Due to military expenses, a deficit has formed in the state’s budget. Ukraine spent 43% of the planned annual defense budget in just four months. According to the Chairman of the Parliament’s Financial Committee, Danylo Hetmantsev, one option for closing the budget deficit is eliminating the shadow economy. However, this would only provide approximately ₴50-80B per year in the short term. Ukraine’s shadow economy is estimated at ₴500B ($12.5B) per year, but fighting to legitimize this economic sector is a long process.
The second option is redirecting a portion of bank’s available liquidity to purchase Domestic State Loan Bonds (OVDP). Yet another solution is budget sequestration, but the government is loath to use it because of its desire to reduce expenses.
“But billions, perhaps tens of billions, can be cut, and the Ministry of Defense needs hundreds of billions,” Hetmantsev noted.
Also, according to the parliamentarian, it is possible to convert some of the remaining funds in local budgets into military OVDP. There is currently a reserve of approximately ₴155B that could be utilized. However, this decision would not help with fiscal decentralization.