TACOMA, Washington — With a population of around 44 million people, Ukraine is one of the largest countries in Eastern Europe. Since the fall of the Soviet Union, it has also been one of the poorest countries in the region. However, the country made recent strides in combating poverty. From 2012 to 2015, the number of people below the 2011 Purchasing Power Parity (PPP) line of $5.50 a day increased from 4% to 7.8%. But, from 2016 to 2018, the poverty rate had reduced from 6.4% to 4%. Despite ongoing violence in Crimea and Donbas, the economy has still managed to grow in recent years, with a GDP growth rate of about 3% in both 2018 and 2019. The COVID-19 pandemic has resulted in harsh consequences for the country but the World Bank is committed to fighting poverty in Ukraine.
COVID-19’s Economic Impact
Ukraine implemented strict lockdown measures that involved the closure of schools, restaurants and other major businesses. This contributed to higher unemployment, which was at 9.6% at the end of June 2020. GDP is expected to decline 5% by the end of 2020 and the poverty rate is projected to reach 23% by the end of the year. The country’s social safety net has been stretched increasingly thin in attempts to support rising amounts of unemployed and low-income people.
The World Bank’s Relief Efforts
The World Bank has long supported Ukraine, with more than $14 billion spent on over 80 projects since it joined the organization in 1992 after the fall of the Soviet Union. It has already lent support to the country in April 2020, with a $135 million loan to support the Ukrainian healthcare system and emergency COVID-19 responses. On December 11, 2020, the World Bank approved another loan to Ukraine, to the amount of $300 million. Unlike the earlier loan, this one is focused exclusively on fighting the rising poverty in Ukraine. This loan, combined with other earlier financing efforts, makes up a total of $750 million spent by the bank on poverty and healthcare aid to the country since 2014.
The Impact of Aid to Ukraine
The loan is expected to have an extremely positive impact on poverty in Ukraine. The World Bank estimates that 60% of Ukrainians in danger of becoming impoverished do not currently benefit from existing social welfare programs. To this end, the money will strengthen Ukraine’s existing Guaranteed Minimum Income Program and save an estimated one million Ukrainians from falling into poverty. The program involves cash transfers and direct aid to individuals who have lost their jobs and/or homes in recent months due to the COVID-19 pandemic. Existing infrastructure could not handle the increased strain of the past months but this loan will help in struggling areas and will also help to finance new delivery systems and digital payments.
Ukraine faces a lot of uncertainty in its future as the ongoing warfare, rising poverty and the effects of COVID-19 all continue to have an impact. The World Bank’s efforts for fighting poverty in Ukraine has allowed the country an opportunity to recover from the effects of the COVID-19 pandemic.
– Bradley Cisternino