"Living on Our Own Means Will Be Painful": Economist Danilo Monin on the 100 UAH per dollar exchange rate, debt, and Ukraine's future
Last week, Ukraine suffered the largest missile strike on large businesses since the beginning of the year. Russian missiles struck the logistics centers of Epicenter, Rozetka, Nova Poshta, NOVUS, and other companies that provide the country with goods, jobs, and tax revenue every day.
Ukrainians are counting their money until payday, while businesses are tallying their losses after the massive missile strike. Yet another one. Destroyed warehouses, more expensive fuel, new excise taxes, record-high imports, and the usual warnings about “the hardest winter”: what will happen to the country’s economy—not tomorrow, but in a few months, and after the war? Danylo Monin, an economist and expert at the Ukrainian Institute of the Future, believes that Ukraine’s main problems are yet to come. In an interview, he explained why he calls the trade deficit a “catastrophe squared,” anticipates an exchange rate of 100 hryvnias to the dollar after the war ends, and is convinced that current economic policies are driving businesses and people abroad. His assessments are unlikely to please government officials, but they clearly illustrate how he sees the country’s economy after the war.
Below are direct quotes from Danil Monin.
Strikes on warehouses, business relocation, and the destruction of industrial capacity
Missile strikes are forcing Ukrainian businesses to restructure urgently. And the example of “Rozetka” is very telling here. The company lost its best logistics center, built in 2017. It was a peacetime model—a large, centralized facility where huge volumes of goods were concentrated. But during wartime, such concentration becomes a massive vulnerability.
We are effectively in the midst of an infrastructure war right now. Large Class A logistics centers, shopping complexes, and major retail facilities are under attack. And businesses will have to abandon this approach—not because they want to, but because otherwise they’ll simply continue to lose assets.
But there’s an even worse scenario. Some businesses are already beginning to move production abroad. For example, Epicenter announced the relocation of its production facilities. They simply decided that, under current conditions, it is safer to manufacture outside Ukraine. For us, this is a catastrophic trend. We are effectively losing what remains of our own industrial base.
And the problem isn’t just the missiles. Our energy sector, logistics, and production facilities themselves are all under threat at the same time. And instead of helping businesses adapt, the government is creating additional problems for them. Electricity rates for businesses are already higher than in Europe. Loans are prohibitively expensive due to the NBU’s policies. Add tax policies to the mix, and we end up with an environment in which it’s simply not profitable for Ukrainian manufacturers to remain in Ukraine.
In fact, we are pushing businesses to move their production and capital abroad. And then a very simple calculation kicks in: less domestic production means more imports, fewer jobs, less tax revenue, and even greater dependence on foreign supplies. This is a direct path to the further decline of our own economy.
But there is an alternative. I, for example, like the “Nova Poshta” model. From the very beginning, they built a distributed network of small facilities across the country. And today, it’s practically impossible to destroy it in one fell swoop.
Ukrainian businesses need to shift from giant warehouses to distributed logistics. Not a single warehouse spanning tens of thousands of square meters, but thousands of small, rapidly erected container warehouses. Today’s technology allows them to be managed as a single entity using WMS systems. And here, a very simple economic reality of war comes into play: it’s simply not cost-effective for the enemy to waste a million-dollar missile on a small container.
Production lines are more difficult to decentralize. They must either be duplicated in different regions or moved underground. But for this to happen, businesses need freedom of action and accessible financing. And the state, for now, is behaving like a dinosaur—oblivious to what’s happening around it and continuing to operate under peacetime rules.
The Enemy’s Limited Missile Capabilities and Threats to Logistics
Many people naively believe that the enemy has an endless supply of ballistic missiles and can strike everywhere at once. This is not the case. Missiles are a limited resource, and the enemy is forced to use them sparingly.
In 2022–2023, they produced about 200 ballistic missiles per year—that’s up to 15 per month. Now they’ve ramped up production to roughly 700 per year, or 60–70 per month. That’s a lot, but it’s still not an infinite resource. Yes, sometimes we see massive barrages, as during the recent attacks on Kyiv. But that doesn’t mean they produced a hundred missiles in a single night. They are building up a strategic stockpile and then periodically using it up, varying the intensity of their strikes. That’s why I don’t believe in a scenario where Ukraine’s food logistics are completely paralyzed. Ukraine is an agrarian country. We produce a huge amount of food ourselves and even export it. Destroying a small warehouse full of perishable goods with an expensive missile makes no economic sense.
