Yuriy Gorodnichenko and Oleksandr Talavera: War financing for Ukraine

Ukraine is living through very trying times. Among Ukraine’s many problems, the Russian aggression in Donetsk and Luhansk regions is likely to be a top priority issue: it costs thousands of human lives. In addition, it weighs heavily on the Ukrainian economy. On Dec. 20, President Petro Poroshenko reported that each day of Anti-Terrorist Operation (ATO) in eastern Ukraine costs Hr 100 million. According to the recently approved budget for 2015, the government plans to spend Hr 90 billion on national security (approximately 5 percent of Ukraine’s GDP). While there is some progress in containing the conflict, in all likelihood it will smoulder for a long time before it’s resolved and, thus, the total bill could be in hundreds of billions of hryvnia. How should Ukraine finance these expenditures?