The danger for Ukraine if Western aid does not come

Ukraine’s hard-won economic stability is under threat again as President Volodymyr Zelensky’s government faces a massive budget hole and its two biggest allies and donors – the US and the EU – have so far been unable to agree on whether they will send more aid this year and beyond.

If no support is committed by early February, and the money does not arrive by early March, not only will it set back troops on the front lines, but the progress Ukraine has made in combating inflation will also be at risk, making wartime life even more difficult for ordinary people.

Economic health

Nearly two years since Russian President Vladimir Putin launched a “special military operation” in his eastern neighbor, the International Monetary Fund (IMF) said Ukraine’s economy has shown “remarkable resilience.”

The first months of the war, which began in February 2022, saw the war-torn Eastern European country lose a third of its economic output and the Russian military take control of Ukraine's heavy industrial heartland.

Inflation also soared to 26% as the Central Bank of Ukraine (NBU) had to print more money to cover the growing budget gap.

A damaged apartment building in Kharkiv after a missile strike, January 17, 2024. Photo: The Guardian

However, things recovered last year, with inflation falling to 5.7% and the economy growing by 4.9%, which is higher than some major economies such as Germany. Ukraine's banking system continues to function, schools and clinics remain open, and pensions are still being paid.

It's a lifeline for people like Nadiia Astreiko and her 93-year-old mother, who live on two pension payments totaling $170 a month.

“The war has changed everyone’s life,” said Astreiko, 63. “Money is also difficult because now I have to count every penny… It’s very difficult for us.”

Important achievements

Ukraine spends nearly all of its tax revenue on funding its war with Russia. That leaves a huge deficit because there are other bills to keep society running, like pensions for the elderly and salaries for teachers, doctors, nurses and civil servants.

At the start of the war, Ukraine resorted to asking the NBU to print more money, a dangerous temporary measure because it could cause inflation and destroy the value of the hryvnia – the country's currency.

As donor contributions became more regular and predictable, Ukraine was able to suspend this measure, and the 2024 budget passed by Parliament last November no longer depends on it.

People take shelter in a metro station during an air raid alert in Kiev, Ukraine, January 17, 2024. Photo: The Guardian

One important achievement is adjusting pensions for the elderly, which could be the equivalent of $100 a month, to account for inflation, said Hlib Vyshlinsky, executive director of the Center for Economic Strategy, a Kiev-based nongovernmental research organization focused on promoting sustainable and inclusive economic growth.

If more money had to be printed, the resulting inflation “would push many people into real poverty,” Mr. Vyshlinsky said, adding that to avoid that again, Ukraine needed to know whether there would be any support commitments in early February and whether the money would arrive in early March.

Hard to make a living

Ukraine is significantly poorer than the rest of Europe. Millions of people like Astreiko and her mother spend 80% of their income on food, and the rest goes to buy medicine for Astreiko's mother.

The only way to afford things like clothes and shoes is to save on food and medicine. The two women eat fish twice a week and meat once or twice a week. As for vegetables, mushrooms and fruit, Mrs. Astreiko grows them herself or picks them from the forest and cans or freezes them for the winter.

She insists there are bigger worries than the economy: military casualties and frequent rocket attacks on the capital Kiev, where her grandchildren live. “We will survive. If only the war would end,” Astreiko said.

Ukrainian firefighters try to extinguish a fire following a missile attack on Kiev, January 2, 2024. Photo: Getty Images

The economic recovery has helped sustain businesses like Dmytro Felixov’s concert.ua website, one of the most widely used in Ukraine for buying tickets to plays, concerts and comedy shows. Felixov has weathered several crises, including Russia’s annexation of Crimea in 2014.

He said the war had led to a “certain cultural renaissance” and sparked a growing interest in Ukrainian culture. He envisioned a return to pre-conflict profits by around 2025, saying: “Our business will survive.”

Even the frequent missile strikes have not had a significant impact on Mr. Felixov’s business. During Russia’s record missile and drone strikes on December 29, ticket sales dropped 20 percent, but were back to normal the next day, he said.

If people used to go to concerts to relax, now they go to concerts to help them relieve stress. “They go to concerts to heal,” says Mr. Felixov.

Waiting for aid

Ukraine’s budget this year calls for $41 billion in aid to reduce its deficit and avoid printing more money. Kiev is counting on $8.5 billion from the United States and $18 billion from the European Union, but the fate of those funds remains uncertain due to internal political conflicts at both top donors.

EU leaders failed to agree on a $52 billion aid package for Ukraine over four years (2024-2027) in December. Hungary blocked the deal, which would have required the unanimous approval of all 27 EU member states. However, the bloc is working to find a way for the remaining 26 countries to come up with the money before a leaders’ summit on February 1.

In more bad news for Kiev, Hungarian Prime Minister Viktor Orban has found allies who share a common voice on his plan to support Ukraine. Slovakian Prime Minister Robert Fico said on January 16 that Bratislava and Budapest agreed on the need to revise the EU plan to provide financial support to Ukraine.

After bilateral talks in Budapest, Mr. Fico said he agreed with Mr. Orban's view that the EU should not provide $54 billion in aid to Kiev from the bloc's common budget, and repeated Mr. Orban's assertion that the war in Ukraine cannot be resolved through military means.

Ukrainian President Volodymyr Zelensky holds talks with US Secretary of State Antony Blinken on the sidelines of the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, January 16, 2024. Photo: Kyiv Post

​On the other side of the Atlantic, the situation is also uncertain as Republicans in the US Congress have tied aid to Ukraine to border security measures to prevent illegal immigration. No decision has been made yet.

The White House last October asked Congress for $11.8 billion in funding over 12 months. The money would “ensure that Putin does not succeed in collapsing the Ukrainian economy,” Shalanda D. Young, director of the White House Office of Management and Budget, wrote in a letter to Congress dated Oct. 20, 2023.

President Zelensky said on January 16 in Davos, Switzerland, that he believed there were “only a few weeks left” until the EU and the US provided more aid to his country.

But in Washington, DC, there was little sign of progress in breaking the months-long impasse over border policies that has delayed US funding for Ukraine. US President Joe Biden held his first meeting in months on January 17 with House Speaker Mike Johnson and other top lawmakers.

Mr Biden has repeatedly said he would compromise on border policy, but has not specified any concessions. “We have to emphasize that the border is a priority,” Mr Johnson told reporters after the meeting.

There has been talk of seizing some $300 billion in Russian assets abroad that have been frozen by pro-Ukrainian governments. That money could theoretically ease the taxpayer money stalemate in Washington and Brussels – but it faces concerns about the legal precedent and economic impact of such a drastic step .

Minh Duc (According to AP, Fox News, National News)

Source: https://www.nguoiduatin.vn/moi-nguy-doi-voi-ukraine-neu-vien-tro-phuong-tay-khong-den-a646081.html