Our logistics infrastructure is fairly well-distributed. Fuel has long been delivered via established routes, and crude oil is transported abroad for refining. Therefore, unless the government once again starts creating problems through strict price controls, as it did in 2022, small freight vehicles will continue to transport goods across the country.
Of course, the situation is completely different along the front lines. The risks there are significantly higher. But there is no basis for claiming that Ukraine will run out of food tomorrow due to missile strikes on logistics centers.
Scenarios for the winter of 2026/2027: gas, air defense shortages, and a threat to the capital
Everything here will depend heavily on the weather. It’s one thing to have a winter where temperatures hover around zero—a typical European winter. It’s quite another if the anomaly we saw in 2025 were to repeat itself. As far as I recall, Kyiv hasn’t experienced winters like that in over a decade. Therefore, there’s a high probability that such an anomaly won’t happen again.
If the average temperature ranges from zero to minus five, that’s a completely different strain on the power grid and heating networks. But if we hit minus 15–20, the situation will be very dire. This is no longer a matter of comfort—it’s a matter of the physical ability to survive the winter in the city.
We must also understand another unpleasant reality: we effectively have no anti-missile systems for the Patriot, and we won’t have enough of them in the near future. This means the enemy could potentially strike virtually any piece of infrastructure. But even after very serious strikes, the system does not necessarily collapse completely. Last winter, during the first attack in January, five missiles struck Thermal Power Plant No. 5, but it continued to supply heat. CHP-6 was shut down completely, but additional heating boilers were installed there—which made it possible, for example, to supply heat to Troieshchyna. Preparations are also underway now. Generators and equipment are being brought in, and backup solutions are being prepared. But I wouldn’t count on this winter passing without any problems. We need to be prepared for power outages and heating disruptions.
The situation with gas is much more stable. There are currently about 13 billion cubic meters in storage, and we expect about 16 billion by the start of the heating season. That’s enough to get through the winter using our own production. In other words, there will definitely be gas. The problem lies elsewhere: gas may be in the pipeline, but that doesn’t mean there will be heat in your apartment. If the heating networks are damaged, it will be physically impossible to deliver that heat to your home.
We don’t know right now exactly where the enemy will direct its next massive strike. Its missile reserves are limited, so it has to choose its targets. If the main strike is again directed at Kyiv and there’s an opportunity to get the children out or temporarily leave the city, that’s what I would do. It’s better to get through the winter somewhere warm than to find out the hard way how well the system works at minus 20.
The government’s disastrous economic policy and the “Dunkirk” approach to business
The rise in imports is a very bad sign, especially from the perspective of Ukraine’s future—not just today, but what our economy will look like in a few years. We import far too much and export far too little. And the longer this continues, the greater the economic imbalances become. Moreover, the government itself is currently helping to deepen these imbalances. It’s acting like a dinosaur that’s completely out of touch with the business community.
Here’s a simple example. The enemy is destroying gas stations. What should be done? Allow mobile gas stations, remove unnecessary restrictions, and give businesses the opportunity to react quickly. But the government says: No, we have licenses, rules, and procedures. And all of this must be followed even when rockets are flying all around us.
About one trillion hryvnias in liquidity is tied up in the banking system. The money is there. But loans for businesses are so expensive that it’s simply not worth taking them out. Electricity rates for Ukrainian companies are already higher than in Europe. Add tax pressure to that—and you get an economy in which the government is effectively telling manufacturers, “Get out of here.” And manufacturers do leave. Because they don’t pay salaries out of patriotism, but out of economic necessity. If another country offers cheaper electricity, more accessible credit, and a lower risk of a rocket hitting a production facility, businesses will compare these conditions. And they’ll choose the safer and cheaper jurisdiction.
This is a very dangerous process. We’re losing manufacturing, jobs, and our tax base. Instead, we’re getting imports. And at some point, we may wake up in a country that produces practically nothing but buys everything from abroad. That’s why what we need right now isn’t a fight against business, but its rapid transformation. And here I’d draw an analogy with Dunkirk in 1940. When hundreds of thousands of British and French soldiers found themselves trapped near the English Channel, Britain did not say, “We don’t have enough large ships—so it’s all over.” Instead, it mobilized thousands of small vessels and civilian boats and used them to evacuate the army.
