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UPDATE 2-U.S. to send Ukraine $5.5 billion in new fiscal, military aid

·3 min read

(Adds details on military package, funding sources)

By Andrea Shalal and Idrees Ali

Aug 8 (Reuters) - The United States will send an additional $5.5 billion in aid to Ukraine, made up of $4.5 billion in budgetary support and $1 billion in military assistance, to help it come to grips with the turmoil of this year's Russian invasion.

The $4.5 billion budgetary grant will fund urgent government needs including payments for pensions, social welfare and healthcare costs, bringing total U.S. fiscal aid for Ukraine to $8.5 billion since Russia's February invasion, the U.S. Agency for International Development said.

The funding, coordinated with the U.S. Treasury Department through the World Bank, will go to the Ukraine government in tranches, beginning with a $3 billion disbursement in August, USAID said.

It follows previous transfers of $1.7 billion in July and $1.3 billion in June, USAID said. Washington has also provided billions of dollars in military and security support.

The $1 billion arms package announced by the Pentagon is the largest single military package under President Joe Biden's drawdown authority, including long-range rocket munitions and armored medical transport vehicles

It includes as many as 50 M113 armored medical transports and munitions for the U.S.-supplied HIMARS long range rocket launchers and for the NASAMS surface-to-air missile system.

The fiscal and military aid packages - both first reported by Reuters on Monday - are drawn from a $40 billion aid package for Ukraine approved by Congress in May.

Overall, the United States has contributed more than $18 billion to Ukraine this year. UKRAINE POVERTY GROWS The new budgetary funds are to help the Ukrainian government maintain essential functions, including social and financial assistance for the growing poor population, children with disabilities, and millions of internally displaced persons, as the war drags on.

Ukrainian officials estimate the country faces a $5 billion-a-month fiscal shortfall - or 2.5% of pre-war gross domestic product - due to the cost of the war and declining tax revenues. Economists say that will swell Ukraine's annual deficit to 25% of GDP, compared with 3.5% before the conflict.

The World Bank estimates that 55% of Ukrainians will be living in poverty by the end of 2023 as a result of the war and the large numbers of displaced persons, compared with 2.5% before the start of the war.

USAID said U.S. budget support has enabled the Ukrainian government to keep gas and electricity flowing to hospitals, schools and other critical infrastructure and deliver urgently needed humanitarian supplies to citizens.

The funds have also paid for healthcare workers, teachers and other civil servants.

USAID said robust safeguards had been put in place by the World Bank, along with USAID-funded, third-party watchdogs embedded within the Ukrainian government to make sure the funds are directed where they are meant to go.

“This economic assistance is critical in supporting the Ukrainian people as they defend their democracy against Russia’s unprovoked war of aggression," U.S. Treasury Secretary Janet Yellen said in a statement.

The injection of fresh cash for Ukraine comes as the war, which Russia calls "a special military operation," stretches into a sixth month, with millions of Ukrainians displaced and authorities warning of likely gas shortages in winter.

(Reporting by Andrea Shalal, Idrees Ali and Mike Stone; Additional reporting by David Lawder Editing by Heather Timmons and Howard Goller)