What Are ‘War Bonds’ That Ukraine Is Using To Fund Army? | Explained

Russia Ukraine News: After the fall of prices of the government bonds in the country, the Finance Ministry of Ukraine announced the launch of these special bonds.

New Delhi: Ukrainian President Volodymyr Zelensky has urged businesses to invest in the country, especially by buying the ‘war bonds’. According to a report by Mint, he said, “War bonds are a tool for you to both support us in a fight for freedom and earn, earn from us.” In March 2022, the Finance Ministry of Ukraine announced the launch of these special bonds.

“In the time of military aggression of the Russian Federation, the Ministry of Finance offers citizens, businesses and foreign investors to support the budget of Ukraine by investing in military government bonds,” the Ministry of Finance of Ukraine said on Twitter.

In the time of military aggression of the Russian Federation, the Ministry of Finance offers citizens, businesses and foreign investors to support the budget of Ukraine by investing in military government bonds. pic.twitter.com/7P7AkxmTaD

— MinFin UA (@ua_minfin) February 28, 2022

It also added, “The proceeds from the bonds will be used to meet the needs of the Armed Forces of Ukraine.” According to BBC, the government has assured that it will not default on the existing debts.

What Are War Bonds?

War bonds are special debt instruments issued by the government of a county to fund military operations during an ongoing war or conflict, according to Investopedia. The bonds usually offer a lower rate of interest than other bonds So, appeals are made to the investors for their sense of patriotism.

The bonds do not usually pay a rate of interest and thus are issued at a discount. They are redeemed at the face value. The difference between the face value and discounted prices is the income of the investor. These bonds were widely used during WW2.

Currently, the instrument is being used by the Ukrainian government to raise funds for fighting the Russian forces. Fierce battles are going on in various cities across Ukraine, including the capital of Kyiv. Various countries have declared economic sanctions on Russia in response to its military adventurism.

European Commission imposed a ban on the import of Russian oil, with certain exceptions. Hungary, however, has been vocal against the ban due to its large dependency on Russian oil.

Various banks in Russia have also been removed from the SWIFT messaging system. This is expected to put massive pressure on Russia because it cannot use a majority of its reserves worth $600 billion.