Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

World Bank Warns Ukraine Faces Bankruptcy Threat

Mon 01 Apr 2024 | 09:06 PM
Israa Farhan

A dire warning issued by the World Bank signals Ukraine's imminent risk of bankruptcy, with projections suggesting it could face financial collapse as early as next year unless decisive actions are taken by Western nations to relieve or restructure its mounting debts.

Speaking to TASS on Saturday, a World Bank official underscored the urgency of the situation, highlighting the critical need for international intervention to avert an economic catastrophe.

Kyiv finds itself heavily reliant on financial assistance from its Western allies. However, recent months have witnessed a decline in foreign support, exacerbating the nation's financial woes. Meanwhile, a crucial $60 billion US aid package remains mired in Congressional gridlock, further compounding Ukraine's fiscal challenges.

The latest $1.5 billion tranche of funding, disbursed under a World Bank program, serves as a temporary lifeline for Ukraine.

However, the outlook remains bleak, as highlighted by the stark opposition from the World Bank's Russian division, which voted against the loan, citing concerns outlined in the organization's charter.

An unnamed official cautioned that Ukraine's public finances are in a "catastrophic" state, attributed to an economic downturn and a reduction in foreign aid. Expressing apprehension about the future, the official emphasized the urgent necessity for Western creditors to consider debt relief measures, including those owed by private entities, to prevent an impending financial collapse by 2025.

Acknowledging the precariousness of collaborating with Ukraine, the senior management of the World Bank has recognized the "extremely high" risks associated with financial transactions involving the nation.

Notably, the latest tranche of funds did not involve direct financial contributions from the World Bank; instead, it relied on guarantees provided by Japan and the UK, two of Ukraine's key donors.

According to Ukrainian Prime Minister Denis Shmigal, the allocated funds will be directed towards addressing urgent social and humanitarian needs, as well as facilitating reconstruction efforts.

With Ukraine facing a record budget deficit projected at $43.9 billion this year, the government anticipates bridging the shortfall primarily through continued financial assistance from Western supporters.

Former Ukrainian Prime Minister Nikolay Azarov has previously warned that the nation's economic crisis is not a recent development but rather a longstanding issue. 

Azarov emphasized that Ukraine's insolvency is evident in its inability to sustain its budgetary requirements without significant reliance on external aid.