Russian attacks have caused more than $7.7 billion in damage to Ukrainian companies since the start of the year. Ukrainian Prime Minister Serhii Koretskyi said this, according to Deutsche Welle, on Monday, 26 October, at the 12th Kyiv International Economic Forum.
According to Koretskyi, the most affected sectors are the energy industry, metallurgy, logistics, manufacturing and retail. Economy and Environment Minister Oleksandr Kravchenko expects damage of around $10 billion for the full year. In the first half of the year, Russia mainly hit energy, while in the second half all sectors are affected, he said at the forum. According to the baseline forecast, this will cost the state budget the equivalent of around $1.5 billion by the end of the year.
Koretskyi called on businesses to prepare for the worst case. “I would very much ask and recommend that you think according to the most critical scenario,” he said. Entrepreneurs should look early for alternative production sites and premises for relocation, find partners for cooperation and conclude framework agreements with suppliers in advance. “It is better to be prepared for it and for it not to happen than to end up in an unexpected situation,” the head of government stressed.
According to him, the state currently covers only one third of its expenditure from its own revenues. “We live according to the cashflow principle and in a sense go for broke by providing funds for support programmes, grants and scholarships,” Koretskyi said. He named “Affordable Loans 5-7-9” as the most important proven programme, through which businesses have received 580 billion hryvnias in preferential loans since its launch. This year, 18 billion hryvnias have been earmarked for it in the budget, and by the end of the year spending is to rise to 22 billion. The programme was recently also opened to large companies – up to 1 billion hryvnias per company group at an interest rate of around 10 per cent.
There is also partial compensation for damaged or destroyed property. In September, the government raised the maximum payment from 10 to 30 million hryvnias and added Kyiv and the Kyiv region to the list of areas with increased risk. The state also reimburses part of insurance premiums.
The director general of the Ukrainian Employers’ Federation, Ruslan Illichov, said that insurance practically does not work under current conditions because insurers do not cover war risks in many areas and for many properties. “In fact, at present either the programme for 30 million or the grant of 16 million works. But of course that is a drop in the ocean,” he said. Deputy Economy Minister Vitalii Kindrativ admitted: “We are very aware that this is a drop in the ocean. It is not enough, but as things stand it is all there is.”
The government is now proposing a special fund to compensate for damage caused by Russian attacks. According to Koretskyi, the state contribution is to be $1 billion, and international partners could double or triple it. Minister Kravchenko said the fund should have two components – compensation for destruction and preferential loans for reconstruction – and provide guarantees of up to 50 per cent for loans. “As for this fund and the support instruments, there are no disputes, there is absolute consensus here,” he said. The Economy Ministry wants to launch the fund from 2027. Payouts are to be simplified: within 30 days of processing, a maximum of around $5 million per recipient.
The financing remains open. The government had proposed raising value added tax from 20 to 21 per cent, but neither large and medium-sized businesses nor parliament support this idea. “We are looking for and examining another mechanism. But we have no other way, we must find an instrument,” Koretskyi said. Kravchenko still considers the one-percentage-point increase the best option: “It is not ideal, but of all of them it is the lesser evil.” The ministry is ready to talk with the Finance Ministry and MPs about alternatives as well. Help from international partners would only come if there were “serious domestic sources” for the fund in Ukraine, the minister stressed.
The MP Dmytro Kysylevskyi (“Servant of the People”), coordinator of the “Made in Ukraine” policy in parliament, would himself vote for the VAT increase but doubts that the necessary votes exist in parliament. As an alternative, he proposes a levy on non-critical imports: “We import weapons and fuel – that is critical imports – but we also import mobile phones, clothing and much else.” The employers’ federation had advocated this idea from the outset; it supported the creation of the fund on condition that a time-limited customs levy be examined. Illichov urged haste: “While the fund has been discussed for two months, we have received 100 strikes. If we talk for another two months, we will receive another 100 strikes. I am in favour of quick decisions.” In his view, the fund could also be launched with donor funds.
There is also criticism from big business. The president of the TERWIN corporation and founder of the EVA and VARUS chains, Ruslan Shostak, said that big business feels no state support. “The fifth year of the war is practically coming to an end, and we know full well that there is no support from the state. Businesses survive on their own strength,” he criticised. His company group had lost more than 10 billion hryvnias and paid around 40 billion hryvnias in taxes over five years. Without insurance, no one will invest in reconstruction: “Why rebuild if everything is destroyed?” Shostak considers the compensation fund necessary, and a VAT increase is “perhaps not the best example, but at least a way”. At the same time, there are other sources: Russian assets arrested in Ukraine, de-shadowing the economy and combating smuggling. In addition, businesses need access to loans at at least 14 to 15 per cent. “Our government has become much more accessible. We can talk a lot, but more must also be done. We are waiting for an answer from the government and the MPs,” the entrepreneur said.
