Key pillars for emergency economic assistance

29 April 2022

Based on LSE Policy Brief by Tymofii Brik, Luke Cooper, Mary Kaldor, Nataliia Shapoval. This briefing draws together proposals presented at a private meeting of economists and political scientists led by Tymofiy Mylovanov (KSE) and Joseph Stiglitz (Columbia).

  • • War-economy reorganisation. Demand should not be a problem in a redesigned war economy which primarily faces constraints on supply (resources, people, etc.). The war effort will generate demand and the international community — above all, the EU, UK, US and West per se — needs to provide all financial support necessary to achieve these ends.
  • • Centralisation mechanisms. Markets cannot make the adjustments necessary on their own in the time required without state intervention. In logistics, procurement and construction the state needs to plan and direct business activity to meet war effort needs.
  • • Infrastructure investments. Logistics and infrastructure can be coordinated centrally but run by businesses on a decentralised basis, thus sustaining functioning markets for the future. Social needs should be rapidly prioritised; for example, investment in quality prefabricated housing in western Ukraine could meet needs of displaced population in a relatively short period of time, investments in roads can help support logistics in light of Russian occupation of / attacks on key maritime trading infrastructure in the south.
  • • Agriculture. Emergency credit for Ukrainian farmers is critical to ensure that planting takes place this year. Agribusinesses should receive materials, machinery, and other aid to ensure they have resources to harvest/store/transport/export crops. Agribusinesses should be prioritized for credits.
  • • Critical role of insurance. The role of insurance is central and cannot be provided effectively by the market given the obvious destruction risks in wartime. The state will need to step in with insurance that effectively underwrites production in key sectors, e.g., protecting farmers to ensure food supply, as well as infrastructure and logistics.
  • • Protecting Ukraine’s public goods. In order to ensure the on-going civic character of the Ukrainian resistance and its ability to exercise power — even in extremis conditions of martial law, etc., — with public legitimacy, international economic assistance should be provided to protect and uphold as far as possible key public goods, such as education, welfare and healthcare systems, policing, legal institutions and the rule of law system.
  • • Upholding Ukraine’s ‘intellectual sovereignty’. Ukraine must be supported in its efforts to defend what they have called their ‘intellectual sovereignty’ in the face of Putin’s war, i.e., ensuring the on-going presence of the country’s research and educational sector within the worldwide scientific commons, and providing reach and profile to the country’s intellectuals, teachers and researchers in the global community.
  • • Massive injection of financial liquidity needed. To achieve the above aims Ukraine is in urgent need of an immediate and massive injection of financial liquidity in the form of cash / aid — and not more loans. The EU, UK and US should investigate scope for innovative central bank interventions that could support Ukraine’s financial position and the Hryvnia. While anti-corruption guarantees should not be discarded, they should be proportionate to the reality of Ukraine’s need to rapidly grow the war economy.
  • • Multistakeholder process for sustainable Ukrainian borrowing. Ukraine needs a mechanism for the suspension of interest payments, which reduces as much as possible downstream risks. It should be agreed rapidly on a multistakeholder basis involving the IMF, World Bank, EU, US and other key actors taking into account the unique situation of the Russian invasion. A long-term public commitment to debt restructuring is also needed based on fair burden- sharing between bondholders and international institutions.

 

Head of KSE Institute, Member of Editorial Board of VoxUkraine

Read the full article Meeting the immediate needs of the Ukrainian economy, the role of international actors and the importance of understanding the conflict as a conventional war