Ukrainian President Volodymyr Zelensky expressed deep concern for the Ukrainian economy to decline amid speculation that a Russian invasion was to take place last February 16. Secretary of State Antony Blinken has announced that the United States is prepared to give Ukraine a sovereign loan guarantee of up to $1 billion to help strengthen its economy through this destabilizing situation at their borders.
“We are working closely with allies to mobilize robust international support for Ukraine, including a U.S.-backed sovereign loan guarantee of up to $1 billion to support key reforms. This support will bolster Ukraine’s ability to deliver prosperity for its people,” said Blinken in a tweet.
We are working closely with allies to mobilize robust international support for Ukraine, including a U.S.-backed sovereign loan guarantee of up to $1 billion to support key reforms. This support will bolster Ukraine’s ability to deliver prosperity for its people.
— Secretary Antony Blinken (@SecBlinken) February 15, 2022
This is not the first the United States has issued economic loan packages to Ukraine. In fact, the US has issued three separate loans to Ukraine from 2014 to 2016, to help Ukraine in stabilizing its economy. Furthermore, the US Department of State highlighted that they had an active role in providing monetary assistance as well as investment assistance throughout the years, with over $2 billion in development assistance and a potential $3 billion fund through the Export-Import Bank of the United States to help procure US goods and services for Ukraine. Lastly, the US International Development Finance Corporation reportedly had $800 million investments across a dozen projects in Ukraine.
It can be remembered that 2014 and 2016 were particularly devastating to Ukraine’s economy due to the Russian annexation of the Crimean Peninsula, which resulted in a cumulative decline in GDP of over 16.5%. The World Bank reported that Ukraine’s economy from 2014 to 2015 had declined 7.5% in terms of its real GDP. It was marred by sharp currency devaluation and faced large accumulated fiscal and external imbalances, leading to a decline in consumption and investment. It did not help that Ukraine’s politics had always been subject to corruption, with a history of an underperforming economy throughout the 1980s.
In January 2022, the Ukrainian Ministry of Economy had downgraded its GDP growth forecast from 3.8% to 3.6% due to the COVID-19 pandemic and subsequent lockdown following a contraction of 4% in 2020. SOFREP’s Kaj Larsen had predicted that the Ukrainian crisis could affect Ukraine’s economic performance as global stock markets widely became unstable characterized by high volatility, discussing how this would be both positive and a negative for stock market players and investors. In fact, just two days ago, stocks slumped amid the tensions, with the Dow Jones Industrial Average posting a drop of 600 points in its worst decline in 2022. The Nasdaq Composite also fell 2.9% that day.
Ukrainian Stocks tanked after US National Security Advisor Jake Sullivan warned Russia that an invasion was imminent which resulted in some business leaders(and even politicians) fleeing the beleaguered country. Sullivan had advised US citizens to get out of the country within 24 to 48 hours. The US Embassy in Kyiv was also evacuated, with a small consulate operating out of Lviv for emergency communications.
“But the risk is now high enough, and the threat is now immediate enough that this is what Putin demands. If you stay, you are assuming risk with no guarantee that there will be any other opportunity to leave and no prospect of a US military evacuation in the event of a Russian invasion,” Sullivan claimed.
Ukrainian President Volodymyr Zelensky blamed the West and the United States for instilling panic regarding the crisis, saying, “There are signals even from respected leaders of states; they just say that tomorrow there will be war. This is panic—how much does it cost for our state?” He also went on to say that he was not hostile toward US President Biden for claiming an imminent Russian invasion; however, he did assert that he knew what was going on in his country just as Biden knew what was going on within the United States.
The projected US intelligence reports of an “immediate” invasion did not come to fruition, with no invasion on February 16. On the same day, Russia announced that it had begun withdrawing some troops from the border, with NATO being skeptical that the withdrawal was not enough to suspend potential invasion threats.
This most recent offer of a sovereign loan guarantee of $1 billion combined with the International Monetary Fund assistance along with other G7 countries offering their help “will bolster Ukraine’s ability to ensure economic stability, growth, and prosperity for its people in the face of Russia’s destabilizing behavior,” a US Department of State press statement said. Along with this, the European Commission and the United Kingdom have announced that they would be giving monetary aid to Ukraine through $1.35 billion and $120 million in assistance packages, respectively.