MNI INTERVIEW:Ukraine To Keep Currency Stable-Zelensky Advisor

Ukraine has sufficient foreign exchange reserves and international assistance to support its currency and financial system, and will maintain debt payments despite extreme disruptions resulting from Russian's invasion that have halted about half of economic activity, President Volodymyr Zelensky’s economic adviser Oleg Ustenko told MNI.

“Of course it would not happen if we did not have enough international support, but support is really coming,” Ustenko said in an interview. “The president had a talk already with many including the IMF and the World Bank. They are prepared to help, same with the World Bank, same with the EU, same with the United States.”

The U.S. had already offered USD1 billion in sovereign loan guarantees in advance of the war, while the European Union has pledged some EUR1.2 billion in support.

“We still continue to serve our debts,” Ustenko said. “We paid the coupon for our eurobonds – we are serving all of our debts. The whole machine on one side is concentrated on all these security issues but at the same time we continue to run the whole state machine.”

Ustenko said that, before the Russian attacks, he had been expecting the economy to grow at least 3.5% this year on the back of strong household balance sheets and post-Covid rebound in investment. Now, all those prospects have been shattered, or at least pushed back to what Ustenko hopes will be a post-war reconstruction boom.

“We are losing, we are losing, of course we are losing,” he said. “It’s very preliminary, but my understanding is that around 50% of our companies are not working, half of our economy does not work now, so obviously we are going to have a tremendous decrease in our GDP this year.”

Ustenko said the country has already lost an estimated USD100 billion in assets from the war, which represents some two thirds of GDP. Still, he expects ample foreign exchange reserves plus foreign assistance will be plenty to keep the exchange rate fairly steady under the circumstances.

"We have USD27.5 billion as of Friday. We continue to receive money so the exchange rate is going to be quite stable," he said.

MOMENTUM BUILDS FOR OIL EMBARGO

Ustenko said only a complete ban by major Western nations of Russian oil and gas imports can adequately stifle Vladimir Putin’s ability to wage a war which if prolonged will lead to a further spike in global inflation.

U.S. oil prices have surged past USD120 a barrel first because of the Russian invasion and more recently due to the prospect of a U.S. ban on Russian oil imports, which has gained support from top Democratic Senators and U.S. House Speaker Nancy Pelosi.

“We are expecting that the United States is going to have a leading role here in turning off their access to international oil markets,” Ustenko said. “Germany will follow down the same path,” despite recent opposition, he added. “This will really change behavior and change the whole path of this war – otherwise it will continue for a very long time.”

Ustenko noted that the attacks had come at a crucial juncture in the spring planting season for Ukraine’s agriculture, which accounts for as much as 15% of national output. The country is a major exporter of wheat, corn and sunflower oil.

“If the war is not stopped there is going to be a hike of inflation,” he said. “So another economic reason to stop the war in Ukraine is global food security.