The fiscal angle to the Ukraine war is undercovered

Ukraine’s budget crisis has become acute because of a slump in tax revenues and customs duties since the invasion began almost five months ago together with higher war spending.

A halt to grain and steel exports has deprived Kyiv of foreign currency earnings. Ukraine is being forced to burn through its foreign exchange reserves at an accelerating pace, as the central bank purchases government bonds to plug its financing gap.

…The finance ministry said its assessment of the gap was still $5bn a month but even that was way more than western capitals had so far provided.

…The fiscal strains are showing more broadly. Naftogaz, the state-owned energy company, on Tuesday asked holders of $1.5bn of its bonds to accept a delay in payments as it seeks to preserve cash for purchasing gas. It would amount to the first default by a Ukrainian state entity since the war began.

Here is more from the FT.

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