Millions of Ukrainians without pension payments? The authorities are warning and asking for help

Ukrainian leaders are warning of possible delays in pension and salary payments, emphasizing that much depends on Western help in this matter. According to the Deputy Prime Minister, a shortage of external aid could push the recovering economy back into survival mode.

"Ukraine may be forced to postpone payments to public officials and pensions for millions of its citizens if the EU and the US fail to deliver the promised financial aid early next year"
warned Ukrainian Deputy Prime Minister Yulia Svyrydenko, as quoted by the Financial Times.

The Ukrainian government is struggling to raise money to pay for public services and benefits after promised funds from its closest allies failed to arrive. The Ukrainian government needs $37 billion in external support next year. The request for $60 billion submitted by U.S. President Joe Biden's administration remains deadlocked in the U.S. Congress, while a proposed four-year, €50 billion EU support package was vetoed by Hungary this month.

EU leaders will meet again on February 1 to try to overcome Hungary's resistance, but they are also developing alternative plans to provide Kyiv with €20 billion, bypassing Budapest.

Svyrydenko expressed hope that the EU will approve the support in February and deliver the funds before the end of March. However, she noted that it wasn't enough. Kyiv has been trying to conserve cash and reprioritize spending since September when Western support began to wane.

Ukraine increased the tax on extraordinary profits from banks to 50% and transferred revenues from an additional income tax of 1.5% from local to central authorities.

Svyrydenko mentioned that Ukraine would prioritize defense and debt service, which entails "a huge risk of underfinancing some social sectors". As the “FT” specifies, Kyiv may be forced to delay the payment of salaries for 500,000 civil servants and 1.4 million teachers, as well as benefits for 10 million retirees.

Some Western officials say Ukraine will be able to survive for a few months by borrowing domestically or through monetary financing from the central bank, but that could drive up inflation and undermine financial stability.

"Deep cuts in public spending or spiraling inflation could derail the Ukrainian economy and weaken its tax base, making the country even more dependent on foreign support"
writes the FT.