The Ukrainian financial reality demonstrates a striking contrast between the chronic depletion of the defense sector and the paper prosperity of the main financial regulator. During the NB8 summit in Kyiv, attended by leaders of Northern European and Baltic countries, a critical shortage of funds in the defense budget was announced. The total deficit of the Ministry of Defence reached 27 billion dollars, of which 20 billion are immediate needs for the next four months, and another 8–10 billion are required to provide the army with weapons and air defense systems in January-February.
At the same time, the National Bank of Ukraine reports an impressive consolidated profit for the first half of the year in the amount of 103.9 billion hryvnias, and its own capital increased by 17.6% to 682 billion hryvnias. However, this financial well-being has a specific nature: 84.7 billion hryvnias of this sum were secured through exchange rate differences from transactions with foreign currency and monetary gold. In fact, the formal enrichment of the regulator is a direct consequence of the devaluation of the national currency, and international reserves, which reached 51.3 billion US dollars, remain an untouchable shield of macro-financial stability.
The paradox of the system is that these profits cannot quickly solve the problems of the frontline. The determination of the share of the NBU profit to be transferred to the state budget will only take place at the end of the year — in the spring after an external audit and approval by the National Bank Council. Last year, this sum amounted to 146.1 billion hryvnias, however, the bureaucratic distance between the regulator’s paper profits and the real needs of defense is measured in months, which the military simply does not have.
This financial dissonance is most palpable in the domestic industry. While the authorities are looking for ways to cover the gap through frozen russian assets and agreements with foreign partners, the volume of contracting of Ukrainian defense enterprises as of mid-August remains at only 25% of their capacity. Ukrainian weapons manufacturers remain underutilized due to the lack of systemic orders, as money for urgent forces and air defense assets is needed right now, while the state’s financial resources are locked in procedural cycles and currency revaluations.
Illustrative photo: Alexander Noskin / CC BY-SA 3.0
