The state of Ukraine’s economy
The World Bank, the Government of Ukraine, the European Commission, and the United Nations, have undertaken the Rapid Damage and Needs Assessment (RDNA2) as an ongoing effort to take stock of Ukraine’s damage and losses from Russia’s invasion. Their findings as of February 24, 2023:
- Ukraine’s gross domestic product (GDP) shrank by 29.2 percent in 2022, and poverty increased from 5.5 percent to 24.1 percent in 2022 (based on the poverty line of US$6.85 per person per day).
- Reconstruction and recovery needs are estimated at about US$411 billion. Integrated into these needs are critical steps toward becoming a modern, low-carbon, disaster- and climate-resilient country that has aligned with European Union policies and standards.
- Implementation priorities for 2023 are at around US$14 billion. These are focused on the most urgent needs, including restoration of energy, housing, critical and social infrastructure, basic services for the most vulnerable, explosive hazard management, and private sector development.
Ukraine- Rapid Damage and Needs Assessment
By: World Bank
Who should pay for Ukraine’s reconstruction
Larry Summers and Barry Eichengreen argue that G-7 countries are already heavily indebted and faced with the need to devote additional resources to national defense, to the green transition, and to aging populations. Therefore a case can be made for Russia’s frozen assets to help finance Ukraine’s reconstruction. They fend off some of the arguments against such action:
- Using the $230 billion of frozen Russian central bank assets will not prompt central banks to stop holding reserves, and the international monetary system will not become illiquid and unstable. Only central banks whose governments commit the most egregious violations of international norms will be subjected to such measures.
- The role of the dollar as a reserve currency will not be diminished if the US and its allies garnish Russia’s reserves mainly because there is no other alternative for the time being.
- There will not be a repeat of what happened with German reparations after World War I when the German government unable to meet its domestic obligations while paying reparations, forced the central bank to provide monetary finance which led to hyperinflation. The difference with the situation today is that “a reparations levy on Russia would be a one-time event, not an ongoing, festering sore.”
Russia and the Long Shadow of Versailles
By: Barry Eichengreen – University of California, Berkeley
The moral and legal case for sending Russia’s frozen $300 billion to Ukraine
By: Larry Summers – Harvard University
