Will Ukraine's current financial assistance come?

Ukraine's economic stability is once again threatened as the government faces a huge budget deficit, and its two largest allies and sponsors, the United States and the European Union, have not yet reached an agreement on extending more aid. If support is not promised before early February and funds are not in place in March, Ukraine's progress in dealing with inflation may face risks.

The United States Secretary of State Anthony Blinken and Ukrainian President Vladimir Zerensky also discussed this issue when they met at the World Economic Forum in Davos, Switzerland.

How is the performance of the Ukrainian economy?

The International Monetary Fund stated that the Ukrainian economy has shown "extraordinary resilience". At the beginning of the war in 2022, due to Russia's control of the central area of Ukraine's heavy industry, the country lost one-third of its economic output due to occupation and destruction. Due to the central bank having to print money to fill the expanding budget deficit, the inflation rate has skyrocketed to 26%.

However, the situation rebounded last year, with inflation dropping to 5.7% and economic growth reaching 4.9%, surpassing some major economies such as Germany. Ukraine's banking system remains operational, schools and clinics are open, and pensions are also being disbursed.

Why does Ukraine need financial assistance?

Ukraine spends almost all of its tax revenue on funding wars. This has led to a huge deficit as there are other bills that need to maintain social functioning, such as paying pensions and salaries for teachers, doctors, nurses, and state employees. At the beginning of the war, Ukraine resorted to the central bank printing new banknotes, which was a dangerous stopgap as it would exacerbate inflation and damage the country's currency value. As donor donations become more regular and predictable, Ukraine has been able to stop this practice, and the budget passed by parliament in November last year is no longer reliant on it.

Khelib Vyshlinsky, Executive Director of the Ukrainian Economic Strategy Center, stated that adjusting pensions is an important achievement, equivalent to $100 per month, to offset the impact of inflation. He said that printing money again and the resulting inflation "will lead many people into true poverty.". Vishlinsky pointed out that in order to avoid such a situation from happening again, Ukraine needs to make a decision in early February and provide funding before early March.

What impact does it have on ordinary people?

Compared to other European countries, Ukraine has a much higher level of poverty. Millions of people use 80% of their income to buy food and the rest to buy medicine. They can only afford items such as clothing or shoes by saving on food and medicine expenses.

Economic recovery helps maintain businesses like Dmytro Felixov's Concert.ua website, which is one of the most widely used websites in Ukraine to purchase tickets for plays, concerts, and comedy performances. The war brought about a certain degree of cultural revival and sparked a strong interest in Ukrainian culture. Nowadays, people go to performances not only to relax, but also to relieve stress.

How is the current situation?

Ukraine's budget for this year requires $41 billion in aid funds to eliminate deficits and avoid printing money. Ukraine hopes to receive $8.5 billion from the United States and $18 billion from the European Union, but this is still uncertain. EU leaders were unable to reach an agreement on a package of $52 billion, four-year aid plans in December last year. Hungary has blocked this agreement that requires unanimous agreement from all 27 EU member states. However, the EU is working hard to find ways to raise funds for the remaining 26 countries before the leaders' summit on February 1st.

The situation in Washington is not very certain, as Republicans in Congress have linked the funding provided to Ukraine to border security measures aimed at preventing illegal immigration, but a decision has not yet been made.

In short, Ukraine is facing severe economic, military, and diplomatic challenges, but this is not without solutions. By actively taking measures, including seeking international support, strengthening internal reforms, and seeking peaceful ways to resolve conflicts, Ukraine has the hope of overcoming difficulties and gradually improving the situation. However, this requires the firm determination and wisdom of the Ukrainian government, as well as the support and cooperation of the international community.