Opinion | How Europe’s dithering leaves Ukraine fighting Russia and high inflation

While Ukraine’s military is succeeding on the battlefield, its economy is struggling as the financial support flowing to Kyiv is well short of what was promised

Europe has been the biggest laggard in making good on its pledges, forcing Ukraine’s government to print money to stay afloat

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Ukrainian service members shop for groceries in Kramatorsk, Ukraine, on September 1. Ukraine’s military might be succeeding on the ground, but the country’s economy is struggling with high inflation and donors dallying in providing aid. Photo: Reuters

Published: 10:00pm, 12 Oct 2022Updated: 10:49pm, 12 Oct 2022

Thanks to Western arms deliveries, Ukrainian forces are celebrating one battlefield victory after another. But Ukraine faces another serious threat: high inflation. It therefore needs not only arms but also more financial support.

Russia’s war has inflicted enormous damage, with the Ukrainian government and the Kyiv School of Economics putting the tally of recorded material losses at US$120 billion. The country’s GDP is set to fall by 35 to 40 per cent this year, and government revenues by even more.

Earlier this year, the International Monetary Fund determined the Ukrainian government would need US$5 billion per month in external support to finance government salaries, pensions, healthcare, schools and some social benefits. These are basic expenditures to keep the government functioning.

Unfortunately, only half of the necessary funds have been made available. According to Ukrainian brokerage Dragon Capital, US$35 billion was pledged to Ukraine as of September 30 but only US$20 billion was disbursed.

The dominant donor is the United States, which has already provided US$8.5 billion with commitments for another US$1.5 billion per month for the rest of 2022.

The biggest disappointment is Europe, which has contributed only about half what the US has. Though the European Union committed €9 billion (US$8.7 billion) in macro-financial assistance in May, only €1 billion of that has been disbursed – a pace that is simply unacceptable for this moment of crisis. Now, five months after it made its commitment, one hopes that the EU can free up at least €5 billion more.

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