Ukraine now needs to do roughly the same thing—only in the economy. It should not try to preserve huge, vulnerable structures as they were before the war, but rather create thousands of small, mobile, and distributed elements. In port logistics, this could mean hundreds of small berths and small boats operating via the Danube or toward Constanta. In warehouse logistics—not a single massive Class A warehouse, but thousands of small container warehouses. Let’s say—ten thousand facilities, spread out from one another. And this is precisely where modern WMS systems make it possible to manage them as a single warehouse. For the customer, nothing changes: they see a single system. But for a missile, this is no longer a single massive target, but thousands of small ones. Wasting a missile worth millions of dollars on a single container makes no economic sense.
This isn’t just a way to survive the war. It’s a chance to build one of the most efficient distributed logistics systems in the world after the war. But for that to happen, the government must stop being an obstacle. We need accessible loans, preferential financing, and a realistic opportunity to quickly restructure businesses. We have the resources to do this. The Ukraine Facility program alone amounts to 8 billion euros. The question isn’t just how much money we receive. The question is whether we’ll be able to use it to restructure the economy—or whether we’ll simply continue to patch up the old model, which clearly no longer works.
“A Disaster Squared”: Ukraine Imports 34% of GDP More Than It Exports
Ukraine’s trade deficit stands at 34% of GDP. This is simply a catastrophe squared. By comparison: when Trump tried to tackle the U.S. trade deficit and imposed harsh tariffs, that figure there was only about 3% of GDP. Here, it’s ten times higher.
We are essentially living off imports: we buy fuel, drone parts, consumer goods, and some food products from abroad. Meanwhile, our domestic production and exports are steadily declining. As a result, a colossal imbalance is building up. For now, it’s masked by Western funding. They give us foreign currency—we use it to pay for imports. That’s why, on the surface, everything looks more or less stable.
But that doesn’t mean the problem has gone away. We’re simply postponing the moment when we’ll have to pay for this imbalance. When the war ends and we’re told, “That’s it, guys, now live on your own,” a very serious economic crisis could begin. Because if a country produces almost nothing but continues to import a lot, it constantly needs foreign currency. And there will be virtually nowhere to get it.
“100 hryvnias per dollar—entirely realistic”: what lies ahead for the hryvnia after the war
I’m not trying to scare anyone right now—at this stage, we’re not facing the threat of a sharp devaluation. Our Western partners are providing us with very solid funding. In the second half of the year, according to my estimates, we could receive about $72 billion in foreign currency financing instead of the planned $50 billion. As a result, the NBU’s reserves could grow to $65–70 billion. In other words, the National Bank currently has sufficient resources to control the situation.
The gradual devaluation being carried out by the NBU is, in my opinion, the right approach. It is better to gradually adjust the exchange rate to account for future imbalances than to suddenly face a scenario like the one we saw in 2015, when the hryvnia plummeted from 12 to 30 hryvnias per dollar.
By the end of this year, the exchange rate will most likely not exceed 45 hryvnias per dollar. For 2027, there is also confirmed funding from the EU—at least €45 billion, plus other inflows. Therefore, next year I do not expect the exchange rate to exceed 47 hryvnias per dollar.
However, once the war ends, the situation could be completely different. If we’re left with massive imports, millions of people abroad, and a virtually destroyed industrial sector, there will be frenzied demand for foreign currency coupled with a very weak ability to earn it.
In that case, the devaluation could be colossal. Theoretically, the exchange rate could even reach 100 hryvnias per dollar.
“We’re being funded because it’s in Europe’s interest”: How much longer can Ukraine survive on other people’s money?
As long as the war continues, we’ll be funded. The Europeans’ logic here is quite clear: they’re essentially buying their own security with this money. For them, these sums aren’t critical. If Europe spends trillions of euros on various needs, then Ukraine’s tens of billions are relatively small change for it. Moreover, a significant portion of these funds isn’t simply money from Europe’s pocket, but financing secured against frozen Russian assets. Therefore, this model could continue to work for a long time. But there’s a problem: it doesn’t build our economy.
On the contrary, the war is destroying industry, people are leaving, production is shrinking, and imports remain enormous. In other words, we are becoming increasingly dependent on external infusions of funds.
