WASHINGTON – High-ranking global financial officials gathered in Washington last week have faced a grim picture of the rising economic costs of Russia’s war in Ukraine and the challenges they face in helping pay Ukraine’s short- and long-term bills.
Ukraine needs about $ 5 billion a month in budget support for up to five months and about $ 600 billion in broader recovery efforts, Ukrainian Prime Minister Denis Shmihal said Thursday at a World Bank forum during spring meetings. conducted with the International Monetary Fund.
The two international financial institutions and several separate governments have begun pledging contributions, but in interviews and public comments, officials have acknowledged that much work remains to be done to find the necessary funds.
EBRD’s Odile Reno-Basso said Ukrainian support comparable to the post-World War II Marshall Plan was being considered.
Photo: Holly Adams / Bloomberg News
“Now you will see a great mobilization of the international community,” Odile Reno-Basso, president of the European Bank for Reconstruction and Development, said in an interview Friday. “Everyone is thinking of something like the Marshall Plan for Ukraine, like what happened after World War II,” she said, referring to the US-led multinational reconstruction program launched in 1948, which helped revive the European economy by official assistance and private investment.
The task comes at a difficult time for the world economy. Countries, including the United States, are struggling with their own problems, including rising inflation and slowing growth. Many developing countries, facing higher food and fuel prices and rising debt in the midst of rising interest rates and the ongoing pandemic, say they need help from wealthy governments and international financial institutions such as the IMF and the World Bank.
“The big problem that everyone is struggling with is how you do politics in this world when you have a crisis after a crisis and you still haven’t recovered from the first crisis,” Gita Gopinat, the IMF’s first deputy managing director, said in an interview.
Non-military support for Ukraine and the debt stress of developing countries were leading topics for finance ministers and central bankers attending the meetings.
Ukrainian President Vladimir Zelensky spoke about Russia’s military goals in a video statement at a World Bank roundtable this week.
Photo: Grant Ellis / World Bank Group / Shutterstock
Ukraine’s financial needs, according to officials from Kyiv and multilateral groups, fall into two main categories: short-term and long-term.
The country needs approximately $ 5 billion each month to cover basic government services over the next two to three months, according to IMF Managing Director Kristalina Georgieva, citing budget shortfalls due to declining revenues and increased spending. wounded soldiers and displaced citizens.
Ukrainian President Volodymyr Zelensky told delegates in a video statement at a World Bank roundtable on aid to Ukraine on Thursday that “the Russian military aims to destroy all sites in Ukraine that could serve as an economic base, including railway stations.” food warehouses, oil refineries. ”
Mr Schmihal said about $ 600 billion would be needed to rebuild, rebuild and transform its economy. He said his government had asked a number of countries to grant 10% of their unused special drawing rights – IMF-created cash reserve assets – to help Ukraine after a $ 650 billion global allocation last year to boost global liquidity.
Meanwhile, the World Bank estimates the physical damage to Ukraine’s infrastructure and buildings at $ 60 billion so far.
Ukrainian Prime Minister Denis Shmihal, who visited Washington this week, says Ukraine will need about $ 600 billion.
Photo: Susan Walsh / Pres Pool
World Bank President David Malpas has suggested that reconstruction planning is under way. He said at a roundtable on Thursday that reconstruction should begin with urgent repairs to basic infrastructure such as transport, electricity, heating and digital connectivity within six to eight months after the end of the war. Efforts must be made to strengthen cities, households, agriculture and businesses, he said.
“As the war continues, we will work to build confidence in Ukraine’s financial, monetary and fiscal institutions,” Mr Malpas said.
Officials from multilateral institutions said they hoped to provide support for Ukraine’s short-term budget needs with grants from countries rather than loans that require repayment, given the current dysfunction of its economy. The IMF predicted last week that Ukraine’s economy would shrink by 35% this year. Mr Schmihal said more than 60% of the country’s businesses had shut down completely or partially in March, including the Mariupol Iron and Steel Plant, where Ukrainian soldiers were hiding.
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Compiling a reconstruction package will be more complicated. To persuade nations to provide significant resources, Ukraine must commit to reviewing its economy while presenting plans to strengthen its long-term sustainability, including efforts to protect the environment, said Ms Reno-Basso of the EBRD.
“Before the war, Ukraine had a huge reform agenda in terms of improving governance, fighting corruption and improving its judiciary,” she said. “These challenges remain and they will have to be addressed in the reconstruction if there is to be strong international support.
Attracting private sector investment is also essential, officials said. On Thursday, US Deputy Treasury Secretary Wally Adeimo and Ukrainian Finance Minister Sergei Marchenko invited leaders of leading US financial institutions to dinner to discuss how they could help rebuild Ukraine. Included were Bank of America Corp., Goldman Sachs Group Inc., Citigroup Inc. and Mastercard Inc.
“We believe that the only way to give us the energy we need to get out of the crisis is through huge investments, private investment,” Marchenko said in an interview with The Wall Street Journal.
He said the group had discussed possible reforms in Ukraine to attract more private investment, including fighting corruption, improving the judiciary and strengthening investor protection.
“It is reasonable to take some steps, some necessary steps so that we can attract additional investment in Ukraine,” Mr Marchenko said.
Predicting the extent of the damage and the cost of rebuilding is difficult as the war continues, officials said. It is clear that the sums will be huge.
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After World War II, the UN High Commissioner for Refugees was set up to help three million Europeans displaced from their homes. Today, more than 4.5 million Ukrainians have fled the country, and another eight million have been internally displaced, Ms Georgieva said during a roundtable with Ukrainian officials, calling on the countries to help.
“Those of us who know European history well are terrified of you, but we are also terrified of Europe and the world,” said Ms Georgieva, a development economist born and educated in Bulgaria since the Cold War. “We have these rare moments in life when we discover who we are, and this is one of those moments.”
Write to Yuka Hayashi at yuka.hayashi@wsj.com
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