Something is wrong here. MP tells where the funds from the purchase of government bonds go

Since the beginning of the full-scale invasion, almost $37 billion has been raised to the Ukrainian budget through the issuance of domestic government bonds, but these funds are spent not only on the Armed Forces of Ukraine. This was reported by Nina Yuzhanina, a member of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, UNN reports.

“Since the beginning of the full-scale war, citizens’ investments in domestic government bonds have increased 2.8 times – from UAH 25.5 billion in circulation as of February 24, 2022 to UAH 72.61 billion as of November 19, 2024 (USD 1.9 billion),” Yuzhanina reported .

At the same time, according to her data, since 2014, during Russia’s war against Ukraine, the volume of purchases of government bonds by citizens has increased more than 600 times.

In total, during the 1000 days of the full-scale invasion, the state budget received UAH 1.36 trillion (USD 36.8 billion) in equivalent through the issue of government bonds. External budget support since the beginning of the full-scale war has reached USD 100.8 billion, the MP also said.

“However, something is wrong here. So far, the funds raised from the placement of domestic government bonds have not been spent only on the Armed Forces. So, this  issue has not been resolved, although the necessary amendments to the Budget Code and the budget have been submitted many times,” Yuzhanina emphasized.

Add

Earlier, under the pretext of the need to increase funding for the army, Danylo Hetmantsev, chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, who has repeatedly initiated tax increases in Ukraine, proposed to oblige working Ukrainians to buy government bonds for 7% of their salaries. Experts criticize the initiative because of the additional burden on the population and possible negative consequences for the economy.

For example, Myroslav Laba, a tax and regulatory policy specialist at the Economic Expert Platform, CASE Ukraine associate expert, in an interview with UNN noted that additional costs in the form of mandatory purchase of government bonds could create an additional financial burden for the population, especially for low-income citizens and entrepreneurs, and called for alternative ways to finance public needs. Laba suggested focusing on combating the shadow economy and tax arrears instead of introducing new mandatory expenditures for citizens.

Vitaliy Shapran, a member of the Ukrainian Society of Financial Analysts, also sharply criticized Hetmantsev’s idea to introduce mandatory purchases of government bonds by working people. According to the financial analyst, the introduction of such an obligation will lead to an increase in the number of Ukrainian citizens leaving the country.

“Another idea of Hetmantsev (a student of Volodymyr Sivkovych) to force Ukrainians to buy government bonds at 7% of their income indicates that Danylo either has an acute mental disorder with an obsession to take a bite out of Ukrainians’ income, or a clear task from the Center from the FSB and Co. to constantly confuse Ukrainians with new ideas, indirectly agitating economically active citizens to leave Ukraine,” wrote Shapran on his Facebook page.

According to him, a compulsory obligation to buy domestic government bonds on the secondary market could lead to a number of negative consequences for Ukraine’s economy. The saturation of the market with bonds purchased by the population under pressure will inevitably lead to an increase in the yield of domestic government bonds on the secondary market, as many citizens will try to get rid of these assets. This, in turn, will force the Ministry of Finance to raise interest rates for new bond issues on the primary market, which will increase the cost of servicing the public debt and put an additional financial burden on the budget.

In addition, Hetmantsev’s proposal, according to Shapran, does not take into account the high costs of administering and opening securities accounts, which is a challenge for the banking system. In particular, the cost of opening and maintaining accounts for transactions with domestic government bonds may exceed the return on such investments for middle-income citizens. 

The financial analyst also believes that such an initiative will actually stimulate the transition to shadow wages and minimization of official payments, as the mandatory percentage of income on government bonds can be perceived as an additional tax.

“Ukraine is a country with a market economy, and such coercion can hardly be called market-based. Leaders must prove the profitability of their operations by their own example. Mr. Hetmantsev’s annual declaration does not show that he or his family members are buyers of government bonds. On the contrary, I see a lot of foreign currency deposits and foreign currency cash. Therefore, it is strange to hear him talk about forced government bonds, especially since such reflections indicate that he has no idea how the government bond market works in Ukraine. And he, as the head of the Verkhovna Rada’s Finance Committee, should know this, at least at the end of his term,” Shapran added.

He called on the President of Ukraine and the Chairman of the Verkhovna Rada to immediately remove Hetmantsev from the post of Chairman of the Tax Committee of the Rada and “send him for a compulsory psychiatric examination.” 

“The people have to find out: Hetmantsev is either a fool with no economic education who has no one to stop him, or a traitor who is adding fuel to the Ukrainian economic crisis. In any case, Hetmantsev’s professional influence on the Ukrainian financial sector should be eliminated, preferably yesterday,” the financial analyst emphasized.