KYIV, Ukraine — The Ukrainian government has struggled to raise money on bond markets during the war and is paying investors more than it is collecting, according to a Central Bank statement that points to the country’s deepening dependence on foreign aid.
About a fifth of Ukraine’s territory is occupied by Russian forces. Pivotal sectors like steel manufacturing and agriculture have been directly damaged by the war. And with cruise missile volleys hitting cities throughout Ukraine, tremendous uncertainty looms over all of the country’s businesses.
The economy has been projected to shrink about 40 percent this year, drying up tax revenue and indefinitely delaying previously planned spending that would have spurred growth.
The Central Bank statement, published on Monday, pointed to a less visible side of Ukraine’s financing shortfalls cause by the war: an inability to raise money on the market. Since Russia invaded on Feb. 24, Ukraine has not been able to roll over debt accumulated before the war. The country paid investors about $2.2 billion more than it collected in bond sales in that time, the Central Bank said.
All of that has left Ukrainian public finance, which has been wobbly at the best of times in the post-independence period, deeply reliant on assistance from the United States, the European Union, European countries that donate individually and other donors.
The finance ministry sold $6.7 billion in bonds during that period despite fighting in southeastern Ukraine, missile strikes in the capital and the Russian military’s advancement to within about a dozen miles of central Kyiv in the first month of the war.
Much of those sales were considered politically driven — with investors wanting to assist the government or unable to invest elsewhere because of capital controls. The rate the finance ministry pays on government debt is below market, given the risks and other more market-driven indicators of what borrowing costs are expected to be.
In a peculiarity of Ukraine’s wartime monetary policy, the Central Bank has maintained a lending rate, averaging about 25 percent, far higher than Ukrainian bond yields, which have been about 15 percent.
Ukraine’s moves to cover deficits over the summer by printing money to pay soldiers’ salaries and cover other wartime costs drove up inflation. Now, the Central Bank is striving to tamp down inflation, while the government is seeking lower rates to reduce borrowing costs.
The budget passed by Ukraine’s Parliament for next year includes a deficit of about $36 billion. About half of the planned expenditures are for the army, the police and other military outlays. The deficit this year has run even higher, at about $5 billion a month.
The International Monetary Fund, which bailed out Ukraine through a long run of post-independence financial crises, has not continued large-scale lending during the war.
“They are worried about debt sustainability,” said Tymofiy Mylovanov, a former economy minister who is a professor at the Kyiv School of Economics. “If the I.M.F. is worried about debt sustainability and ability to finance, imagine what private investors are thinking.”
After waves of Russian missile strikes on Ukraine’s energy grid, about nine million people have been left without electricity, President Volodymyr Zelensky said in his nightly address on Monday. Blackouts have brought economic activity to a near standstill in some towns.
Donors weighing the cost of defending Ukraine must also consider the potential cost of continued instability in Eastern Europe if Ukraine remains unstable, Mr. Mylovanov said.
“Ukraine will be a net recipient of foreign aid for a long, long time, and in very substantial amounts exactly because it will be critical for European security,” he said. But prolonged instability in Europe would be more costly than propping up Ukraine’s government, he said.