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How Is Ukraine’s Economy Performing in the Midst of the Russian Invasion?

Economía de guerra en Ucrania

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Life in Ukraine has been inevitably disrupted in the wake of Russia’s invasion. Now civilians have to adapt, migrate, or stockpile supplies to adapt to the new war economy. Surprisingly, the Ukrainian economy is robust and functioning despite the magnitude of the conflict, or at least, so says Ukraine’s former Minister of Economy, Tymofiy Mylovanov to El American.

“Gas stations today outside of military active zones are operating. Food is there, also, some supplies are limited,” Milovanov comments.

“In Kyiv today, I had a friend who called Uklon —a competitor of Uber in Ukraine—, you know. So that tells you a bunch of things telecom is working, payment systems are working, the bridges are intact. There are traffic jams and checkpoints, of course, she needed to get from the left bank of Kyiv to the right bank. It cost her $40. Usually, it would cost her maybe 10,” explains the former minister.

“So that means that, surprisingly, after a week of bombing key Kyiv city economies somehow function,” Mylovanov adds.

According to Mylovanov in the city of Kyiv there is still no shortage of food or other supplies: “I talked earlier to some other people in Kyiv, and also to some businessmen, they actually have a problem storing food, rather than not having food and water.”

Despite the bombings, economic life in Kyiv continues. (EFE)

As in any war economy, the government must intervene in the provision of certain services such as “critical lines have been taken over under control,” he comments, to ensure supplies reach the cities.

Cryptocurrencies have played a historic role during the Ukrainian war, so much so that it has caught the attention of Ukrainian authorities. “I talked to the governor of the central bank, and we debated with him today whether we should legalize crypto, as the payment system but cryptocurrency is used now quite effectively, in many business transactions,” the economist explains.

The Ukrainian government has also led a campaign to raise funds to care for the victims of the conflict, “so please donate,” Mylovanov insists.

“I spent some time today with the banks trying to get payments through. The government is operational because in order to get payments through, there are capital controls, of course, now to an extent only military critical input is allowed,” explains Mylovanov

“It’s intense, it’s stressful, but it’s definitely not 2014-2015, when we had the macroeconomic crisis, and I talked to local administrations and some mayors, and they are setting up supplies and resorts and storages. It’s going to be a war economy, but I think it’s not going to be a fundamental crisis, everything is functional here,” he concludes.

International aid and donations have become critical to the war economy in Ukraine. (EFE)

Foreign aid has played a key role in the functioning of Ukraine’s war economy. As Ukrainian economics professor Yuiry Gorodnich explains, “Ukraine receives a lot of aid, and more aid is on its way. We’ve talked a lot about punishing Russia for the aggression, but we should also understand that we should help Ukraine in a variety of ways in terms of financial and economic help.”

There is some work on the way to ensure that both Ukrainians and the government receive funds to pay for critical supplies to ensure that people are not starving and left out in the cold. It’s an unfortunate reality. The last time I saw something like this was in World War II movies, when people were very, very desperate. But, surprisingly, the Ukrainian economy is doing solidly.

One externality of the war that the rest of Europe will have to deal with is the massive wave of refugees left by the conflict: “We are talking about almost a million refugees right now,” explains PhD program director at SciencePo, Sergei Guriev.

The conflict has created a refugee crisis that Eastern European countries will have to take in. (EFE)

“Compared to 2015, when we have a Syrian refugee crisis, we also talked about 1 million Syrian refugees, Iraqi refugees in Europe and there was a crisis. Today, Europe is much better prepared and is handling it much better, even though it’s, of course, a huge human tragedy,” Professor Guriev laments.

Unfortunately for the Ukrainians, their aggressor will not answer for the damage caused inside their homeland, but they will get help from their allies, or so Guriev believes: “I’m pretty sure that reparations will not happen unless Putin is gone. And I’m pretty sure that Europeans and Americans will put together a massive Marshall Plan for Ukraine once the war is over.”

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