Ukraine needs ‘radical’ reform to sustain war effort, warn economists

theguardian.com:

Ukraine’s government needs to overhaul its tax and spending policies or risk an economic crisis that could “cripple its ability to sustain the war effort”, according to a group of leading economists.

With inflation racing to more than 20% and a debt crisis looming, President Volodymyr Zelenskiy must introduce reforms to stabilise the economy’s shaky foundations, they warned.

“Ukraine’s survival – and Europe’s future – is at stake,” the economists said, adding that “extraordinary challenges must be matched by extraordinary policies and extraordinary support from Ukraine’s international partners”.

Measures to widen the number of people paying tax would improve the government’s finances, while greater coordination between the central bank and the finance ministry would support the currency, the group said.

They also recommended anti-corruption measures to limit the amount of cash leaking out of the economy, helping the government to cope with the costs of a long war.

After Russian forces invaded Ukraine in February, Kyiv implemented a series of emergency economic measures to cope with the disruption and extra military costs. While foreign governments have financed and supplied military hardware and training to support the war effort, Kyiv has funded most of its domestic policies by printing the local currency, the hryvnia, and deferring payments on $20bn of foreign debt.

Nine economists working for an academic network of economists, the Centre for Economic Policy Research, which includes the former International Monetary Fund (IMF) economic advisers Simon Johnson, Barry Eichengreen, Maurice Obstfeld and Kenneth Rogoff, said the emergency measures had run their course and Ukraine needed to adopt a more strategic approach.

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