Fighting Ukraine’s Financial Fire by Anders Åslund
Russia’s war has inflicted enormous costs on the Ukrainian economy, leaving the government with insufficient means to maintain its most basic functions. To continue its military gains, Ukraine needs much greater financial support, in addition to a steady supply of arms.
STOCKHOLM – Thanks to Western arms deliveries, Ukrainian forces are celebrating one battlefield victory after another. But Ukraine faces another serious threat: high inflation. It therefore needs not only arms but also more financial support.
Russia’s war has inflicted enormous damage, with the Ukrainian government and the Kyiv School of Economics putting the current tally of recorded material losses at $120 billion. The country’s GDP is set to fall by 35-40% this year, and its government revenues by even more. Earlier this year, the International Monetary Fund determined that the Ukrainian government would need $5 billion per month – $60 billion this year – in external support to finance government salaries, pensions, health care, schools, and some social benefits.
These are basic expenditures to keep the government functioning. Unfortunately, only half of the necessary funds have been made available. According to the Ukrainian brokerage Dragon Capital, $35 billion had been pledged to Ukraine as of September 30, but only $20 billion had been disbursed. The dominant donor is the United States, which has already provided $8.5 billion, with commitments to provide another $1.5 billion per month for the rest of 2022.
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