The US Treasury warned that emergency measures such as money printing used by Kyiv to prop up its public finances risked harming its ability to provide critical public services over time, underscoring the need for allies to adhere to their commitments to provide tens of billions of dollars. grants and cheap loans as soon as possible. EU finance ministers meeting on Tuesday in Brussels agreed on a new emergency loan of 1 billion euros for Ukraine, but are struggling to agree on a wider package for the country. Valdis Dombrovskis, executive vice-president of the European Commission, said Ukraine faces “huge short-term financing needs” and more work is needed to meet them. He urged EU member states to provide sufficient financial guarantees for the Commission to push through a planned €9 billion package in Kyiv. Ukraine’s fiscal crisis has become acute due to falling tax revenues and customs duties since the invasion began nearly five months ago along with higher war spending. Cessation of grain and steel exports has deprived Kyiv of foreign currency earnings. Ukraine is being forced to deplete its foreign exchange reserves at an accelerating rate as the central bank buys government bonds to plug its funding gap. The G7 and the EU have announced official funding commitments to Ukraine of $29.6 billion. According to Dragon Capital, a Kyiv-based investment bank, Ukraine’s allies and international financial institutions have so far disbursed $12.7 billion into the country. EU leaders pledged in May additional support of up to 9 billion euros, on top of the previous emergency loan of 1.2 billion euros. they are still negotiating how to structure this financial support. Officials warn that the full EU aid package is unlikely to be arranged before the August recess. Germany in particular disputes the idea of ​​providing all aid in the form of loans, diplomats say. Berlin has already contributed €1 billion in bilateral support to Ukraine and on Tuesday backed the EU’s additional €1 billion loan. The German finance ministry said the Commission would submit a further proposal to reach €9 billion and that once this was available, it would be assessed by member states. “Together with our international partners we stand by Ukraine,” he added. Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelenskyy, said the country now needs $9 billion a month from its Western backers to cover the budget deficit, nearly double its previous request. The finance ministry said its estimate of the gap was still $5 billion a month, but even that was far more than Western capitals had so far provided. But Ustenko said Ukraine needed an extra $4 billion a month for the next three months to cover the cost of emergency housing and home repairs for millions of people and to fund a basic minimum income for people who have lost their jobs. “We will try to survive in any case, but without financial support from our allies it will not only be difficult to do so, it will be almost impossible.” Fiscal pressures appear more broadly. Naftogaz, the state energy company, on Tuesday asked holders of its $1.5 billion bonds to accept a delay in payments as it seeks to preserve cash to buy gas. It would amount to the first bankruptcy by a Ukrainian state entity since the start of the war.

Naftogaz’s move may signal a change in the Ukrainian government’s approach to its foreign bondholders. Until now, Kyiv has refused to reschedule its debt payments, saying it was important to maintain the confidence of international investors. Ukraine’s central bank said last week it had used up $2.3 billion, or 9.3 percent, of its foreign reserves in June alone, in part because it is running a monetary deficit at an increasing rate. The National Bank of Ukraine bought $3.6 billion worth of government bonds last month, more than double the rate of $1.7 billion in April and May. The central bank still has enough reserves to cover three months of imports. The US on Tuesday announced an additional $1.7 billion in direct financial assistance to the government of Ukraine. “This assistance will help the democratic government of Ukraine provide essential services for the people of Ukraine,” Treasury Secretary Janet Yellen said as she announced the support. The U.S. agency for international development USAID and the Treasury Department have provided $4 billion in direct budget support to the Ukrainian government, which means they are halfway to the total commitments made under the bipartisan legislation. Additional reporting by Guy Chazan in Berlin