World Bank says Ukraine has tenfold increase in poverty due to war

WASHINGTON, Oct 15 (Reuters) – Russia’s attacks on civilian infrastructure in Ukrainian cities away from the front lines will complicate the dire economic situation in the country, where poverty has already increased 10-fold this year, a senior World Bank official has said further Saturday.

Arup Banerji, the World Bank’s regional country director for Eastern Europe, said the rapid restoration of power in Ukraine following this week’s large-scale Russian attacks on energy assets reflects the efficiency of the war system, but Russia’s shift in tactics has heightened risks.

“If this continues, the prospects will be much, much more difficult,” he told Reuters in an interview. “If winter really starts to bite…certainly by December or January, and if houses aren’t repaired…there may be another internal migration wave of IDPs.” Ukraine’s President Volodymyr Zelenskyy told international donors this week that Ukraine needed about $55 billion to $38 billion to cover next year’s estimated budget deficit and another $17 billion to start rebuilding critical infrastructure like schools, homes, and power plants.

Ukrainian officials have stressed that they need continuous and predictable financial support to keep the government running while beginning critical repairs and reconstruction.

The response to Zelenskyy’s call – which took place during the annual meetings of the International Monetary Fund and the World Bank – and many other meetings over the past week has been encouraging, Banerji told Reuters in an interview.

“Most countries have indicated that they will provide financial support to Ukraine next year and this is a very positive result,” he said. Twenty-five percent of the population would be living in poverty by the end of the year, up from just over 2 percent before the war, he said, and the figure could rise to as much as 55 percent by the end of next year.

The unanimous election of Ukraine’s Finance Minister Serhiy Marchenko as the next rotating chairman of both institutions’ boards of governors in 2023 is also a testament to the strong continued support for the war-torn country, Banerji said.

IMF Managing Director Kristalina Georgieva said this week Ukraine’s international partners had already pledged $35 billion in grant and loan financing to Ukraine in 2022, but its financing needs will remain “very large” in 2023.

IMF staff will meet with Ukrainian authorities in Vienna next week to discuss Ukraine’s budget plans and a new IMF surveillance tool that should pave the way for a full-fledged IMF program when conditions permit,” Georgieva said.

Banerji said Ukraine has already reduced its budget plans to a bare minimum, with funds going to fund salaries and pensions, military spending and servicing the domestic debt.

The budget included only $700 million for capital spending, a tiny fraction of the $349 billion in reconstruction costs recently estimated by the World Bank.

If Ukraine doesn’t get enough support, it will either have to print more money while inflation is already in the low 20 percent range, or cut social spending further, he said.

Reporting by Andrea Shaal; Editing by David Gregorio

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