Once the war ends, we may receive assistance for another year or two. But then any country must begin to support itself. And that’s when all the accumulated imbalances will come to the surface.
“We Risk Losing 5 Million People”: Which Cities Ukraine Might Not Rebuild
If we don’t change our economic policy, we could lose at least 5 million people who have already settled abroad and simply won’t return. And this raises a very unpleasant question: what exactly are we going to rebuild?
If a city has been completely destroyed and there are no jobs there, rebuilding the houses isn’t enough. People won’t return simply because their apartments have been rebuilt. They need jobs, salaries, and a functioning economy. Therefore, in some cases, it will be easier to build a modern city from scratch than to try to raise the old one from the ruins.
Large cities with populations over a million, such as Kyiv, will survive. But some smaller cities risk becoming ghost towns after the war.
$212 billion in debt: “We could slide into the gray zone”
Our main problem is also that we continue to worsen conditions for our own businesses. Businesses are already barely surviving under shelling, and the government is also increasing the tax burden.
Total public debt already stands at about $212 billion. Repayments are currently deferred until 2034. But when we have to repay about $15 billion in principal each year, without normal economic growth, the debt burden could reach 120% of GDP. That’s already a very dangerous zone. In effect, this is a path to default and a fresh start in relations with creditors.
And this brings us back to business. If the government does not create the conditions for investment and jobs, we simply won’t have the means to service these debts. In the worst-case scenario, Ukraine could slide into a “gray zone” similar to Abkhazia or the LPR and DPR—territories where a state formally exists but there is no functioning economy, no investment, and no prospects.
“A million-strong army after the war is a waste of resources”
I don’t understand the claims that Ukraine will definitely need a million-strong army once the war ends. This is either a misunderstanding of modern warfare or a blatant waste of the resources we’ll need to rebuild the economy. In the absence of active combat operations, the modern front line can largely be held by approximately 50,000 drone operators. We need a small but highly professional army, plus a trained reserve—about a million people who will undergo regular training. Not a massive force that the state will be forced to maintain for years.
The same applies to the internal security sector. It is currently “devouring” nearly one trillion hryvnias. These expenditures also need to be significantly reduced. As for missile defense, we can form joint consortia with Europeans. Our experience in the practical use of weapons is unique and can in itself be a source of export revenue.
People often tell me that such ideas amount to “working for the enemy.” But this is not working for the enemy. It’s simple economic arithmetic: if we maintain our current spending levels after the war, there simply won’t be any money left for reconstruction.
“Maximum freedom, minimal government”: What Monin proposes instead of raising taxes
Maximum economic freedom must be at the heart of the new economic policy. The tax system should encourage job creation, rather than branding the simplified system as some kind of threat to the state. Because what’s happening now? The more pressure we put on businesses, the more people either go underground or leave the country altogether. That’s why we need maximum liberalization.
But there’s another side to this coin: we’ll have to cut government spending. And that will be painful. According to IMF projections, Ukraine should achieve a balanced budget by the 2030s. The IMF is essentially proposing to achieve this by increasing revenue—that is, through taxes.
I believe the path should be different: not to squeeze even more money out of the economy, but to downsize the state itself and its expenditures. This will simultaneously reduce corruption risks and allow us to use Western funds to navigate this transformation without social upheaval.
“Food Prices Are Almost at European Levels”: Why Ukrainians Are Paying More and More for Groceries
The main factors driving up food prices right now are logistics and fuel. The government continues to raise excise taxes. Currently, the excise tax is €300 per metric ton, plus 20% VAT. Another increase is scheduled for January 1.
Fuel prices are already approaching €2 per liter. And this is automatically factored into the cost of every truck trip, every kilometer of delivery, and, ultimately, every product on the shelf. Therefore, strategically speaking, we have already reached a point where food prices in Ukraine are on par with those in Europe. At the same time, Ukrainians’ incomes are nowhere near European levels.
The processing sector is suffering the most right now. Take the dairy industry, for example: electricity costs for businesses have risen by nearly 1.5–2 times, and payroll expenses are increasing. As a result, Ukrainian cheese is already losing out to Polish and Dutch varieties.
Prices for fruits and vegetables may see a temporary decline in the coming months due to the new harvest and export issues. But the strategic problem remains: it is becoming increasingly expensive to produce goods in Ukraine, and increasingly difficult for Ukrainians to afford them.
