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

Bank says attacks on energy infrastructure is creating hardship

The village of Lyptsi, near Kharkiv, in northeastern Ukraine on October 15, 2022. Ukraine will need about $55 billion to cover next year's estimated budget deficit and rebuild critical infrastructure.Show more

Russia's attacks on civilian infrastructure are adding to the economic crisis in Ukraine, where poverty has increased tenfold this year, a senior World Bank official said on Saturday.

Arup Banerji, World Bank regional country director for Eastern Europe, said Ukraine's rapid restoration of power supplies after this week's large-scale Russian attacks on facilities reflected the efficiency of the wartime system, but Russia's shift in tactics has increased risk.

"If this continues, the outlook is going to be much, much harder,” he said in an interview.

"As winter really starts biting … certainly by December or January, and if the houses are not repaired … there may be another internal wave of migration, of internally displaced persons.

Ukrainian President Volodymyr Zelenskyy told international donors that Ukraine needed about $55 billion, including $38bn to cover next year's estimated budget deficit and $17bn to begin to rebuild critical infrastructure, including schools, housing and energy facilities.

Ukrainian officials said they need continued and reliable assistance to keep the government running and to begin repairs and reconstruction.

The response to Mr Zelenskyy's call, delivered during the annual meetings of the International Monetary Fund and World Bank and many other meetings over the past week, was encouraging, Mr Banerji said.

"Most countries indicated that they would be supporting Ukraine financially over the next year, and so that is a very positive outcome,” he said.

Twenty-five per cent of the population would be living in poverty by the end of the year, up from just over 2 per cent before the war, he said, and the number could rise to as high as 55 per cent by the end of next year.

Unanimous selection of Ukrainian Finance Minister Serhiy Marchenko to the rotating chairmanship of the boards of governors of both institutions in 2023 was also a testament of support for Ukraine, Mr Banerji said.

IMF Managing Director Kristalina Georgieva this week said Ukraine's international partners had already committed $35bn in grant and loan financing for Ukraine in 2022, but its financing needs would remain "very large” in 2023.

IMF staff will meet Ukrainian authorities in Vienna next week to discuss Ukraine's budget plans and a new IMF monitoring instrument, which should pave the way for a full-fledged IMF programme once conditions allow, Ms Georgieva said.

Mr Banerji said Ukraine had already pared its budget plans back to a bare minimum, with funds for salaries and pensions, military expenses and servicing domestic debt.

The budget included $700m for capital expenditure, a fraction of the $349bn in reconstruction costs recently estimated by the World Bank.

If Ukraine failed to get sufficient support, it would either have to print more money at a time when inflation was already in the low 20 per cent range, or further cut social spending, he said.