Page 14 - bne Magazine August 2022

14 I Companies & Markets bne August 2022
The West approves badly needed budgetary support for Ukraine, but delays dog distribution of funds
Ben Aris in Berlin
Both the US and European Commission have approved badly needed financial support packages for Ukraine to shore up the latter's public finances but the distribution of the money has been dogged by bureaucratic delays.
The US and EC have signed off on similar mirrored financial packages to support budget spending of $9bn and €8bn each to help fund Ukrainian budget spending that is currently deeply in deficit. However, despite being approved, neither Washington nor Brussels has released the cash due to accountability concerns.
The Kyiv School of Economics has upped its estimate of the cost of the physical damage done to Ukraine’s economy from $104bn to $165.1bn needed for post-war reconstruction. Damaged housing makes up for nearly 40% of losses, which amounts to $36.6bn, according to KSE’s latest update of its study “Russia Will Pay.” Estimates for the total cost of the war to Ukraine vary from $600bn to over $1 trillion.
The EC has signed off on a second tranche of macro-financial assistance that follows a decision made two months ago on a first €1bn tranche that was finally signed off on this week. The macro-financial assistance programme has been running for years and was in place before the war started, but has been massively ramped up in scale due to Russia’s destruction.
A spokeswoman for the EC said that the money would be released “soon”, reports Evropeyska Pravda, but was unable to give a firm date, as the Council of Europe and the European Parliament both need to approve the emission.
"It is important to emphasise that we intend to come out soon with a proposal for the provision of the remaining macro- financial assistance. And the rest will include the full amount of assistance that was agreed by the European Council for
the reconstruction of Ukraine. Technical work on the second tranche is underway to provide it as soon as possible," she said.
While the spokeswoman reassured that the EC would continue to work throughout the summer, she also said that the next session of the European Parliament is not slated to occur before September.
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Both the EU and the US have promised to send financial aid for budget spending to the tune of €8bn and $9bn but the money has become tangled in bureaucratic tape / wiki
Germany has also been blocking €9bn in EU aid for Ukraine for more than a month, over concerns about accountability, as it is afraid the money will be stolen, according to reports. Previous calls for a Marshall Plan for Ukraine prior to the war were stillborn as European lawmakers had no confidence that any general investment money sent to Kyiv would not be diverted into corrupt schemes by Ukrainian officials and oligarchs.
The West has constantly called on Kyiv to tackle its endemic corruption, with little result.
The stalled loan and deadlocked talks has been confirmed by various protagonists both in Kyiv and in Brussels, reports the local press, that speculate it could have been the reason for Ukrainian President Volodymyr Zelenskiy's decision to remove
“The Kyiv School of Economics has upped its estimate of the cost of the physical damage done to Ukraine’s economy from $104bn to $165.1bn needed for post-war reconstruction”
the controversial Ukrainian ambassador to Germany, Andriy Melnyk, last week, who has been an extremely outspoken critic of Berlin’s reluctant support of Kyiv.
Similar problems have stymied the release of the US money. A member of the US Congress, Victoria Spartz, reported on problems that the US has had in funding Ukraine and said some of them relate to the supervision of allocated funds on July 12. She added that “Republicans and Democrats are very worried about how we will supervise a large amount of money we have spent in Ukraine. That is, the problem
I am talking about exists at the bipartisan level! And you need to solve it! There will be big problems in Ukraine if the Ukrainian government cannot come to an agreement with us now. Ukrainians don't understand that Congress oversees where and on what American money is spent.”