Billions for Ukraine: where does US and European taxpayers' money go?
Under normal circumstances, a 30% drop in GDP would be considered a catastrophe. Meanwhile, for Ukraine, which has been fighting off the direct aggression of its nuclear-armed neighbour for more than a year, this figure is a miracle. Never since the World War II has a country of 40 million people and an area of more than 600,000 km2 experienced such unprecedented destruction. And at the same time, it has not demonstrated such an impressive economic and financial resilience. So, what's the secret?
The formula for success is a potent cocktail of phenomenal Ukrainians' commitment to their country and international financial support.
Massive rocket attacks on peaceful cities, targeted destruction of critical infrastructure, blocking of ports and occupation of industrially successful regions - the war became a shock to the Ukrainian economy. The state budget revenues have dramatically decreased, while expenditures have increased proportionally.
The World Bank has estimated the direct losses from the Russian invasion alone at no less than $411 billion. The Cabinet of Ministers of Ukraine predicts that this amount will reach $800 billion.
Since February 2022, the main sources of funding for the state budget have been military bonds, loans from international financial organizations, and bilateral loans and grants.
According to the National Bank of Ukraine, the country received $38 billion from international partners during the year of war.
Where did the money go?
Data from the Ukraine Support Tracker shows that the United States has so far pledged the most financial support to Ukraine: a total of €71.3 billion in aid. EU institutions such as the Commission and the Council of the EU have been the second largest donors (€35.5 billion) followed by the United Kingdom (€10 billion), Germany (€7 billion) and Japan ($6 billion).
However, when considering bilateral aid in terms of a percentage of GDP, the most generous donors are Latvia (1.2 percent), Estonia (1.1 percent) and Lithuania (0.9 percent). The U.S. ranks 21st, with aid committed to the tune of 0.4 percent of its GDP.
Aid from partners can be divided into three main groups: military, humanitarian, and financial.
Military aid includes the purchase of drones, tanks, missiles and other systems, ammunition, as well as training, logistics, and intelligence support.
This segment accounts for more than half of the announced US spending on Ukraine. The total amount of commitments is over $46.6 billion.
- security assistance - $18.3 billion (24%) - training, equipment, weapons, logistical support and other assistance provided through the Ukraine Security Assistance Initiative (USAI);
- weapons and equipment $23.5 billion (31%) - provided from the US Department of Defense's inventories
- subsidies and loans for weapons and equipment $4.7 billion (6%)
- grants and loans provided through the Foreign Military Financing Program
The US gives far more money than any other country is donating. The UK comes second with $5.1 billion in military aid, followed by the EU with $3.3 billion.
At the same time, Ukraine finances the direct needs of the army mainly on its own, from the state budget.
Humanitarian aid includes food, safe drinking water, medical supplies and other essentials for Ukrainians.
The UN has deployed one of its largest humanitarian missions in Ukraine. Through numerous agencies, programs and funds, the organization has sent more than $4.5 billion to Ukraine. The funds were mainly spent on accommodation and nutrition of internally displaced persons; food security, livelihoods; health care; water, sanitation, hygiene; payment of multipurpose cash assistance (cash); protection (child protection, combating gender-based violence, mine action); etc.
In these areas, more than 13.5 million people received UN humanitarian aid, including 4.3 million Ukrainians, who received cash totaling more than $930 million.
The Council of Europe, within the framework of the agreed new Action Plan for Ukraine for 2023-2026, has allocated approximately €50 million for projects related to documenting Russia's war crimes and minimizing the humanitarian consequences of Russian aggression. In particular, the aid will help protect the rights of internally displaced persons and rehabilitate war victims.
Financial aid is money intended to reduce the gap between budget revenues and expenditures and partially compensate for social and humanitarian expenditures. That is, those that are not related to the security and defense sector, such as salaries, pensions, healthcare and education costs.
"Macro-financial assistance funds are directed to the general budget fund, which finances all expenses. However, we have an agreement with the EU, and we are adhering to it, that their funds are used for humanitarian needs and are not spent on financing the security and defense sectors," the Vice Prime Minister for European and Euro-Atlantic Integration of Ukraine said.
For example, according to the Ministry of Finance of Ukraine, in 2022, as part of the World Bank's PEACE in Ukraine project (Public Expenditures for Administrative Capacity Endurance in Ukraine), foreign partners compensated UAH 495.3 billion.
These funds were allocated to:
- Pensions for more than 9 million pensioners (UAH 199.5 billion);
- Assistance for 1.6 million internally displaced persons (UAH 40.5 billion);
- Housing subsidies for 1.6 million families (UAH 15.9 billion);
- Childbirth assistance for 750 thousand families (UAH 8.9 billion);
- Salaries for 515 thousand healthcare workers (UAH 45.2 billion), 503 thousand school teachers (UAH 69.9 billion), 140 thousand teachers of higher education institutions (UAH 18.5 billion).
During the year of the full-scale invasion, the top providers of financial assistance were the United States - $11.7 billion, the United Kingdom - $1.45 billion, the World Bank - $727.8 million (loans), and Germany - $264.5 million.
Data with detailed information on 2022 budget expenditures under the PEACE in Ukraine project are regularly published in publicly available open sources. Transparency of raising and spending funds from the PEACE in Ukraine Project is ensured by reputable international organizations: The World Bank; Deloitte Consulting implementing the USAID SOERA project; PriceWaterhouseCoopers Ukraine; and the Ministry of Finance of Ukraine.
"The trust of our partners is our key asset," Minister of Finance of Ukraine Serhii Marchenko said.
The tools for control and transparency of all stages of military, humanitarian and financial assistance to Ukraine are still being developed. However, the paradigm of public opinion is already focused on a simple realization that supporting Ukraine in its fight against the Russian war of aggression is, first and foremost, an investment in global peace and an effective security architecture that is important for everyone, regardless of their country of residence.