Victor Pinchuk Foundation and YES held discussion “Life or Death Statistics: Are Ukraine's Finances, Economy, Infrastructure and Social System Sustainable?” during the YES meeting in Kyiv “Two Years — Stay in the Fight”

25 February 2024

On 24 February 2024, the Victor Pinchuk Foundation and Yalta European Strategy (YES) held a discussion “Life or Death Statistics: Are Ukraine's Finances, Economy, Infrastructure and Social System Sustainable?” on the occasion of the YES meeting in Kyiv “Two Years —Stay in the Fight” dedicated to the second anniversary of Ukraine's resistance to the full-scale invasion of Russia. Speakers discussed Ukraine’s fight for life, freedom and rules-based order as well as how to aid Ukrainians victory in this fight for us all. 

Members of this panel included: Taras Kachka, Deputy Minister of Economy of Ukraine, Trade Representative of Ukraine; Roksolana Pidlasa, Chair of the Budget Committee, Member of Verkhovna Rada of Ukraine; Rostyslav Shurma, Deputy Head, Office of the President of Ukraine; Jean-Erik S. de Zagon, Head of Regional Hub for Eastern Europe, European Investment Bank. The panel was moderated by Carl Bildt, Minister for Foreign Affairs of Sweden (2006-2014); Prime Minister of Sweden (1991–1994), and Member, YES Board.

Carl Bildt opened the discussion by saying, “War is a horribly expensive business—it has devastating effects on the economy, apart from the direct effects of financing the war itself. If the economy collapses then society collapses and then the frontline collapses. The battle to keep the economy moving is a way of financing and winning the war. So far the economic management (of the Ukrainian economy) has been amazingly good, with growth of 4-5% last year—a very impressive figure in the circumstances”. He invited each of the panellists to give their view on the current state, but more importantly, what needs to be done to improve the economic situation further.

Roksolana Pidlasa, Member of Verkhovna Rada of Ukraine, and Chair of the Budget Committee in Parliament, told the audience, “To understand how Ukraine’s government functions during the war you have to know that as a result of the full-scale invasion government expenditure has effectively doubled, increasing 2.5 times pre-war expenditure, with a projected increase to more than 52bn USD in 2024. Ukraine has a budget deficit of 41bn USD, which is unprecedented. The risk of not covering the financing is very clear, and constitutes a decrease in both military and non-military expenditures. Thankfully, there is light at the end of the tunnel, at least for 2024, the IMF and the Ukrainian authorities have reached a staff-level agreement on the third review of the programme and Ukraine expects to receive a disbursement of $800bn by the end of March, we are almost certain the the EU will finally approve the Ukrainian Facility (50bn Euro) at the end of February, and we are hopeful that the US congress will vote for Ukraine’s future in the not too distant future. Finally, Japan and Canada have been a tremendous help in covering the remaining gap in government finances.”

Rostyslav Shurma, Deputy Head, Office of the President of Ukraine, said, “To keep the country running and the macro-economic situation in balance – the basics are size and transparency of the economy, which we know shrunk roughly 30% over the first year of the full-scale war. You can see that this was driven by three things: cuts to logistics, energy shortage and the physical destruction of assets. Since then we have undertaken a massive and complex operation to recover the Black Sea route, and we see that January and February numbers are almost at pre-war levels, which has removed one bottleneck. Regarding the energy shortage, we were well prepared for this winter, recovering capacity, recovering the grid, and building protections. We have had no major energy cuts this winter—removing a second bottleneck. These things allow us to increase the capacity utilisation of industrial assets—which contributes 3, 5, maximum 10% of economic growth. However, this is not enough to sustain us as a country or to finance the war.

There is almost zero appetite from the international private sector to invest in Ukraine. The key is to find and activate support tools, insurance tools, to enable the private sector to make investment decisions. We believe the proper tool to do this is to work with credit export agencies, to make those in the G7, the EU, the developed world, start work to supply equipment and boost activity here. We have our first success, a pilot, with Denmark. If this can be replicated across the whole community it will be a big boost for private investments in Ukraine. This is not about begging for aid, it is a win-win, with Ukraine providing an extra market for suppliers of equipment.”

Jean-Erik S. de Zagon, Head of Regional Hub for Eastern Europe, European Investment Bank, told that he is rather optimistic about the economy of Ukraine, saying, “The figures today are not that bad, the strength of the banking sector in Ukraine is remarkable, which is good for the economy, and the policy and management of central bank is very good – also focusing on supporting the economy. In addition, Ukraine is very responsive, the reforms are very good, the third review of the IMF was positive, the accession process for the EU is also showing good reviews of progress made in Ukraine. Another reform indicator is the law of corporate governance passed three day ago was very good – it shows that Ukraine is really doing the necessary reforms. Aside from these indicators, the flexibility of the Ukrainian economy stands out. We should be optimistic from an economic point of view—the financial community is committed to supporting Ukraine—both my former President and the current one have publicly stated that we will support Ukraine for as long as it takes.”

Taras Kachka, Deputy Minister of Economy of Ukraine, Trade Representative of Ukraine, began his remarks by illustrating how the energy and dynamism of the Ukrainian people in solving problems caused by the war and keeping the economy and all systems including banking, logistics and production running during the full-scale invasion, will help the country restore and rebuild. He went on to say in answer to a question on the Polish border, “The most interesting point for the Ukrainian economy is that we see that this problem will be dominant for this year, there is no immediate solution. Meanwhile, we have definitely discovered that the capability of the Ukrainian/Polish border is less than the desire to use it, for example, we need railway interoperability. Interest from the private economy is to develop this border and to further integrate our economy and agriculture with that of the EU.

On the general question of de-risking investments in Ukraine, we have good progress. At least 14 European credit agencies are insuring export not only of goods but also investments as such. Our biggest problem is that Ukraine is in the lowest basket, that’s why the volume of investments that can be insured is very small. It is a dynamic process, but it is getting better and better with the credit agencies.”

Photos are available here

Video is available at the Victor Pinchuk Foundation YouTube channel

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Sauli Niinistö
Sauli Niinistö
President of the Republic of Finland, 16th YES Annual Meeting, 2019
«When a growing number of truly global challenges would urgently call for common responses, the rule-based international order is crumbling in front of our eyes.»