cannot be assessed,” Marchenko said during a briefing at the annual meeting of the EBRD in Marrakech, Morocco.

“What can be assessed is the projection of GDP decline, we are around 45% this year,” he added, speaking by video link.

The country has continued to service its international bonds since Russia’s invasion on Feb. 24. The country is due to pay $1 billion due on a dollar bond on Sept. 1 and is facing a $5 billion fiscal gap on a monthly basis due to the war.

Marchenko added that Ukraine needs to find additional sources to finance this gap, because the country can only cover “62% of our primary budget needs” without including military expenditure.

“We have already raised over $2.2 billion in war bonds,” Marchenko added. “Military bonds are (an) important investment to support state budget in war times.”

Reporting by Karin Strohecker and Jorgelina do Rosario, editing by Saikat Chatterjee and Toby Chopra

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