Ukraine’s hard-won economic stability is under threat again as the government faces a large budget hole and its two biggest allies and sponsors — the United States and the European Union — have so far failed to decide on extending more aid. Without pledges of support by the start of February — when EU leaders meet to decide on aid — and if no money arrives by March, that could risk the progress Ukraine has made against inflation. It has helped ordinary people keep paying rent, put food on the table and resist Russia’s efforts to break their society’s spirit. The issue was on the minds of U.S. Secretary of State Anthony Blinken and Ukrainian President Volodymyr Zelenskyy when they met at the World Economic Forum in Davos, Switzerland on Tuesday. “We’re determined to sustain our support” for Ukraine, Blinken said, “we’re working very closely with Congress in order to do that. I know our European colleagues are doing the same thing.” Here are key things to know about Ukraine’s economy and why funding from allies is crucial: HOW IS UKRAINE’S ECONOMY DOING? The International Monetary Fund has said Ukraine’s economy has showed ” remarkable resilience.” The first months of the war in 2022 saw the country lose a third of its economic output to occupation and destruction because Russia controls the heartland of Ukraine’s heavy industry. Inflation also soared to a whopping 26% because the central bank had to print money to cover yawning budget gaps. However, things rebounded last year, with inflation falling to 5.7% and the economy growing 4.9% — more than some major economies like Germany. Ukraine’s banking system has kept functioning, schools and health clinics are open, and pensions are being paid. That’s a lifeline for people like Nadiia Astreiko and her 93-year-old mother, who live on their combined pensions of $170 a month. “The war has changed everyone’s life,” said Astreiko, 63. “In terms of money, it’s also hard because now I have to count every penny. … It’s very hard for us.” WHY DOES UKRAINE NEED FINANCIAL HELP? Ukraine spends almost all the money it brings in through taxes to fund the war. That leaves a huge deficit because there are other bills to keep society functioning, like old-age pensions and salaries for teachers, doctors, nurses and state employees. At the beginning of the war, Ukraine resorted to having the central bank print new money, a dangerous stopgap because it can fuel inflation and destroy the value of the country’s hryvnia currency. As donor contributions became more regular and predictable, Ukraine was able to halt the practice, and the budget passed by parliament in November does not rely on it. One key accomplishment was adjusting old-age pensions, which can be about the equivalent of $100 per month, to compensate for inflation, said Hlib Vyshlinsky, executive director of the Center for Economic Strategy, a policy institution in Kyiv. Printing money again and the resulting inflation “would bring a lot of people into real poverty,” he said. To avoid that again, Ukraine needs “a decision by the start of February, and the money by the beginning of March,” Vyshlinsky said. WHAT’S THE IMPACT ON ORDINARY PEOPLE? Ukraine is significantly poorer than the rest of Europe. Millions of people are like Astreiko and her mother, with […]