Foreign Policy: Ukraine's economy is heading towards the abyss

Ukraine is striving to advance its economy in the midst of the Russian war, and the West has a vital interest in maintaining the continuity of this country's wartime economy.

In his report, published by the American "Foreign Policy" magazine, writer Bart Zyuchek says that the often-overlooked element in enabling Ukraine to win its struggle against Russia is maintaining the continuity of its wartime economy, although tens of thousands of Ukrainians are fighting on the front while With millions of people forced to flee, the country still needs to support some 38 million citizens with food and jobs, maintain a sustainable future for its infrastructure, and fund public services.

The writer pointed out that the Ukrainian economy is heading towards the abyss and needs urgent help. Russia has prevented Ukrainian ports from exporting goods, targeting factories and basic infrastructure with a barrage of missiles, and stealing an estimated 400,000 tons of grain for transportation to Russia.

He said that the scale of the economic collapse in Ukraine is enormous;

The World Bank expects gross domestic product to shrink 45% this year.

The writer shows that over the past few days;

The West has begun to provide a much-needed economic lifeline to Ukraine by liberalizing trade supplies, in addition to pumping billions of dollars into military equipment, refugee aid, and budget support. Joe Biden last week that the Ukrainians need this huge support "so they can continue this fight."

appalling economic situation

The writer stresses that the economic situation in Ukraine is appalling, its losses in infrastructure have already exceeded $100 billion, according to United Nations estimates.

Accordingly, Ukraine may need $600 billion for post-war reconstruction, and may need more the longer the war drags on. Ukraine's long-term economic prospects are also contingent on the outcome of the war, including how much of its territory and resources it will control, and the level of stability and relative security which can be achieved after the war.

The writer reveals that the European Union and European financial institutions provided about $ 18 billion in grants and loans to Ukraine between 2014 and the start of the last Russian war on February 24.

During the same period, the United States committed $2 billion in economic aid.

The total economic aid that Ukraine received during these eight years was a tenth of what the country actually lost this year alone, not to mention its long-term needs, the report adds.

According to the author;

The West has many resources to finance the wartime Ukrainian economy through grants, loans, and trade concessions;

As the advancement of the Ukrainian economy is in the interest of the West, especially Europe.

In fact - the writer says - the European Union not only needs to build an effective fortress against Russia, but it is also Ukraine's main trading partner, but the collapse of its economy may lead to the flow of millions of refugees to Europe.

The writer believes that European policy makers are aware of this. Last week, both the European Union and Britain opened their markets to Ukrainian exports by eliminating all customs duties, and as European Commissioner for Trade Valdis Dombrovskis noted, "the European Union has never before taken such measures to liberalize trade." .

With Ukraine's total exports to Europe exceeding the $30 billion mark last year - even a small increase could provide much-needed liquidity.

Meanwhile, the Ukrainian government can decide which goods will be exported and which are priority for domestic consumption.

safe lanes

The writer says that in light of the closure of Ukrainian ports by the Russian Navy, exports to non-European markets, such as grain, need a safe and fast passage through Europe by the so-called green corridors, noting that the most difficult part will be to raise a large amount of money to finance the economy Ukrainian.

The writer believes that over time;

Perhaps China can be persuaded to support Ukraine's economy, given its loans and investments in the country and its broader stake in maintaining its economic and financial lifeline to Europe and the West.

The writer notes that before the war;

The European Union and the United States had already coordinated their economic and technical assistance to Ukraine in the G7 Ukraine Support Group, which they helped launch at the 2015 G7 summit.

However, this group is low-ranking and informal in relation to the much expanded scale of what is needed, which includes only local ambassadors residing in Kyiv who meet periodically to exchange views and best practices.

Currently;

Any group would have to be more ambitious, making and coordinating tens of billions of dollars in financial commitments.

The writer stresses that the European Bank for Reconstruction and Development - which has invested more than $150 billion across Central and Eastern Europe since its founding in 1991 - will be a major player in stimulating these efforts, noting that the Bank has already facilitated investments in Ukraine that exceed their value. $16 billion, and recently announced a new $2 billion package.

The writer says that in the coming weeks, the leading economies that have been reorganized into the new G-20 must commit to strengthening aid to Ukraine and organizing a broader donors' conference.

In the long term, Europe must lead Ukraine's economic recovery.

Now that Ukraine's economic survival becomes crucial to the outcome of the war and the security of Europe itself, a serious, intense and rapid response will be required to ensure Ukraine's eventual recovery.