As of the third month of the war, thanks to the support of foreign partners providing billions of dollars to the budget, Ukraine is quickly recovering from the first blows, restoring economic ties and repelling the aggressor.
Foreign aid can be divided into three categories: military aid, humanitarian aid and financial aid.
Military aid is a direct supply of weapons and equipment. Humanitarian aid includes food and medical products for residents of the country. Financial aid allows Ukraine to cover the gap between budget revenues and expenditures and arrange reliable front line defense.
Financial aid is funding that comes to the accounts of the Ukrainian government. This type of aid is the most flexible allowing the country to decide for itself how to use them.
There are three forms of financial aid: government loans, guarantees and grants. Government loan financing (in the form of loans and guarantees), on the one hand, is a positive sign as it demonstrates the trust to Ukraine from the foreign partners and, on the other hand, is an additional burden on the state budget.
About 36% of all aid provided by Ukraine’s partners are grants. This funding comes partly from the World Bank, the European Investment Bank, the International Monetary Fund, the United States, the United Kingdom and Italy. Other countries, such as Canada, France and Germany, provide significant financial aid in the form of loans. Poland deserves a special mention, as its central bank has opened a $ 1 billion swap line that increased the resilience of the NBU.
On April 23, the EU and the G7 announced military, humanitarian and financial aid of €24 billion. To this amount $40 billion should be added, which was announced by the United States on May 9. Thus, the total amount of support is almost UAH 2 trillion.
The remaining funds are in the process of receipt. The amount of financial assistance promised on May 9 by Ukraine’s largest donors, such as the World Bank, the United States, Canada and the EU exceeded $11 billion. According to Ukrainian government, to meet the funding needs Ukraine has to receive at least $5 billion a month for surviving and hundreds of billions for recovering. But so far there is no stable source of such funds. Also, at the end of April, the World Bank announced its assessment of Ukraine’s physical damage from the war – about $60 billion.
With financial assistance from the partners, the government is able to meet its social obligations to the military, doctors, teachers and retirees, as well as make other expenses. The scale of support is impressive, inspiring and allows Ukraine to successfully withstand the aggressor. In times of war, donor funds become a “bridge” between pre-war times and the new reality. Also, it is time for Ukraine to consider financial assistance not only in terms of urgent needs, but also through the prism of long-term fiscal sustainability.
Follow us on Facebook, Twitter, LinkedIn, or YouTube .
