With aid stalled, Ukraine scrambles to make ends meet
Jobs, food, and housing may all be affected
KYIV — Short of cash as well as personnel and equipment for its war against Russia, Ukraine’s government says it has cobbled together financing to last several months without long-stalled aid from the United States and Europe. But further delays would trigger an all-but-certain economic crisis, officials and analysts say.
Government workers might not get paid or lose their jobs. Retirees, already living close to a subsistence level, could slip deeper into poverty if their pensions are not topped up to keep pace with inflation. Museums and theaters — as well as government research institutes and universities — could be forced to shut their doors.
Restaurants, department stores, and a host of other businesses currently remain open in Ukrainian cities away from the front line. But without enough financial aid, the ripple effects would quickly be felt across the economy, as the government runs out of cash to support a wide range of people and institutions.
Along with artillery shells, missiles, and drones, Russia’s war in Ukraine is fought in the economies of both countries. Western sanctions are intended to curb Moscow’s resources, and Western aid is aimed at sustaining Ukraine. An economic crisis in Ukraine could severely undermine its ability to successfully fight the war, experts say.
“It’s the economy that wins wars,” said Orysia Lutsevych, head of the Ukrainian program at Chatham House, a Londonbased research group.
Ukrainians are already strained economically by war and ill-prepared for financial turmoil. In a poll by conducted by the Red Cross in November, 42 percent of Ukrainians said they had insufficient income to meet basic needs, including food and paying for housing.
Ukraine needs the Western aid to cover about a quarter of its national budget this year but has faced hurdles getting it.
On Thursday, European Union leaders will meet in Brussels, hoping to reach agreement on a 50 billion euro, or about $54 billion, multiyear aid package that was blocked by Hungary in December.
The Biden administration is also struggling to get through Congress a package worth about $60 billion of military, humanitarian and financial aid.
If Ukraine fails to get the aid it needs from the West, the economic stability that has been an unexpected wartime success could start to crumble.
Serhiy Marchenko, the country’s finance minister, warned in an interview of the risks of a looming financial crisis. “Achieving macroeconomic stability is not easy,” he said. “It takes a lot of time to boost confidence in businesses, in the citizens of Ukraine.”
Ukraine has also contributed to its own problems, with chronic corruption that has made Western allies more skeptical that money donated is going to the right cause.
Ukraine relies on foreign aid for about half its annual budget and is prohibited by donors from spending that assistance on the military. It receives separate aid from the United States and the European Union for military purposes.