Anders Åslund – Atlantic Council
The world is rightly impressed by the unexpected victories of Ukraine’s armed forces against Russia, and the collective West has provided Ukraine with plenty of modern arms. Yet arms alone are not enough. As columnist Niall Ferguson pointed out in September: “The Ukrainian army may be winning. The Ukrainian economy is losing.” As the end of the year approaches, the West needs to step up and guarantee Ukraine sufficient financing to sustain the country in 2023—and the International Monetary Fund (IMF) must play a pivotal and creative role in delivering the funds.
Russia’s war has caused the contraction of Ukraine’s economy by 35 percent (or seventy billion dollars) this year. In addition, it has caused massive material destruction that the non-governmental Kyiv School of Economics assesses at more than $120 billion. The World Bank has already assessed the total Ukrainian losses at $252 billion.
In the spring, the IMF reckoned that Ukraine’s state budget would need five billion dollars a month or about fifty billion for the whole of 2022. Alas, the total external financing pledged to Ukraine for 2022 has been only $36 billion, and only $26.5 billion has been actually dispersed—that is, about half of what is needed. (These amounts do not include military funding.)
Lacking tax revenues and sufficient foreign aid, Ukraine has little choice but to print money to finance its bare-knuckles budget, as public expenditures have been slashed to the bare minimum. As a result, inflation is rising persistently. In October, it reached 26.6 percent through no fault of the Ukrainian government.
The Ukrainian government has specified its needs for 2023, presuming that the war continues with the current intensity. In October, President Volodymyr Zelenskyy stated that Ukraine would need fifty-five billion dollars of foreign support next year, including thirty-eight billion to patch a hole in the budget and seventeen billion for the rebuilding of critical infrastructure. He expected an IMF program of some twenty billion dollars.
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