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Ukraine’s economy has proved remarkably resilient but needs help

Western countries have the resources but now must display the will to ensure Russia does not prevail

At the annual meeting of the World Economic Forum in Davos two weeks ago, President Volodymyr Zelenskiy of Ukraine asserted that “If anybody thinks this is only about us, this is only about Ukraine, they are fundamentally mistaken”. At a dinner I attended, Dmytro Kuleba, Ukraine’s foreign minister, asked: “Does the West still believe in itself?”

Both the assertion and the question were to the point. What is happening in and to Ukraine challenges western values and western interests.

It challenges our values, because Ukraine has proved with its resources, its blood and its will the desire to be a free, independent and democratic country. It challenges our interests because it could, if independent, be a bulwark against Russia. Since Putin’s Russia is the most dangerous revanchist power on the continent since Hitler’s Germany, Europe seems sure to need it.

Moreover, given its post-Soviet history of corruption and division and the relative size of the two countries, what Ukraine has achieved is astonishing. A new nation is being born out of the fire.


Many, notably Vladimir Putin and his cronies, believed Ukraine would collapse in days. In fact, Russia has made little military progress since March 2022.

Again, despite the loss of territory, the loss of manpower, through emigration, conscription, injury and death, and the material costs of fighting this war, the economy, too, is doing remarkably well. That also can continue, provided the assistance Ukraine desperately needs is forthcoming.

At the end of March 2023, the International Monetary Fund approved a $15.6 billion (€14.4 billion) extended fund facility (EFF) programme as part of a $115 billion support package. This included structural reforms aimed at preparing the country for EU membership. On December 11th, 2023, the IMF’s board stated: “The authorities have made strong progress towards their EFF commitments under challenging conditions, meeting all applicable quantitative performance criteria through end-June and indicative targets through end-September and the majority of structural benchmarks through end-October.”

No less remarkable was the economic performance. When the EFF was agreed last March, the fund forecast GDP growth at between minus 3 and plus 1 per cent in 2023. Staff now expect it to be close to 5 per cent. There was huge damage in 2022, with a 29 per cent fall in GDP.

But in 2023, despite everything, the economy stabilised. Similarly, despite everything, so did the battlefield. Ukraine did not achieve the progress it hoped for. But Russia made no advances either and continues to suffer heavy losses of men and armaments.

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Yet for all its achievements in war, Ukraine can only endure if it receives the wholehearted and timely support of western powers. The Centre for Economic Strategy in Ukraine notes that “About half of the state budget is spent on defence”. If the West wishes to prevent Ukraine’s collapse or the risks of indefinite war, it must provide the resources it needs.

According to Ukraine’s finance ministry, last year’s external financing was $42.5 billion (€39.2 billion). This year’s need is down to $37.3 billion (€34.4 billion). The danger is that, while last year the flow of financing was prompt and adequate, this year that looks unlikely to be true. The EU needs to agree to its €50 billon programme this week. If it fails to do so, the Ukrainian government might be forced to print money, engage in risky short-term borrowing or cut vital spending.

While there seems little likelihood that the EU will fail to deliver in the end, despite Viktor Orban’s vile opposition, the same is not true for the US. As Anne Applebaum argues in The Atlantic, there is a risk that Congress will abandon Ukraine. Some Republicans, it seems, really do prefer Putin’s Russia to Zelenskiy’s Ukraine.

Others wish to fall in line with Donald Trump’s selfish wish to prevent a deal that might ameliorate the crisis on the southern border. That would be particularly serious for the supply of arms the US alone can give.

In brief, we are watching what has come to be called “Ukraine fatigue”. Yet the arguments for stopping Russia from destroying Ukraine have in no way diminished. On the contrary, the behaviour and rhetoric of the Russian government have, if anything, got worse.

The extension of totalitarian control over the occupied regions of Ukraine is horrifying. This is an attempt to eliminate the aspirations and identity of a people. Former Russian president Dmitry Medvedev threatens eternal war until Russia gets Ukraine. And what might Russia want next? The Baltics? Eastern Europe? And what might China want if it sees such a collapse in western will?

Yet aiding Ukraine is also cheap. No western soldiers are at risk. The sums to be agreed this year amount to less than 0.25 per cent of the combined GDP of the EU, UK and US. The argument that this is unaffordable is ridiculous. As I noted on February 28th, 2023, these sums are dwarfed by those spent on energy subsidies in Europe and on earlier US wars.

Personally, I find entirely persuasive the arguments from Robert Zoellick (and others) that the frozen Russian reserves can and must be used for the benefit of the country Putin is trying to destroy. This seems entirely just. But even without that, providing Ukraine with the resources and armaments it needs is a remarkable bargain, set against the moral and material costs of a feeble and reckless abandonment.

In the end, of course, there must be a peace. But it must be peace with honour. That will only come if Russia realises that this time might will not be allowed to be right. The West has the resources to ensure this. The question, as the minister asked, is whether it believes enough in itself to show the will. If not, the price could prove to be beyond reckoning. – Copyright The Financial Times Limited 2024

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