Ukraine under the dilemma of printing money or delaying the payment of salaries and pensions

Lviv (Ukraine), March 30 (EFE, Rostyslav Averchuk). The ukrainian economy shows better than expected growth as it adapts to war conditions after the collapse suffered at the beginning of the large-scale Russian invasion. However, its future appears uncertain as a number of challenges jeopardize further recovery.

After contracting by almost 30% in 2022, the invaded nation’s economy grew by 5.3% last year, the country’s Statistics Office revealed earlier this week. The figure exceeded forecasts, but hardly reflects the complexity of doing business in the midst of war.

“Live here and now!” reads a sign above the entrance of a small shop in the center of Lviv. Faced with overwhelming uncertainty about the future, many Ukrainians have no choice but to follow that advice.

Business and war

The life of Lerane Jaibulaieva, founder of the “Crime Courtyard” café, located right next door, has already taken a couple of sharp turns due to the war. Crimean Tatar had to flee her native peninsula after Russia annexed it in 2014 and launched repressions against the minority, she tells EFE.

He soon opened a cafe near kyiv, in Irpin, which became his way of popularizing Crimean Tatar culture. However, Jaibulaieva had to flee again when Russia destroyed much of Irpin while attempting to capture the capital.

At first, he lacked funds to revive his business in Lviv, about 1,000 kilometers from the front line. He had to abort his second attempt after Russia caused power outages by attacking the country’s energy system.

The businesswoman could not afford an autonomous power generator. Furthermore, her husband, a soldier, was injured and needed more attention.

The third attempt was successful a few months ago and the cafe has become a hit among both residents and many visitors to this border city.

However, the owner is having difficulty finding employees amid the population exodus and market imbalances. Equipment and other costs have also been rising, with many production facilities destroyed in the east of the country and logistics disrupted.

“Every Ukrainian entrepreneur has to juggle every day to survive”says Jaibulaieva.

A 2024 full of risks

64% of senior managers are more pessimistic this year than they were in 2023according to a survey conducted in March by the Ukrainian European Business Association.

“The main reasons include the military situation, mobilization, as well as delays and uncertainty surrounding international aid”explains its general director, Anna Derevianko.

New Russian missile and drone attacks on energy infrastructure are quickly becoming a major concern. Ukraine is likely to face nationwide power outages by July-August at the latest due to massive damage to thermal and hydroelectric power plants, energy experts warn.

Although better prepared than in 2022, many companies may still be hit hard.

Furthermore, although Ukraine is on track to receive the equivalent of a record 8.3 billion euros (nearly $9 billion) in financial aid in March, its continuity also remains a concern. The country still needs 7.5 billion euros (US$8.1 billion) to finance its expenses in 2024according to the Center for Economic Strategy.

This help is crucial as the government only covers half of its expenses on its own. Much of its heavy industry in the east of the country has been lost to Russian attacks or occupation, while the economies of cities on the front lines, such as Kharkiv, remain suffocated.

Without sufficient aid, Ukraine will have to resort to printing money or delaying the payment of salaries and pensions, further damaging the economy, analysts warn.

The current blockade of the country’s border with Poland, its safest trade route amid Russian attacks on its ports, also costs large companies millions of euros a month and affects small entrepreneurs like Jaibulaieva.

Through it all, the cafe owner remains stoic and hopes that the next time she moves anywhere it will be to a liberated Crimea.

“Thanks to our advocates, we can and should plan for the future of our businesses. Although in the end it is different from what we imagine it will be”he emphasizes.