Kryvyi Rih, the hometown of Ukrainian President Volodymyr Zelenskiy, is struggling. Russian airstrikes have forced the city's giant steel plant and mines to cease operations, devastating the local economy.

Mayor Oleksandr Vilkul stated that the industrial city is doing everything possible to ensure hospitals remain open, schools have electricity, and buses can operate. "The situation in Kryvyi Rih is worse than anywhere else, except the front lines," he said.

The financial pressure on this city of 600,000 residents highlights the challenges Ukraine faces as the government grapples with its largest budget crisis since the conflict began in 2022. Last month, steelmaker ArcelorMittal, the city's largest employer, halted operations after a series of Russian ballistic missile attacks.

Vilkul described the outlook for next year as bleak. "This is a matter of survival. Right now, we need to survive," Vilkul said.

This plight extends across Ukraine's entire steel industry, a sector that contributed over 10% to the country's GDP before the conflict. Giant factories in Zaporizhzhia and other industrial cities are silent. Export activities have ceased.

Russia's intensified drone and missile attacks this summer have destroyed factories and warehouses across Ukraine, damaging seaports and railways. This has forced shops and businesses to close, slowing economic growth and tax collection rates.

Meanwhile, billions of euros in foreign loans are delayed because Ukraine has not yet passed tax and anti-corruption reform bills required by Western partners. This has led to a severe budget shortfall.

Ukraine needs 56 billion USD to cover this year's deficit, equivalent to approximately 25% of its GDP. Of this, 27 billion USD is allocated for military spending.

Ukrainian officials met with European counterparts in Brussels last week to discuss the early disbursement of a 90 billion euro (101 billion USD) loan package. However, Reuters sources indicated that accelerating these payments this year could increase budget pressure on Ukraine next year. Upcoming election campaigns in countries like France and Poland could also diminish support for Kyiv.

Prime Minister Sergii Koretskyi acknowledged that the situation is "challenging." The government has frozen non-essential expenditures, such as rebuilding damaged buildings and infrastructure, to prioritize military spending, public sector salaries, and pensions. "All resources must be directed to essential areas," he told reporters.

Two years ago, the conflict cost 140 million USD daily, but this has now risen to 190 million USD, according to Roksolana Pidlasa, Chair of Ukraine's Parliament Budget Committee. This figure does not include direct military assistance from Western allies to Kyiv.

Figures show that in the first nine months of the year, Ukraine spent over 44 billion USD on defense. In contrast, the government collected only about 42 billion USD in tax revenue due to slowed economic growth.

Pidlasa stated that in the first nine months of the year, Ukraine's budget lost over 49.5 billion hryvnia (1.1 billion USD) in tax revenue due to Russian attacks. These attacks not only damaged property and goods but also disrupted logistics, forcing shops and businesses to close for hours. The Ukrainian government estimates that by the end of the year, total revenue losses could reach 70 billion hryvnia.

Some Ukrainian businesses have begun scaling back operations, while others have postponed investments. Business sentiment and economic expectations are increasingly pessimistic.

Vasyl Khmelnytskyi, founder of an industrial park in Bila Tserkva near Kyiv, stated he canceled plans to build three new factories. "The risks are too great right now, for both businesses and workers," Khmelnytskyi wrote on social media.

Workers at the ArcelorMittal steel plant in Kryvyi Rih in April 2022. Photo: Reuters

Ukraine's agricultural sector, its largest export earner, has been particularly hard hit. Russian attacks on Black Sea ports caused grain exports in September to fall by nearly 37% compared to the same period last year.

Economy Minister Oleksandr Kravchenko stated that approximately 40 billion USD in export turnover this year is at risk due to the blockade. According to economists, even with tens of billions of euros in foreign aid, Ukraine's economy is projected to grow by only 0.5-1.5% this year, a decrease from 1.8% last year.

For over four years, Ukraine has maintained macroeconomic and financial stability thanks to nearly 200 billion USD in Western support. However, Koretskyi stated that 29.5 billion USD in foreign aid this year is at risk of not being disbursed due to the government's slow progress in adopting reforms. Ukraine has postponed approximately 900 million USD in investment spending until December, hoping the bills will be passed.

Lawmakers are currently debating next year's budget. The government has proposed a record defense budget expenditure of 110 billion USD. This figure does not include direct military aid.

Finance Minister Sergii Marchenko estimated that the uncovered budget deficit for next year already exceeds 32 billion USD. He revealed one solution is to utilize frozen Russian assets in Europe. EU countries froze approximately 210 billion euro of Russia's Central Bank assets after Moskva launched its military campaign in 2022.

"Ukraine is still mobilizing domestic resources, but the scale of the conflict has drawn clear limits to our capabilities," Marchenko wrote on X.

Ha Thu (according to Reuters)