Ukraine is bracing for a brutal winter as intensified Russian attacks on the country’s infrastructure and key export industries compound a deepening budget crisis.
Economy Minister Oleksandr Kravchenko said that damage to infrastructure and fixed assets from Russian air strikes was estimated at close to $US10 billion ($A14 billion) this year.
While the broader economic costs of the attacks and the de facto blockage of its ports was about 1.5 percentage points of gross domestic product.
“We anticipate a very difficult winter in terms of both critical infrastructure, which is being destroyed every day by Russian attacks, but also in terms of overall economic conditions in the country,” Kravchenko said.
“This all comes when the budget and the fiscal space are very constrained,” Kravchenko told investors, officials and diplomats at a YES conference in Kyiv.
With fighting on the front line largely stalled more than 4.5 years into the war in Ukraine, Russia and Ukraine have increasingly targeted logistics networks and other economic assets in an effort to undermine each other’s war effort.
For more than two weeks, Russia has carried out near-constant attacks on Kyiv using faster jet-powered drones, disrupting life, business and government operations.
Both Russia and Ukraine deny deliberately targeting civilians in air attacks.
Moscow has also effectively blocked Ukraine’s Black Sea ports by intensifying its air attacks on the country’s southern regions.
About $US40 billion ($A56 billion) in export revenue is at risk as a result of the blockade, Kravchenko said.
Ukraine’s main exports – agricultural products and iron and steel – are shipped via its Black Sea ports.
As Russian attacks damage infrastructure and industry, domestic budget revenue has begun to come under pressure.
Domestic revenue underperformed by $US1.35 billion ($A1.88 billion) in the first eight months of the year, with a quarter of those losses recorded in August alone, said Roksolana Pidlasa, head of the parliamentary budget committee.
She said the war was becoming increasingly expensive and Ukraine could no longer fully finance its defence needs from domestic resources, as it had in previous years.
Ukraine spent about $US42 billion ($A59 billion) on its defence in the first eight months of the year, excluding in-kind military support.
However, domestic revenue generation and local borrowing yielded only $US39 billion ($A54 billion) in this period, Pidlasa said.
“Unfortunately, this year the war has gotten so expensive that we can’t even cover our share of the costs,” she said at the conference.
The daily cost of the war grew to about $US190 million ($A265 million) this year compared with $US140 million ($A195 million) in 2024 due to inflation, expanded troop numbers, mounting social payments for families of fallen soldiers, and higher ammunition consumption, she added.
Ukraine faces an additional funding gap through the end of this year for its defence.
The government is looking for ways to cut or postpone non-military budget spending and is negotiating with its western partners on more financial support, but so far no clear and fast solution has been found.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
